• Dr Lockwood Smith
International Trade

The Alliance policy of imposing a five percent tariff on all imported goods, except those from Australia, has a fundamental flaw which undermines Mr Anderton's objective of raising one billion dollars revenue, and leaves an unexplained deficit in his $6.5 billion spending plans, according to Trade Minister Lockwood Smith.

"Perhaps in recognition of the huge benefits that have accrued to New Zealand exporters through free trade with our neighbour, Mr Anderton has excluded Australia from his loopy tariff policy," Dr Smith said.
"But this exception will be the undoing of his intention to raise one billion dollars revenue through the tariff policy.

"An analysis of applying a five percent across all imports, excluding those from Australia, shows that on current figures the Alliance would already fall short of its one billion dollar objective(1).

"And when the rational market response to the policy of applying a 5% tariff on all imported goods is taken into account, one realises that raising one billion dollars is an impossible dream.

"The Alliance tariff policy will give a five percent comparative advantage to Australian exporters, meaning that importers will simply avoid the tariff barrier by sourcing ex-Australia, rather than their current markets. For example, people may choose the Australian manufactured Holden rather than a Toyota from Japan as they'll receive a comparative benefit of 5% on goods imported from Australia.

"As well as failing to achieve its objective, the Alliance's tariff policy will harm New Zealand businesses and families. The application of a five percent tariff on petrol, for example, will raise the cost structure right through the economy - for farmers, business-people, transport operators, and worst of all, those New Zealand families that can least afford it.

"The Australian loop-hole will undermine Mr Anderton's revenue projections, meaning that he'll have to find other ways to fund his campaign promises.
"The question then becomes how much a Labour-Alliance Government will have to raise taxes to fund its spending promises," Dr Smith concluded.

Inquiries Ben King 04-471-9864 (w) 025-514-790 (c)

(1) Source, New Zealand External Trade Statistics, June Years Ending 1999, Compiled by the Ministry of Foreign Affairs and Trade from Statistics New Zealand Data.
* Total Imports (All economies):$24,259,144,000
* Total Imports (Australia):$ 5,374,447,000
* Total Imports (Less Australia):$18,884,697,000
* 5% of Total Imports (Less Australia):$944,234,000