VZCZCXRO1903
RR RUEHNZ
DE RUEHWL #0987/01 3550422
ZNR UUUUU ZZH
R 210422Z DEC 05
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 2168
INFO RUEHBY/AMEMBASSY CANBERRA 4243
RUEHNZ/AMCONSUL AUCKLAND 0559
RUCPDOC/USDOC WASHDC 0011
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 05 WELLINGTON 000987 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EB/MTA/MST AND EAP/ANP 
STATE PASS USTR FOR BWEISEL AND GBLUE 
COMMERCE FOR ABENAISSA/4530/ITA/MAC/AP/OSAO 
TREASURY FOR OASIA 
 
E.O. 12356: N/A 
TAGS: ETRD ECON EFIN NZ
SUBJECT: 2006 NATIONAL TRADE ESTIMATE REPORT: NEW ZEALAND 
 
REF: STATE 193384 
 
¶1.  Following is post's input for the 2006 National Trade 
Estimate Report on New Zealand.  We assume that 
Washington agencies will provide updated trade and 
investment data. 
 
¶2.  We also note that the section on "Biotechnology Food 
Approval" should be consistent with the NTE on Australia. 
 
¶3.  Begin text of NTE submission: 
 
IMPORT POLICIES 
 
In general, tariff rates in New Zealand are low as a result of 
several rounds of unilateral tariff cuts that began in the mid- 
1980s and continued until the current Labor government, elected 
in 1999, froze further reductions until July 2005.  The New 
Zealand government announced in September 2003 that it would 
resume unilateral tariff reductions starting July 1, 2006. New 
Zealand plans to begin gradual reductions of its highest tariff 
rates of between 17 percent and 19 percent, taking them to 10 
percent by July 1, 2009.  The top rates apply mostly to clothing, 
footwear, carpets, and certain automobiles and auto parts.  Ad 
valorem tariffs on other goods also will gradually be reduced to 
5 percent by July 1, 2008.  None of these low tariff rates are 
bound.  The New Zealand government will conduct a review in 2006 
to determine rates for the period after July 1, 2009. 
 
STANDARDS, TESTING, LABELING AND CERTIFICATION 
 
Biotechnology Regulations 
 
New Zealand's Environmental Risk Management Authority (ERMA) 
reviews applications for the release of new organisms, including 
genetically modified organisms (GMOs), on a case-by-case basis. 
ERMA, an independent body, can issue three types of approval for 
the release of new organisms: contained trials, conditional 
release and full, unconditional release.  The agency can approve 
applications with conditions that aim to prevent, minimize or 
manage any identified risks.  Contained trials are strictly 
regulated and monitored and can include field trials.  A full 
release is unregulated and has no controls, making it extremely 
unlikely one would be granted for a GMO.  Conditional release 
fills the gap between these two extremes, providing controls and 
regulation determined on a case-by-case basis.  This allows for 
specific conditions to be placed on the planting of a crop, which 
can be any size from a contained trial to a large commercial 
planting.  The Ministry of Agriculture and Forestry (MAF) 
monitors implementation of such approvals.  To date applications 
have been limited to a small number of contained trials. 
 
Until October 2003, New Zealand maintained a voluntary two-year 
moratorium on the introduction of all GMOs, which precluded 
applications for the commercial planting of genetically modified 
crops, the commercial importation of genetically modified seeds, 
the release into the environment of genetically modified animals 
and, to a lesser extent, some human and veterinary medicines 
containing GMOs.  The moratorium, however, did not apply to the 
use and sale of processed genetically modified foods and 
ingredients.  With the moratorium's expiration, Parliament 
amended the Hazardous Substances and New Organisms Act 1996 to 
regulate the introduction of GMOs.  The amendment, the New 
Organisms and Other Matters Bill 2003, introduced the conditional 
release category for approval of new organisms. 
 
Biotechnology Food Approval 
 
Imported genetically modified foods for sale in New Zealand must 
be assessed and approved by Food Standards Australia New Zealand 
(FSANZ), which operates under the authority of the New Zealand 
Food Safety Authority (NZFSA). A mandatory standard for foods 
produced using modern biotechnology came into effect in mid-1999. 
The standard established under the Food Act 1981 prohibits the 
sale of food produced using gene technology, unless such food has 
been assessed by FSANZ and listed in the food code standard.  As 
of November 2005, FSANZ had received 34 applications for safety 
assessments of bioengineered foods. Of these, 28 applications had 
been approved (including four under review pending additional 
assessment), four applications were being processed, and two 
requests had been withdrawn. 
 
