Tariff as an Instrument of Negotiation
The tariff has been used to extend the markets for New Zealand's exports through the negotiation of reciprocal tariff agreements. New Zealand has used a preferential tariff system since 1903. Goods from Britain and the colonies and the British Dominions are, in general, admitted at rates of duty lower than those levied on goods from other countries. The difference between these two rates of duty is known as the “margin of preference”.
During the Imperial Economic Conference of 1932, an agreement (known as the “Ottawa Agreement”) was concluded with Britain. Under the terms of this agreement New Zealand guaranteed specified margins of preference (generally 20 per cent on imports from Britain and British non-selfgoverning colonies and protectorates) in return for preferences on New Zealand products. The Ottawa Agreement continued in force until modified by the Britain – New Zealand Trade Agreement of 1958, under which the margins of preference on goods from Britain and colonies may be reduced to 5 per cent, 7 ½ per cent, or 10 per cent according to the item. Advantage was taken of this agreement to reduce the margins of preference on many items in the 1962 tariff, but in only a few cases was the margin reduced to the limit provided for in the agreement.
In 1922 an agreement with Australia enabled an exchange of tariff preferences. Under a new agreement in 1933, special rates of duty were introduced on specified goods from Australia, while all other goods were admitted under the British Preferential Tariff. A similar type of agreement had been concluded with Canada in 1932. Both these agreements provided for reciprocal preferences on New Zealand goods entering those countries. These agreements are still in force, although modifications have been made to them from time to time. In 1933 a trade agreement was concluded with Belgium, following which most-favoured-nation rates of duty (intermediate between the British preferential and general rates) were applied to a limited range of goods imported from that country. Similar agreements, which extended the range of goods covered by the Most-Favoured-Nation Tariff, were negotiated with Germany and the Netherlands in 1938.
In 1947 the General Agreement on Tariffs and Trade (GATT) came into existence and New Zealand became a contracting party. This agreement has as its principal aims the reduction of barriers to trade and the development of agreed rules for the conduct of international trade. As regards tariffs, the general agreement laid down the principle of most-favoured-nation treatment for all contracting parties, but provision was made for the retention (but not extension) of existing preferences. A multilateral tariff conference was held in 1947. The participating countries negotiated reciprocal tariff concessions, which consisted of the reduction of rates of duty on some items and an undertaking not to increase the rates of duty on others. Four other series of multilateral tariff conferences were held in 1949, 1950, 1956, and 1960. Following these negotiations, the Most-Favoured-Nation Tariff was considerably extended in the range of items covered and in the number of countries to which it was applied. As a result of all these agreements, the New Zealand tariff is now made up of five duty columns – the British Preferential Tariff, Australian and Canadian agreement rates, the Most-Favoured-Nation Tariff, and the General Tariff.