New Zealand Legislation: Bills

Recommendation

The Foreign Affairs, Defence and Trade Committee has examined the Trade (Safeguard Measures) Bill and recommends that it be passed with the amendments shown.

Introduction

The Trade (Safeguard Measures) Bill seeks to repeal the Temporary Safeguard Authorities Act 1987 and to implement a new safeguard regime for New Zealand that is consistent with the World Trade Organisation’s rules and promotes efficient, transparent, and objective investigative and decision-making processes. “Safeguards” are emergency measures applied at New Zealand’s border. They are usually in the form of a duty, and facilitate adjustment by a domestic industry to competition from increased imports.

Our commentary on the bill addresses only the more significant amendments. It does not cover any minor or technical amendments.

Overview clause

We recommend amending the bill to include an overview clause to explain that the safeguard measures provided in the bill represent just one of several trade remedies available, and to clarify the distinctions between them and guide potential users to the most appropriate form of remedy. In addition to safeguard measures, there are also remedies available against dumped and subsidised goods, which are provided for in the Dumping and Countervailing Duties Act 1988, and transitional safeguard measures, which are provided for in the Tariff Act 1988. The latter may be applied in certain circumstances under some of the free trade agreements entered into by New Zealand, if tariff reductions under the agreement have resulted in an injurious increase in imports from the free trade partner.

Provisional safeguard duty—termination or reduction

As introduced, clause 15 of the bill would provide the Minister with a wide-reaching discretionary power to terminate or reduce a provisional safeguard duty. We consider that this power is too wide and should be subject to a “parameter of compliance”. We therefore recommend an amendment to clause 15(1) to limit the Minister’s discretion to terminate a provisional safeguard measure by requiring that the Minister be no longer satisfied that there are reasonable grounds for believing that the conditions that justified imposing a provisional safeguard duty are met. We also recommend an amendment to clause 15(1) to limit the Minister’s discretion to reduce a provisional safeguard duty by requiring that the Minister be satisfied there are good reasons for doing so.

Refund of provisional safeguard duty

We recommend the amendment of clause 16(1)(a) to provide that the Minister must, unless satisfied that there is good reason for not doing so, refund the difference where provisional safeguard duty is more than the final duty. We consider it is appropriate that the Minister be required to make a positive decision not to remit the duty.

We recommend further amendment of clause 16(2) to provide that the Minister must, unless satisfied that there is a good reason for not doing so, refund the provisional safeguard duty where no final duty is imposed.

Provisional safeguard duty—exempting imported goods from certain countries from a provisional safeguard duty

We recommend an amendment to clause 13 of the bill to provide for the Minister to exempt imported goods from certain countries from a provisional safeguard duty on the same basis as a safeguard measure.

As introduced, the bill proposes that the Minister is permitted to exempt imported goods from certain countries from a safeguard measure, but not from a provisional safeguard duty. We understand that this is necessary to comply with WTO rules that require the exemption of developing countries from a measure in certain circumstances, and to comply with the requirements of some of our free trade agreements that have a reciprocal mandatory or discretionary requirement to grant an exemption from a measure, or to further New Zealand’s international relations or trade goals. We consider that it is just as important to be able to exempt certain countries from a provisional safeguard duty as from a safeguard measure.

Notification and publication

We recommend that the bill be amended to provide that the following Ministerial orders, which the bill as introduced provided were regulations and subject to disallowance by the House, be published in the Statutory Regulations (SR) series:

• imposing a provisional safeguard duty (clause 13)

• imposing a safeguard duty (clause 18)

• extending a safeguard duty (clause 22).

We recommend that the following Ministerial orders be treated as regulations and be subject to disallowance by the House (with consequential publication in the SR series):

• exempting imported goods from certain countries from a provisional safeguard duty (clause 13)

• terminating or reducing a provisional safeguard duty (clause 15)

• exempting imported goods from certain countries from a safeguard measure (clause 18)

• exempting imported goods from certain countries from an extended safeguard measure (clause 22)

• terminating or reducing a safeguard duty (clause 25).

We consider that our recommendations would provide consistency in the way actions were notified, published, and scrutinised by the House.

Types of safeguard measures

We recommend the deletion of clause 17(d), which provides that a safeguard measure can consist of “any other action the Minister considers appropriate”. We consider that the types of safeguard measures in clause 17(a) to (c) are comprehensive; and likely actions other than those provided for in the bill, such as the monitoring of particular imports by the Ministry of Economic Development, would not require legislative authority.

We also recommend an amendment to clause 17(b) to delete the words “or an exemption from any duty”, because there is no case in which a safeguard measure could be an exemption from a duty under the Tariff Act 1988.

Safeguard measure—exemption of imported goods from certain countries

We recommend amending clause 18(3) to clarify the purpose of the discretion of the Minister to exempt imported goods from specific countries from a safeguard measure. We consider that the purpose of the discretion should be to comply with New Zealand’s international obligations as a party to the World Trade Organisation Agreement or other agreements, or to further New Zealand’s international relations or trade goals. We understand that these trade goals might include managing a delicate stage in a trade negotiation process.

Notification of chief executive’s report

We recommend an amendment to clauses 18 and 23 to require the notification of the chief executive’s report about a safeguard investigation or safeguard review, to ensure conformity to WTO rules.

Duration of a provisional safeguard duty and a safeguard duty

We recommend an amendment to clauses 14(2), 19(2), and 23(2) to provide that the order making a provisional, final, or extended safeguard duty may specify that the duty will be for a period less than the minimum duration provided for in those clauses.

We believe that the Minister should have the flexibility to impose a lesser time in appropriate cases. The bill as introduced does not allow the Minister to impose a provisional safeguard duty, or a safeguard duty, or an extended safeguard duty, for less than 200 days, 4 or 8 years respectively.

Duration of measures other than a safeguard duty

Clauses 19 and 23 set out the periods for which a safeguard duty and an extended safeguard duty could apply, including their maximum duration. These clauses do not, however, specify the duration of a safeguard measure imposed by Order in Council under the Tariff Act 1988, the Customs and Excise Act 1996, or the Imports and Exports (Restrictions) Act 1988. A safeguard measure imposed under these Acts is subject under WTO rules to the same maximum duration as a safeguard duty and an extended safeguard duty. We recommend an amendment to clauses 19 and 23 to specify in these cases the periods that will apply and their maximum duration.

Extended safeguard measure—exemption of imported goods from certain countries

We recommend amending clause 22(3) of the bill to provide that the discretion of the Minister to exempt imported goods from specific countries from an extended safeguard measure is subject to compliance with New Zealand’s international obligations as a party to the WTO Agreement or other agreements, or the need to further New Zealand’s international relations or trade goals.

Safeguard measure—termination or reduction

We recommend an amendment to clause 25(1) of the bill to provide that the Minister’s discretion to terminate or reduce a safeguard measure or to recommend the termination or reduction of a safeguard measure is subject to the requirement that the Minister be satisfied that there are good reasons for doing so.

Safeguard review investigation—no ability to change measures

We recommend the deletion of clause 21(c)(ii), which provides that in a review of a safeguard measure, the chief executive must investigate which measure is appropriate. Our recommendation accords with WTO jurisprudence, which has established that in extending the duration of a measure the type of measure being applied must not be changed; for example, it would not be possible to change a safeguard duty to a quantitative restriction. To ensure consistency, we also recommend amending clause 22(1)(c) to delete the words “is the appropriate measure”.