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The direct financial implications for the New Zealand government of entering into and complying with the CEP fall into two categories:
In 2004 revenue collected on imports from Thailand totaled NZ$6 million. As tariffs are phased out over the ten-year transition period under the CEP, the Customs Service will collect progressively less revenue from duty payments. The exact amount of duty collected in coming years will be influenced by any variation in the pattern of imports from Thailand and by the proportion of those imports that qualify for tariff preference under the rules of origin. The revenue foregone as a direct result of the Thai CEP will also be offset by the parallel implementation of the government’s unilateral tariff reduction programme over the period 2006-2009. It should be noted that revenue concerns have not been a determining factor in tariff policy decisions since the mid-1980s and were not considered fiscally significant in the 2002 Tariff Review process.
One-off costs associated with implementing the CEP, incurred over the period January-July 2005, are estimated to amount to NZ$6,600. These largely cover non-recoverable costs associated with preparing a new edition of the Working Tariff (other costs will be recovered through sales of the new edition) and preparing Customs Service staff for implementation of the new rules of origin. In addition, an estimated two FTEs within existing agency establishments (Ministry of Foreign Affairs and Trade, Customs Service, and Ministry of Economic Development) have been devoted to implementation activities over this period.
The ongoing annual costs of meeting New Zealand’s obligations under the CEP are estimated at around NZ$280,000 annually over the next few years (beyond which it is difficult to estimate annual costs). These cover such activities as attending regular meetings of bilateral committees on trade facilitation, the CEP Joint Commission and the Labour and Environment Arrangement committees, new full or partial positions in Ministry of Foreign Affairs and Trade, Ministry for the Environment and Department of Labour for servicing New Zealand’s obligations under the CEP and associated arrangements, and Customs Service monitoring of imports from Thailand. Funding will be provided from existing departmental baselines and any additional funds allocated through the Growth and Innovation Fund in the next Budget.
Government agencies will also be working with the private sector and others to implement strategies for leveraging opportunities from the CEP. Such activities represent an investment in the CEP rather than a compliance cost.
