Exclusive Australian licences as a compensatory mechanism within the context of closer economic relationships with Australia

Abstract

All visible trade barriers between New Zealand and Australia are being removed under the Australia and New Zealand Closer Economic Relationship Treaty. A mechanism to meet the conditions of import licence liberalisation is called Exclusive Australian licences. These are allocated 50/50 to Tendered Exclusive Australian Licences and Manufacturer Exclusive Australian licences. MEALs are allocated to manufacturers who apply to import a product that they were manufacturing but which will no longer be competitive on the domestic market under ANZCERT. TEALs are allocated on the basis of tenders made.

The removal of import licences will allow the community to enjoy a higher Community Indifference Curve in the static analysis, but the greatest benefit is the dynamic gains in improved x-efficiency and transfer of technology.

The removal of licences results in an income redistribution. Some argue that in certain circumstances the 'losers' should be compensated. In the present context it has been decided that manufacturers are entitled to compensation. This has been done by MEALs.

The total compensation bestowed by Meals during the first round of ANZCERT is estimated at $3,062 thousand. The implied average mark up on the MEALs is 5%, 3% less than the 8% mark up for TEALs, which compares to the mark up on global licences of 23%.