Story: Customs and tariffs

Page 4. Tariffs and the GATT

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Liberalisation of trade

In 1948 New Zealand, along with many other countries, became a member of the internationally instituted General Agreement on Tariffs and Trade (GATT). By the 1970s GATT was beginning negotiations on non-tariff barriers to international trading. In the 1980s these negotiations extended into agriculture by way of the Uruguay round.

New Zealand had a direct interest in the liberalisation of international agricultural trade, especially after Britain joined the European Economic Community in 1973. Trade had already been liberalised with the country’s most significant trading partner, Australia, by the New Zealand Australia Free Trade Agreement (NAFTA) in 1965 and Closer Economic Relations (CER) in 1983. Other countries had also successfully abandoned import licensing (which required importers to be licensed by the government).

Licensing was also criticised for rewarding cronies and limiting competition. From 1984 governments adopted policies of deregulation, both domestically and internationally. David Lange’s Labour government abolished import controls, and in December 1987 announced a programme that would reduce most tariffs to less than 20% by 1992. This was later extended to less than 10% by 1996.

Border absurdities

 

In 1988 the New Zealand border tariff listed over 13,000 discrete items. ‘Tarpaulins normally attracted a 22.5 per cent duty; they were free if they came from Australia, Canada, Pacific Forum members or from “Least Developed Countries”; but they paid 18 per cent if produced by “Less Developed Countries”. A substantial industry existed to help companies negotiate the complexities of the tariff and the complicated appeals process for concessions.’1

 

Zero tariffs

In 1994 New Zealand (and 143 other countries) ratified the creation of the World Trade Organization in a treaty which set rules and standards to reduce tariffs and encourage international trading. By the end of 1999 New Zealand had rated around 95% of its tariffs at zero, leaving the remaining residual tariffs (mainly textiles and clothing) to be phased out.

The hope was that after the Uruguay round of negotiations, New Zealand’s actual and potential trading partners would remove tariffs on agricultural goods – but this did not happen. Barriers to free agricultural trade have remained, because of domestic political considerations in many major economies, particularly the United States and Europe. New Zealand has pursued bilateral trading agreements instead, and completed the first major one in 2008, with China.

The end of a tariff policy

New Zealand had established border tariffs as a major source of revenue in 1841, and controlled imports as a central instrument of economic management – but its economic position in a globalised world compelled it to ignore the maritime border as a means of economic management.

In the 2000s, about a third of government tax revenue came from transaction taxes (mainly excise and sales taxes), but very little of this was collected at the border. The Department of Customs, one of the country’s oldest government agencies, still existed (as the New Zealand Customs Service). But the border tariff had been abandoned as an instrument of fiscal and economic purposes.

Footnotes:
  1. Paul Goldsmith, We won, you lost, eat that!: a political history of tax in New Zealand since 1840. Auckland: David Ling, 2008, p. 307. Back
How to cite this page:

Tony Simpson, 'Customs and tariffs - Tariffs and the GATT', Te Ara - the Encyclopedia of New Zealand, http://www.TeAra.govt.nz/en/customs-and-tariffs/page-4 (accessed 23 September 2019)

Story by Tony Simpson, published 11 Mar 2010