Biotechnology Food Labeling 
 
Mandatory labeling requirements for foods produced using gene 
 
WELLINGTON 00000987  002 OF 005 
 
 
technology took effect in December 2001. With few exceptions, a 
food in its final form that contains detectable DNA or protein 
resulting from genetic modification must be so labeled. Meeting 
New Zealand's biotechnology food labeling regulations can be 
burdensome and is especially relevant for U.S. agricultural 
exporters who deal primarily in processed food.  New Zealand 
wholesalers and retailers frequently demand biotechnology-free 
declarations from their suppliers.  This effectively passes 
liability for any biotechnology labeling non-compliance back to 
the importer. New Zealand food legislation requires businesses to 
exercise due diligence in complying with food standards, which 
usually is defined as maintaining a paper or audit trail similar 
to a quality assurance system. 
 
The NZFSA conducts periodic compliance audits. Violators of food- 
labeling requirements can be assessed penalties under the Food 
Act 1981. The New Zealand government is reviewing penalties 
stipulated under the act to ensure that they represent an 
adequate economic deterrent. The effect of these regulations is 
to discourage New Zealand food retailers from carrying 
biotechnology food products. 
 
Sanitary and Phytosanitary Measures 
 
New Zealand maintains a strict regimen of sanitary and 
phytosanitary (SPS) controls for virtually all imported 
agricultural products. The United States and New Zealand continue 
to discuss specific SPS issues that negatively impact trade in 
products supplied by the United States. 
 
Imports of U.S. poultry meat (except canned product) remain 
suspended due to restrictions on countries that have infectious 
bursal disease.  Imports of U.S. pork meat products are subject 
to a pre-cooking requirement because of the presence of porcine 
reproductive and respiratory syndrome in the United States. 
Imports of California table grapes were restarted in 2005 as a 
result of changes in import requirements, while market access 
also was achieved for cherries from Idaho, Oregon and Washington. 
 
U.S. beef and beef variety meats were restricted from entering 
New Zealand following the December 2003 announcement of bovine 
spongiform encephalopathy (BSE) in the United States.  Import 
restrictions also were imposed on live cattle, certain pet food 
and U.S. processed food products containing beef.  The NZFSA had 
required case-by-case assessment of U.S. bovine products before 
importation.  However, after completing an assessment of the U.S. 
BSE regime, NZFSA decided to lift that restriction once both 
sides agree on certification that must accompany meat imports. 
MAF is conducting a review that may result in resumption of live 
cattle trade. 
 
INTELLECTUAL PROPERTY RIGHTS (IPR) PROTECTION 
 
The New Zealand government has proposed amendments to strengthen 
its copyright and patent laws and enhance the country's 
protection of intellectual property rights.  With proposed 
amendments to the Copyright Act 1994, the government aims to 
address developments in digital technologies and international 
developments in copyright law and to bring New Zealand law into 
closer conformity with the WIPO Copyright Treaty (WCT) and the 
WIPO Performances and Phonograms Treaty (WPPT).  The amendments 
are expected to be reviewed and approved by Cabinet before they 
are introduced in Parliament in 2006.  If this legislation is 
enacted, the New Zealand government then will determine whether 
to accede to the WCT and WPPT treaties. 
 
The Ministry of Economic Development in December 2004 released 
draft legislation that is intended to replace the Patents Act 
1953 and to bring New Zealand's patent law into closer conformity 
with international standards.  This draft would keep the maximum 
patent term at 20 years, but would tighten the criteria for 
granting a patent, from a patentable invention being new in New 
Zealand, to being new anywhere in the world and involving an 
inventive step.  At year's end, the legislation had not yet been 
introduced in Parliament. 
 
The U.S. music industry opposes a proposed amendment to the 
Copyright Act that would legalize the duplication of sound 
recordings in other formats for a purchaser's private use.  The 
government says this would enable consumers to employ new digital 
technologies and would legalize what already is common practice. 
The government also notes the amendment would limit copying to 
one copy per format, specify that the original sound recording 
must be legitimate, and exclude making copies from borrowed or 
rented recordings.  The music industry warns that such an 
 
WELLINGTON 00000987  003 OF 005 
 
 
exception to copyright protection would make copyright 
infringement difficult to police, send the wrong message to 
consumers and cost the industry in sales revenue and profits. 
The industry says that the exception would discourage the 
development of music products that would permit home copying 
under contractual arrangements between the consumer and the 
provider.  The industry and government continue to discuss this 
exception. 
 
