Canterbury manufacturers have vowed to survive an almost 50 per cent cut in clothing, footwear, and carpet tariffs over three years. The Government announced yesterday that a freeze on tariff rates, introduced in 1999 to help protect jobs, would end in 2006.
Commerce Minister Lianne Dalziel said, while tariffs would again begin reducing, the Government had held off moving to a zero-tariff regime targeted by the previous National-led Government.
The highest tariff rates of 17 to 19 per cent, which applied largely to clothing, footwear, and carpet, would begin reducing from July 1, 2006. These rates would reduce gradually to 10 per cent by July 1, 2009. Tariff rates on all other goods would reduce to 5 per cent by July 2008.
Canterbury Manufacturers Association president Glen Keen said industries would have preferred a continuation of the freeze "until our trading partners' situations were clearer" but added the result was the best that could be expected. "The gradual nature of the tariff cuts will give the industry time to grow its export capability," he said.
Manufacturers faced stiff competition from Chinese factories, for example, which paid workers only 50 cents an hour compared with $10 to $12 for a New Zealand worker, he said. To survive, New Zealand firms would have to become more competitive and produce high-end, added-value products.
Mr Keen appealed to the Government for assistance to develop export markets for New Zealand manufacturers. "The industry clearly won't be able to survive on the domestic market alone," he said.
Tariff reductions would have a bigger impact on manufacturers of specific items protected by special tariffs, Mr Keen said. Underwear manufacturers, such as Christchurch company Lane, Walker, Rudkin (LWR), were protected by an additional tariff of $1 to $2 on each pair of imported briefs.
In 1991 there were about 5000 clothing industry workers in Christchurch. In the 1950s, when tariffs were as high as 90 per cent and it was illegal to import many products, up to 80,000 people were involved in clothing manufacture. Today there are still 18,000 people employed in the industry.
About 30 small cut, make, and trim (CMT) manufacturers in Christchurch, who make clothes on behalf of other companies, will be affected by the tariff changes, along with big local players such as LWR and sock manufacturer Pacific Brands.
Pacific Brands employs 70 manufacturing staff at its Christchurch factory, where it makes Gold Top, Canterbury, and Jockey socks. Pacific's general manager, Mark Jordan, said the industry had lobbied to keep tariffs but planned for tariff reductions.
LWR general manager Albert Yee was pleased the tariffs were not being slashed too fast, too soon. "The tariffs being set relative to our New Zealand trading partners (are) a better result than the previous extreme position," he said.
Consumers Institute chief executive David Russell said the tariff reductions would be good for shoppers. "In terms of price we need to watch where this stuff comes from. The New Zealand industry shouldn't be forced to face unfair competition but by and large any reduction in tariffs is going to benefit the New Zealand consumer."
Progressive Party leader Jim Anderton, who campaigned against rapid tariff reduction, said the key objective of the Government's programme was to minimise adjustment pressures on firms and regions. "What we rejected was a unilateral move to zero tariffs by 2010. What we will have is a further review in 2006 to determine appropriate tariff rates after 1 July, 2009," he said.
The Government would be working closely with the textile, clothing, footwear, and carpet industries, in particular, to ensure that existing industry and regional development policies were effective in helping those industries work through the adjustment process.
