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Free Trade Agreements

02 September 2014

Traditionally many countries or economies have imposed Tariffs, Duties and / or Import restrictions to some degree or other. The intentions are usually to:

  1. Protect local manufacturers
  2. A means of gathering revenue
  3. A means of restricting quantities of specific products into an economy
  4. Protecting the outflow of local currency to pay for imports.

 
Prior to the mid-1980’s, New Zealand had an extremely protected and restrictive economy, famously described as being as regulated as a Polish Shipyard.
 
 Before anyone could import anything they had to obtain an Import Licence (usually buying it from an existing holder), then pay very high Tariff on importation (typically 30-40%), often with an additional 25% Sales tax as the icing on the cake.
 
As an example New Zealand had a large motor vehicle assembly industry (Toyota in Thames, Honda in Nelson, VW in Otahuhu, Ford in Wiri, GM in Wellington and so on). It was almost impossible to import a built up vehicle from anywhere, for any reason.
 
Eventually Government bit the bullet and through the philosophies of Rogernomics, began to adopt less restrictive policies that did away with these artificial constraints.
 
In recent years, most governments and trade blocs have seen great benefit in easing restrictions between themselves in an effort to stimulate trade (whilst still excluding others) – the European Union being a good example, encouraging trade within their members rather than externally.
 
New Zealand relies on being able to sell its produce, particularly commodity products, into foreign markets at the best possible price, (without the imposition of duties or restrictions). Where a bi-lateral Free Trade Agreement has been negotiated, allows duty free import for most goods into NZ, and in return, New Zealand goods duty free entry into the signatories economy.
 
Typically, where a Free trade Agreement is in place, significant benefits follow. New Zealand and China signed an agreement taking effect from October 2008, and under the agreement all tariffs for Chinese exports to New Zealand will be eliminated by 2016, and 96 per cent of New Zealand exports to China will be tariff free by 2019.

                                                                                2008                       2012
Exports to China                                                      $2.1B                     $6.1B
Imports from China                                                  $5.8B                     $7.7B

(Info from Statistics NZ)

News added by: Don Malcolm 02 Sept 2014

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