Additionally, the industry favors a wider approach to 
technological protection measures (TPMs) than that provided in 
the government's proposed amendments.  The government's proposal 
would prohibit the supply of devices or the means or information 
to circumvent TPMs that would result in infringing any of a 
copyright owner's exclusive rights, and not just copying as now 
specified in the legislation.  The industry says the act of 
circumventing a TPM also should be illegal.  It also wants 
protection against the circumvention of TPMs that control access 
to copyright material, in addition to TPMs that control copying. 
 
U.S. industry also has expressed concern over a proposed 
exception to the Copyright Act that would allow the unauthorized 
time-shifting of virtually all works communicated to the public. 
The industry warns that the exception would discourage rights 
holders from developing new approaches to meeting consumer demand 
for electronically delivered materials and reduce access and 
choice for New Zealand consumers to these materials. 
 
In the draft patents legislation, a prohibition of patents for 
methods of medical treatment concerns some pharmaceutical 
companies.  The industry also is concerned by the Cabinet's 
decision in mid-2004 to halt a study on the economic impact of 
extending patent terms for pharmaceuticals.  The draft patents 
bill fails to address the issue of patent terms.  The 
pharmaceutical industry group, Researched Medicines Industry 
Association of New Zealand, contends that New Zealand's effective 
patent life for pharmaceuticals has been substantially eroded. 
It asserts that extending the effective patent term would be in 
line with international best practices. 
 
The pharmaceutical industry also is concerned by an amendment, 
enacted in December 2002, to the Patents Act 1953.  This 
amendment states that it is not a patent infringement for a 
person to make, use, exercise or vend an invention for purposes 
related to gaining regulatory approval in New Zealand or other 
countries.  This provision can be used to effectively expedite, 
or "springboard," the approval process for generic competition to 
products going off patent.  The pharmaceutical industry strongly 
opposes this legislation. 
 
Some U.S. industries, particularly producers and distributors of 
music and software, have voiced concerns about New Zealand law 
that allows parallel imports of certain copyrighted goods, saying 
such imports make it more difficult to detect and combat piracy 
and erode the value of their products in New Zealand and third- 
country markets.  The New Zealand Parliament in October 2003 
enacted a ban on the parallel importation of films, videos and 
DVDs for the initial nine months after a film's international 
release, but the ban does not apply to parallel importation of 
music, software and books.  The ban is scheduled to sunset in 
2008, unless extended. 
 
The October 2003 legislation, which amended the Copyright Act 
1994, makes it easier to challenge copyright violations in court 
by shifting the burden of proof in certain copyright infringement 
cases to the defendant, who must prove that an imported film, 
sound recording or computer software is not a pirated copy. 
 
The United States continues to monitor developments in IPR issues 
closely. 
 
SERVICES BARRIERS 
 
Local Content Quotas 
 
Radio and television broadcasters have adopted voluntary local 
content targets, but only after the New Zealand government made 
it clear that it would otherwise pursue mandatory quotas. 
Although New Zealand government officials have said they are 
sensitive to the implications of quotas under the WTO General 
Agreement on Trade in Services (GATS), they reserve the right to 
impose them. 
 
Telecommunications 
 
 
WELLINGTON 00000987  004 OF 005 
 
 
U.S. industry has expressed concern about the fees charged for 
completing calls onto mobile networks in New Zealand, which are 
among the highest in the world.  After a year-long investigation 
into mobile termination rates, the New Zealand regulating 
authority said in June 2005 that mobile network operators had 
been able to set unreasonably high rates because of limited 
market competition.  The authority called for such charges to be 
regulated.  The Communications Minister in August 2005 agreed 
with the authority's position that the termination rates should 
come down, but asked the authority to reconsider its 
recommendations by examining several issues, including commercial 
offers by New Zealand's two mobile-phone service providers for 
rate reductions and how best to ensure that end users benefit 
from reductions in wholesale rates.  The authority was expected 
to release a draft report soon. 
 
Competitors of the formerly state-owned monopoly, Telecom, were 
disappointed by the New Zealand government's decision in May 2004 
against unbundling the local loop.  Although under competitive 
pressure, Telecom still dominates the market.  The Communications 
Minister accepted the regulator's recommendation against ordering 
Telecom to open its national fixed-line network to competitors. 
Saying he aimed to increase competition in broadband services, 
the Minister also agreed with the regulator's recommendation to 
require bitstream unbundling, or access to Telecom's equipment by 
service providers in order to sell their own broadband services. 
TelstraClear, Telecom's primary land-line competitor, in November 
2004 asked the regulator to determine the terms and conditions 
for access to Telecom's unbundled bitstream service. The 
regulator made that determination December 20, although Telecom 
was considering a court appeal. 
 
