NEW ZEALAND/THAILAND CLOSER ECONOMIC PARTNERSHIP AGREEMENT

INFORMATION BULLETIN: CONCLUSION OF NEGOTIATIONS

November 2004

Status - Negotiations on the New Zealand/Thailand Closer Economic Partnership (CEP) Agreement have been substantially concluded. Currently a small number of elements are being finalised and the text of the Agreement is undergoing legal checking.

- The full text of the Agreement and the tariff reduction schedules will be released once these are finalised and approved.

- As part of the New Zealand treaty-making process, the Agreement along with a National Interest Analysis will be submitted to Parliament for consideration.

- The target date for implementation is 1 July 2005.

- This bulletin provides a broad outline of the key outcomes for New Zealand.

- A New Zealand/Thailand trade fact sheet is also attached.

FOR NEW ZEALAND EXPORTERS TO THAILAND

Overall Outcomes

- On entry into force of the CEP on 1 July 2005, Thailand will eliminate tariffs and quotas on 52% of imports from New Zealand. Currently only 4% of imports from New Zealand receive duty free access.

- By 2010, a further 13% of trade will be duty free. Another 20% of trade will have tariffs phased out by 2020. Trade restrictions on the remaining 15% of imports (covering only skim milk powder and liquid milk and cream) will be eliminated by 2025.

- The first round of tariff cuts will take place on implementation of the CEP on 1 July 2005 and the second round on 1 January 2006, with subsequent reductions being applied on 1 January each year.

- There is scope within the Agreement to accelerate these tariff reductions in the future.

- The following section covers the outcomes on tariff reductions for New Zealand's major export sectors to Thailand.

Dairy - Tariffs on infant milk formula (currently 5%), casein (5%), lactose (up to 10%) and protein concentrates (5%) will be eliminated on implementation.

- Tariffs on yoghurt (5%), buttermilk (5%), milk protein concentrate (5%) and butterfat (5%) will be removed by 2009.

- The 18% tariff on whole milk powder will drop to 15% on implementation and then phase down to zero by 2020.

- Tariffs on cheese and butter will phase to zero by 2020.

- Tariff and quota restrictions on skim milk powder imports from New Zealand will be removed by 2025.

Fruit and Vegetables - Thailand will, on implementation, eliminate tariffs on most New Zealand horticulture exports to Thailand including sweet potatoes, carrots, frozen peas, frozen mixed vegetables, dried peas, avocadoes, apples, cherries, kiwifruit and persimmons. These items currently face tariffs of up to 40%.

- Thailand will establish and then gradually increase additional New Zealand-specific quotas for imports of fresh potatoes and onions. All trade restrictions on these products will be removed by 2020.

Forestry Products - Most New Zealand forestry exports to Thailand currently face a tariff of only 1%, which will be removed on implementation.

- Other tariffs of up to 30% will be either eliminated on implementation or phased out by 2010. The 12.5% tariff on fibreboard will be cut to 5% in 2005 and removed in 2012.

Meat - The 30% tariff on sheepmeat will drop to 24% on implementation, then phase out by 2010.

- The 50% tariff on beef will drop to 40% on implementation and will phase down to zero by 2020.

- The 30% tariff on beef offal will phase to zero by 2020.

Processed food and beverages - Thailand's current 60% tariff on wine will drop to 30% on implementation and then phase to zero by 2015.

- Thailand will phase out the current 30% tariff on processed potatoes by 2015.

Manufactured Goods - Almost all Thailand's tariffs on imports of mechanical and electrical machinery items from New Zealand will be eliminated either on implementation or by 2010.

- Tariffs on most other industrial items will phase to zero in 2010 although a selected number will be eliminated immediately.

- Significant New Zealand manufactured exports which stand to benefit from the CEP include gas pumps (15% tariff to be eliminated on implementation), plastic goods (tariffs of up to 30% to be phased to zero in 2010) and aluminium foil (7.5% tariff to be phased to zero in 2007).

FOR NEW ZEALANDERS DOING BUSINESS AND INVESTING IN THAILAND

The CEP will make it easier for New Zealand business people and investors to operate in Thailand.

Temporary entry for business people - Business visitors will be able to obtain one-year multiple-entry non-immigrant business visas valid for visits of 90 days at a time.

