Friday, 23 April 2010

Striking down tariffs

Sir Roger Douglas's office helpfully provides a list of line item tariff collections in New Zealand running through the 2008/2009 year.  The first sheet gives line item accounts; the second, some aggregations.

In many cases, the tariffs collected couldn't cover the cost of categorizing the classified items. For example, we collected $70 in tariff revenues in 2008/9 from "Fruit and nuts, provisionally preserved (for example, by sulphur dioxide gas, in brine, in sulphur water or in other presdervative solutions), but unsuitable in that state for immediate consumption". Is it possible that it cost less than $70 to categorize the items generating that revenue? New Zealand earned $5 in tariff revenues from "artificial graphite; colloidal or semi-colloidal graphite; preparations based on graphite or other carbon in the form of pastes, blocks, plates or other semi-manufactures". About 300 line items list revenues less than $10,000.

Total collections in 2008/09 were $1.7 billion, but the vast bulk of that revenue came from excise equivalent duties on alcohol, tobacco, and oil products that would remain in place if tariffs were eliminated. Eliminating those excise equivalent duties while maintaining domestic excise taxes would be a rather bad idea.

So, where do we get most of our tariff revenue? Clothing at $116 million, followed by footwear at $31.8 million in 2008/09. Maybe there's a reason so many Kiwis go barefoot. Does any possible benefit from protecting whatever domestic shoe manufacturing remains outweigh the costs on poor people trying to buy shoes for their kids? $18 million on food products. More than $20 million on producer inputs - raising the cost of manufacturing other goods here. All these numbers are pretty rough cut tabulations from the supplied spreadsheet and I don't guarantee that I have them all in the right categories.

It looks like the total of non-petroleum, non-tobacco and non-alcohol revenues was about $270 million in 2008/09. Getting rid of the remaining tariffs would not be particularly costly; holding on to them for later use as bargaining chips in free trade negotiations doesn't seem to have much value. Whatever trade gains we might get through negotiation are highly uncertain and a fair way down the track; gains from eliminating tariffs would be immediate.


  1. Hey Eric

    You can find the exact monthly tariff revenue numbers at the same link where you found the excise equivalent duties for alcohol, tobacco and fuel:

    2008/09 came out at $262M and 2009/10 is just $141M in the nine months to March 2010. This would result in $189m for the 2009/10 year going by the trend so far this year. The declining tariff schedule for Chinese imports under the FTA would be a likely explanation for this (and further declines), particularly considering the two biggest sources of tariff revenue - clothing and footwear, as you mention - are largely sourced from China.

  2. @Sam: I'd not noted the partial year results; I'd put the recent decline to recession, but you're definitely right about the effect of the Chinese FTA.