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Top US manufacturing group calls for US-NZ FTA

National Business Review, New Zealand

2 February 2005

Top US manufacturing group calls for US-NZ FTA

As tipped by Korea’s Yonhap News two weeks ago, the top group representing US manufacturers, the National Association of Manufacturers (NAM), has called for a free trade agreement with New Zealand.

In discussions with the Press Association, NAM’s international director of trade policy, Christopher Wenk, said the nuclear issue was a real sticking point but that resistance from US dairy interests might be an even more difficult obstacle.

He noted that New Zealand’s programme of subsidies for medicines might also cause problems, as it did in Australia.

But NAM said in a report it presented to the US Congress — NAM’s Recommended Candidates for Additional Free Trade Agreement Negotiations 2005 — that there were strong advantages for the US in a New Zealand FTA, particularly since an agreement might allow it to overcome EU dominance in imports of manufactured goods.

New Zealand was one of five countries targeted for FTAs.

The other countries were Egypt, India, Malaysia and South Korea.

In addition, the association put five countries on an "FTA Watch List" — indicating that, once key obstacles were removed, they should proceed to FTAs.

Those countries were Brasil, China, the EU, Japan and Taiwan.

NAM said the average US import duty on imported manufactured goods is 1.8 per cent — and excluding textiles and apparel, it is only 0.9 per cent.

It said 70 per cent of all US imports enter the United States duty-free and that there were only 22 countries — out of 40 — with which the US did more than $US1 billion a year in trade that did not have some form of FTA in place (or in negotiation) with the US.

It said barriers to US goods were much higher in most of the world, even in New Zealand.

It noted in the report that New Zealand is the second smallest importer of US manufactured goods on the NAM list, but is the most open market of the entire group in terms of quality of its judicial system, absence of non-tariff barriers, treatment of customs, treatment of foreign investment, transparency of regulations and other key influencers of trade.
These factors imply a relatively easy FTA negotiation, as New Zealand already has in place most of the factors that would be sought in an FTA. New Zealand’s average applied tariff on US manufactured goods is 3.5 per cent, somewhat higher than the 2.5 per cent duty New Zealand products pay in the United States.

A very important factor with respect to New Zealand, however, is that it is unique among industrial countries in having bound tariff rates that are much higher than its applied rates. Its weighted bound rates on US manufactured goods exports average 12.5 per cent — nearly four times as high as its applied rates. New Zealand could legally raise its tariffs to its bound levels at any time, a possibility that would be precluded by an FTA.

New Zealand imported $1.7 billion of US manufactured goods in 2003, an amount that the NAM model projects will be about $2.5 billion in 2010. The NAM’s linear estimates indicate that this growth could be faster by perhaps one-eighth if an FTA were to eliminate all tariffs on US manufactured goods.

The European Union is New Zealand’s largest supplier, providing about 20 per cent of its imports, compared to the US share of 11 per cent - implying substitution possibilities for US manufactures.
NAM said that the 18 countries with FTAs in place or in negotiation accounted for half of all US exports of manufactured goods.

Of the remaining 22 countries, it discarded from consideration Russia, Saudi Arabia, and Vietnam because they are not yet members of the WTO and do not have the base commitments from which a WTO-plus agreement could be negotiated.

Turkey was excluded because it is now in a customs union with the European Union, and its trade regime is effectively negotiated by the European Commission.