- Business people with such visas will not need a work permit to conduct business meetings and attend seminars in Thailand, provided this does not involve receiving remuneration.

- Intra-corporate transferees employed as managers, executives or specialists in Thailand can have their work permits extended annually, up to a maximum of five years.

- Intra-corporate transferees will be permitted to attend business meetings and seminars anywhere in Thailand without giving prior notification to the Thai authorities.

- New Zealand companies in Thailand may apply for work permits for New Zealand employees prior to their entry into Thailand.

- The spouses of investors and intra-corporate transferees with non-immigrant visas will have the right to be employed as managers, executives or specialists, provided they comply with the relevant Thai laws and regulations.

Investment - Thailand will allow 100% equity participation and remove restrictions on the number of New Zealand directors for investments in a number of manufacturing sectors including machinery and mechanical appliances, food processing, paper products, software manufacture, furniture and textile manufacture.

- The Agreement provides for additional protections for New Zealand investments. These include compensation for losses and appropriate protection against expropriation unless internationally accepted criteria are met.

NEW ZEALAND'S COMMITMENTS

Goods - New Zealand currently provides duty free access for 65% of imports from Thailand.

- On implementation, New Zealand will eliminate tariffs on a further 20% of imports from Thailand, covering a range of items including the remaining tariffs on agricultural products, air-conditioning machines, processed food and sporting equipment.

- New Zealand will remove tariffs on further items by 2010, at which point 97% of Thailand's current exports will become duty free. This list includes aluminium products, some automotive parts, furniture, plastics, steel and iron products, plasterboard and wallboard, and whiteware items.

- The remaining tariffs, covering textile, apparel, footwear and carpet products, will be phased to zero by 2015.

Investment - Thai investors will remain subject to New Zealand's overseas investment screening regime.

- The CEP provides for any disputes between investors and governments to be resolved through domestic courts or, if both Parties agree, through international dispute settlement mechanisms.

Temporary Employment - New Zealand will provide access for qualified Thai chefs to be employed on contract in New Zealand without labour market testing for up to four years.

- New Zealand will also explore the scope for developing a system to recognise the qualifications of traditional Thai massage therapists with a view to facilitating their entry into New Zealand for temporary employment purposes.

OTHER PROVISIONS

Rules of Origin - Products must be substantially transformed in either country to qualify for preferential tariff treatment under the Agreement.

- A change of tariff classification (CTC) rule is used to determine if the "substantially transformed" requirement has been met (a value-added rule serves this purpose in CER and the New Zealand/Singapore CEP).

- Textile, apparel, footwear and carpet products must meet a 50% FOB Thai/New Zealand content rule, in addition to the change of tariff classification requirement.

- Robust provisions for verification of the rules of origin are included.

Trade Remedies - Under the CEP, both parties will retain their existing WTO rights and obligations on anti-dumping and countervailing duties procedures and the use of global safeguard measures (although there is discretion to exclude partner country trade from any global safeguard action).

- Bilateral transitional safeguards will also be available.

- Thailand will apply special safeguards for the most sensitive agricultural products (whole milk powder and a number of other dairy products, beef, beef offal and processed frozen potatoes). Imports of these products will benefit from reducing tariffs up to a certain volume based on historical imports, plus a growth factor. Once the volume of imports from New Zealand reaches this level, these safeguards automatically trigger a snapback to the normal tariff. The same provisions were included in Thailand's Free Trade Agreement with Australia.

Other Trade Related Issues - The CEP contains provisions aimed at facilitating trade and reducing transaction costs through cooperation and information sharing. The CEP will establish mechanisms for regulators and officials to work together more effectively to resolve any barriers to trade in the areas of:

o customs procedures;

o sanitary and phytosanitary measures;

o standards and conformance; and

o electronic commerce.

- Efforts will be made to facilitate consideration of each Party's sanitary and phytosanitary requests within the existing biosecurity regimes.

- The CEP reaffirms both countries' WTO commitments on intellectual property rights. It also aims to facilitate the enforcement of intellectual property rights and the promotion of innovation through cooperation between the Parties.

- A chapter on competition policy is included in the CEP to promote fair competition in line with the APEC Principles of non-discrimination, comprehensiveness, transparency and accountability.