INVESTMENT BARRIERS 
 
Investment Screening 
 
New Zealand screens certain types of foreign investment through 
the Overseas Investment Office (OIO).  Amid growing public 
concern about purchases of coastal properties by foreigners, the 
New Zealand government enacted legislation in August 2005 that 
toughened the screening and monitoring of land purchases, but 
raised the minimum threshold for scrutiny of proposed business 
purchases.   Under the legislation, the threshold for screening 
non-land business assets has been increased from NZ $50 million 
to NZ $100 million, where a foreigner proposes to take ownership 
or control of 25 percent or more of a business.  Government 
approval is required for purchases of land larger than 5 hectares 
(12.35 acres) and land in certain sensitive or protected areas. 
Any application involving land in any form must meet a national 
interest test.  For land purchases, foreigners who do not intend 
to live in New Zealand must provide a management proposal 
covering any historic, heritage, conservation or public access 
matters and any economic development planned.  That proposal 
would have to be approved and generally made a condition of 
consent.  In addition, investors would be required to report 
regularly on their compliance with the terms of the consent. 
Overseas persons also must demonstrate the necessary experience 
to manage the investment.  The OIO, part of Land Information New 
Zealand, took over the functions of the Overseas Investment 
Commission in August 2005.  The United States has raised concerns 
about the continued use of this screening mechanism.  New 
Zealand's commitments under the GATS Agreement of the WTO are 
limited as a result of New Zealand's screening program. 
 
OTHER BARRIERS 
 
Pharmaceuticals 
 
The U.S. government continued to raise concerns about New 
Zealand's pharmaceutical sector policies, which do not 
appropriately value innovation and discourage investment in the 
research and development of innovative pharmaceutical products. 
New Zealand's Pharmaceutical Management Agency (PHARMAC), a stand- 
alone Crown entity, administers a Pharmaceutical Schedule that 
lists medicines subsidized by the New Zealand government and the 
reimbursement paid for each pharmaceutical under the national 
health care system.  The schedule also specifies conditions for 
prescribing a product listed for reimbursement. PHARMAC accounts 
for 73 percent of New Zealand's expenditures on prescription 
drugs.  The government also supports hospitals' pharmaceutical 
expenditures, bringing its share of total spending on 
prescription drugs in the country to about 80 percent. 
 
New Zealand does not directly restrict the sale of non-subsidized 
pharmaceuticals in the country.  However, private medical 
 
WELLINGTON 00000987  005 OF 005 
 
 
insurance companies will not cover the cost of non-subsidized 
medicines and doctors are often reluctant to prescribe them to 
patients who would have to pay the cost out of pocket.  Thus, 
PHARMAC's decisions have a major impact on the availability and 
price of non-subsidized medicines and the ability of 
pharmaceutical companies to sell their products in the New 
Zealand market. 
 
The United States has serious concerns relating to the 
transparency, predictability and accountability of PHARMAC's 
operations.  U.S. pharmaceutical suppliers maintain that the 
methodology used to determine Pharmaceutical Schedule decisions 
lacks transparency.  Meanwhile, PHARMAC is reviewing the way it 
decides funding for high-cost medicines.  And, the Labour Party, 
in an agreement to form a new government in October 2005 with 
support from the United Future party, assented to a review of the 
nation's long-term medicines strategy, including PHARMAC's role. 
The U.S. government will continue to closely monitor developments 
in this sector. 
 
The New Zealand and Australian governments signed a treaty on 
December 10, 2003, to create a joint agency to regulate medical 
devices, prescription and over-the-counter medicines, dietary and 
nutritional supplements, and cosmetics such as sun creams.  Aside 
from prescription pharmaceuticals, New Zealand does not currently 
regulate market entry of these products.  Both governments must 
enact implementing legislation, which probably will not be 
introduced in their Parliaments until at least mid-2006.  It is 
expected that the new agency will charge full cost-recovery fees 
to register products and require additional documentation and 
assessments for certain products, even if they already have U.S. 
Food and Drug Administration approval.  Each country's government 
will continue to separately determine funding of prescription 
medicines.  U.S. manufacturers and distributors of non- 
pharmaceutical therapeutic products in New Zealand have expressed 
concerns that those requirements would be overly burdensome and 
costly, and could serve to discourage exports of their products 
from the United States to New Zealand. 
 
BURNETT