NEW ZEALAND: questions on fisheries subsidies at NZ's WTO Trade Policy Review

Here are a number of questions by the European Union, and New Zealand's answers, at the 2009 Trade Policy Review. It concerns fuel subsidies:

(the references to paragraphs relate to the Report prepared by the WTO Secretariat (WTO document WT/TPR/S/216 of 6 May 2009). The answers can be found in the Record of Meeting which took place on 10 and 12 June 2009 (WTO document WT/TPR/M/216/Add.1).

Q50 In paragraph 26 it is mentioned that New Zealand introduced in September 2008 an emission trading scheme. According to publicly available information the fisheries sector is being treated differently than other sectors as will receive a free allocation of emission units covering 50% of the total of all eligible parties' 2005 emissions from the consumption of fuel. This free allocation will be provided each year from 2011 to 2013.

Furthermore, the official webpage explaining the functioning of the emission trading scheme mentions (see text hereunder) that this measure is a subsidy, for which one of the main raisons d'être is the fact that this sector is exposed to trade.

"Free allocation is being provided to various groups under the emissions trading scheme for a range of reasons. It's technically a subsidy, but it's a transitional measure only available to some emitters."

"The rationale for free allocation of emissions units to forestry and fishing is more that asset values are affected by introducing the emissions trading scheme, so allocation aims to achieve equity rather than deal with economic regrets. Having said this, there is an element of trade-exposure underpinning the rationale of providing free allocation to the fishing sector." (http://www.climatechange.govt.nz/ emissions-trading-scheme/questions-and-answers.html#fishing)

Could New Zealand confirm the above information?

Answer:

New Zealand can confirm that an amendment to the Climate Change Response Act 2002, passed in September 2008, introduced an emissions trading scheme. This scheme was designed as a key instrument to introduce, over time, a price on carbon across the New Zealand economy. The scheme covers all sectors and the six main greenhouse gases, and, as such, is one of the most comprehensive schemes of its kind in the world.

The current legislation contains provision for free allocation as a transitional measure to some sectors of the economy whose competitiveness may be at risk, due to uneven coverage and pricing of carbon across economies in the short term, resulting in carbon leakage. Partial and transitional free allocation is envisaged for some sectors, including forestry, industry, agriculture and fishing, to adapt to this domestic policy measure of emissions pricing in the New Zealand emissions trading scheme (ETS).

We note that other emissions trading schemes, including the EU ETS, also involve the use of free allocation. The legislation is currently being reviewed by a special Parliamentary select committee, the Emissions Trading Scheme Review Select Committee.

Some of the information contained in the website quoted was incorrect, and does not reflect the official view of the New Zealand Government.

Q51 Given that most of New Zealand's fish production is intended for export, such subsidy can be considered a "de facto" export subsidy.

Answer:

We disagree. There remains considerable uncertainty internationally about the application of WTO rules to measures such as free allocation under an emissions trading scheme, which is designed explicitly to enable countries to meet multilateral climate change objectives. These provisions simply level the playing field to avoid a distortion from the application of domestic policy to meet multilateral objectives. This is consistent with emerging international practice to provide a level of transitional assistance under an ETS.

Q52 Has New Zealand carried out an analysis demonstrating that the cost of the emissions trading scheme cannot be passed to customers (most of them third country importers) of New Zealand's fishing industry?

Answer:

New Zealand is a price taker on international markets: the Emissions Trading Scheme will not change this.

Q53 Has New Zealand quantified the financial benefit for New Zealand's exporters of the aforementioned subsidy?

Answer:

There will be no net financial benefit to New Zealand's fishing industry resulting from his transitional measure. The industry will face higher fuel costs given the inclusion of iquid fuels in the ETS. The free allocation will offset only a portion of those costs for a limited period of time.

Here is the link to the WTO website with all the information on the Trade Policy Review of New Zealand.

http://www.wto.org/english/tratop_e/tpr_e/tpr_e.htm