Services - A substantive negotiation on the liberalisation of services trade (including recognition of qualifications) is scheduled to commence within three years after entry into force of the CEP.

Government Procurement - The two countries will work progressively to eliminate barriers related to government procurement. Further substantive negotiations to expand on the initial commitments are envisaged.

Treaty of Waitangi - As in the New Zealand/Singapore CEP, this Agreement contains a specific provision whereby New Zealand maintains its rights to take measures including in fulfilment of its obligations under the Treaty of Waitangi.

Creative Arts - Similar to what was negotiated in the New Zealand/Singapore CEP, this Agreement will not preclude the Parties from taking the necessary measures to protect national treasures or specific sites of historical or archaeological value or to support creative arts of national value.

Reviews - Both sides are committed to a general review of the Agreement after five years and specifically to review the special agricultural safeguard mechanisms after three years.

NEW ZEALAND - THAILAND

ARRANGEMENTS FOR LABOUR AND ENVIRONMENT

INFORMATION BULLETIN: CONCLUSION OF NEGOTIATIONS

November 2004

Status - In parallel with the Thailand Closer Economic Partnership negotiations New Zealand and Thailand have negotiated Arrangements on Labour and Environment.

- It is expected that the Arrangements will be signed at the same time as the CEP Agreement in 2005.

- The full text of the Arrangements will be released along with the text of the CEP Agreement.

- This bulletin provides a broad outline of how the Arrangements will work.

Key Outcomes

Objectives The Arrangements are aimed at promoting sound labour policies and practices and conserving and enhancing environmental quality through cooperation and dialogue.

Key

Undertakings

In support of these objectives, New Zealand and Thailand will:

- work actively to ensure that their labour and environmental laws, regulations, policies and practices are in harmony with relevant international obligations.

- not seek to gain trade or investment advantage by weakening or derogating from their labour or environmental laws and regulations.

- not use their labour or environment laws, regulations, policies and practices for trade protectionist purposes.

- promote public awareness of their labour and environmental laws, regulations, policies and practices domestically and ensure their processes for the operation and enforcement of their labour laws are fair, equitable and transparent.

How the Arrangements will work? - Cooperative activities will play an important role in the operation of the Arrangements.

- Labour and Environment officials committees will be responsible for the cooperation activities and implementing other elements of the Arrangements.

- A process for problem resolution is established based on consultation through the Labour and Environment Committees and at Ministerial level, if necessary.

Public Participation - The Labour and Environment Committees may consult, seek the advice or invite the attendance of the non-government sectors or relevant experts at their meetings.

- Members of the public and non-government sectors may submit views or advice on matters relating to the operation of the Arrangements.

NEW ZEALAND/THAI ECONOMIC RELATIONSHIP: KEY FACTS

BILATERAL GOODS TRADE: 2003

Value (NZ$)

New Zealand exports to Thailand $368 million

New Zealand imports from Thailand $529 million Average

tariff rate

Duty paid on New Zealand exports to Thailand $33 million 9%

Duty paid on New Zealand imports from Thailand $8 million 1.5%

Major NZ Exports to Thailand Major NZ Imports from Thailand

Item Value (NZ$m) Item Value (NZ$m)

Milk powder $112.3 Motor vehicles $139.2

Infant milk formula $60.2 Computers $20.4

Forestry products $43.7 Air-conditioning machines $19.6

Other dairy $36.7 Processed fish $18.0

Seafood $16.7 Telephone equipment $14.8

Hides and skins $12.0 Crustaceans $12.0

Electrical equipment $9.5 Polymers $11.9

Vegetables $6.0 Seats/chairs $11.2

Fruit $5.9 Iron and steel items $11.2

Machinery $5.0 Glass $10.9

- Thailand is New Zealand's 18th largest export market

- New Zealand is Thailand's 38th largest export market

PEOPLE TO PEOPLE LINKS: 2003

- 19,000 Thais visited New Zealand

- 4,350 Thai students studied in New Zealand

- 70,000 New Zealanders visited Thailand

THAI KEY ECONOMIC INDICATORS : 2003

GDP (US$ billion) $143.2

Real GDP Growth 6.8%

Population (million) 64.0

Unemployment rate 2.2%

ENDS

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