NZ, Australia to discuss relaxing rule of origin thresholds

By BRIAN FALLOW

The Australian and New Zealand Governments have agreed to review the rules of origin provisions of the closer economic relations pact - an area of the 20-year-old agreement thought to be showing its age.

The rules of origin require 50 per cent local content in order for goods to qualify for tariff-free entry into the other CER partner.

But since that threshold was set globalisation has tended to increase the imported content of manufactured products.

Trade Minister Jim Sutton and his Australian counterpart Mark Vaile said that as well as the overall review of the regime, due to be completed in June next year, officials had been given the task of drawing up "incremental improvements".

One would ensure that imported intermediate goods would be "appropriately" disregarded from the total cost of the finished good for the purposes of calculating local content.

Statisticians define intermediate goods as those that are used up or transformed in industrial production processes. Reducing the denominator of the rules of origin ratio in this way would make the threshold easier to meet.

A joint Customs committee will be set up to ensure consistency in the way both countries administer rules of origin.

The ministers emphasised the need for consistency in the treatment of outsourcing and equitable treatment of integrated and outsourced manufacturing operations.

"It's about time," said Business NZ chief executive Simon Carlaw.

But he warned that the review of tariffs under way in New Zealand, impacting particularly on the textiles, clothing and footwear sector, had the potential to create a new rules of origin problem.

If New Zealand moved to reduce tariffs in that sector while Australia was more circumspect its textiles could have access to our market while the reverse would not apply.