WORLD TRADE
ORGANIZATIONG/SCM/Q2/NZL/11
8 May 2003
(03-2454)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by AUSTRALIA1 and the UNITED STATES2
Regarding the New and Full Subsidies Notification of NEW ZEALAND3
The following communication, dated 6 May 2003, has been received from the Permanent
Mission of New Zealand.
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QUESTIONS FROM AUSTRALIA
The following are responses to questions submitted by Australia in document
G/SCM/Q2/NZL/10 regarding the notification of th e New Zealand pursuant to Article XVI:I of the
GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures, in document
G/SCM/N/71/NZL.
IV. REGIONAL PARTNERSHIPS PROGRAMME
Q1. How are the grants determined under this programme?
Reply
Grants for strategy development and capability building are approved by the CEO of Industry
New Zealand on the recommendation of an Assessment Panel made up of representatives ofgovernment agencies and two independent consultants.  Applications are assessed against criteria
published on the website www.industrynz.govt.nz.
Grants for Major Regional Initiatives are determined by the Board of Industry New Zealand
after assessment by the Assessment Panel and a Grants Committee of the Industry New ZealandBoard.  Guidelines for applicants are published on the website www.industrynz.govt.nz.
Q2. While the scheme is primarily intended for governance groups, are there targeted
industry sectors under this programme?
Reply
There are no targeted industry sectors under this programme.
                                                     
1 G/SCM/Q2/NZL/10
2 G/SCM/Q2/NZL/9
3 G/SCM/N/71/NZLG/SCM/Q2/NZL/11
Page 2
Q3. What are the principal industry sectors that ultimately benefit from the programme,
and the percentage of total aid they received?
Reply
The only principal industry sectors that can be identified are those benefiting from the four
Major Regional Initiatives that have been approved to date.  Each initiative will receive
NZ$2.0 million.  The Major Regional Initiatives are:
- A Biotechnology Park in Waikato province
- Forestry in Rotorua- Food Processing in Hawkes Bay province
- A Wine Research Centre in Marlborough province.
VI. TECHNOLOGY FOR BUSINESS GROWTH SCHEME
Q1. We note that funding is aimed to help strategies for business growth.  What are the
criteria and are there any performance milestones or targets?
Reply
Research and Development projects for this scheme are required to meet the following
criteria.  They should:
(i) have a clear link to a business strategy focused on developing new markets for high-
value, technology-based products, processes or services with reasonable commercialpotential;
(ii) be unlikely to proceed without the scheme's support;(iii) be technology-based projects undertaken in a "learning by doing" model;  and(iv) have the potential to create an endurin g increase in technological capability in the
firm.
The objectives of the scheme are:(i) to foster research and development, technological learning and technological
innovation within firms;  and
(ii) to support projects that may enhance a firm's technological capability and may enable
firms to move towards high-tech, high-value markets.
Achievement of the objectives is assessed with annual monitoring and accountability reports
that show the extent of progress towards objectives.G/SCM/Q2/NZL/11
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QUESTIONS FROM THE UNITED STATES
The following are responses to questions submitted by the United States in document
G/SCM/Q2/NZL/9 regarding the notification of the New Zealand pursuant to Article XVI:I of the
GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing Measures, in documentG/SCM/N/71/NZL.
A. GENERAL QUESTIONS
Q1. In the September 2001 reply to questions from the United States G/SCM/Q2/NZL/8, you
indicated that neither the Public Good Science Fund (PGSF), nor its successor  had been used to
subsidize the New Zealand meat industry.  However, in a December 1998 PGSF EvaluationReport No. 84, published by the Ministry  of Research, Science and Technology
(http;//www.morst.govt.nz), you indicated that sheep and meat farmers were targeted and
potential recipients of PGSF funds.  The report goes on to state that these farmers participate in
PGSF research funding through groups that collect levies or belong to a group involved with a
research organization.  Please confirm whether this is still the case and whether Meat New
Zealand is eligible for or is receiving PGSF funding?  In addition, the report goes on to state
that PGSF funds have been used to improve tec hnology to chill meat for export.  Please explain
why this was not notified as a subsidy to the New Zealand meat industry?
Reply
It is correct that farmers have participated in the process of public good science and
technology (PGST) research funding and continue  to do so through their respective industry
associations as one of a number of  general classes of end-users.  All research providers, including
(i) universities, (ii) publicly owned research institutes and (iii) private sector firms as well as(iv) research associations (such as Meat New Zealand) funded by industry levies, are eligible to
competitively tender for PGST research funding.  In  general, PGST research carried out by research
associations is not appropriable by any one private sector firm.  Indeed, this research is publicly
available to all end users world-wide.
The PGST fund has funded a wide range of proj ects and does not target particular sectors.
The nexus between a particular research project and a successful technological improvement isdifficult to accurately define.  To date, no research of this kind has resulted in intellectual property
that has been protected.  For these reasons PGST funding is not considered a subsidy to be notified.
Note:  The Public Good Science Fund (PGSF) no longer exists but the type of funding that replaced it
is referred to as Public Good Sc ience and Technology (PGST) funding.
Q2. Can you please provide additional information regarding the Sustainable Farming
Fund?  How many projects were funded under this programme?  What agricultural sectors are
specifically targeted for assistance?  Are cattle ra nchers or beef processors eligible for assistance
under this programme?
Reply
The Sustainable Farming Fund was set up to support community-driven programmes aimed at
improving the financial and environmental performance of the land based sectors.  No priority isassigned to any particular sector, rather the Fund provides grants allocated on a merit basis through a
fully contestable process.  Approved project work programmes last from one to three years.  Projects
must seek to address a need that is identified by a community of interest.  Applicants need toG/SCM/Q2/NZL/11
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demonstrate commitment to the project and be willing to contribute to it.  The maximum grant
payable will normally not exceed $200,000 per project per year.  Projects may include:
- investigations into the efficient use of land-based resources, including water;
- information/technology transfer;  and- identifying barriers to and options for improved land use and management.
This programme meets the fundamental criteria of Annex 2 to the Agreement on Agriculture,
and meets the specific criteria of paragraph 2 – General Services (2(d), extension and advisory
services).  Funding for the direct benefit of individuals and commercial entities is specifically
excluded.  Notifications have been provided to the Committee on Agriculture.
To date some 180 projects have been approved for grant funding assistance.
Along with all other agricultural sectors beef producers are eligible to provide qualifying
project proposals for consideration.  Issues beyond the farm gate, including issues associated with
beef processing are generally ineligible for project support.
An overview of the Fund and the projects that have been funded to date is provided at
www.maf.govt.nz/sff.
B. BIZ ENTERPRISE AWARDS
Q1. How many individual firms received aid under this programme?  What are the
principal industry sectors that receive this aid, and what percentage of total aid do they receive?
Are cattle ranchers eligible?
Reply
Through the BIZ programme 247 companies received aid  in the 2000/2001 financial year.
The Enterprise Awards Scheme does not target businesses in particular sectors.  However,
almost three-quarters of total awards granted in the 2000/2001 financial year were to companies in the
following sectors:
- biotechnology
- creative industries (for example design, music and fashion)
- food
- information and communicat ions technology (ICT)
- niche manufacturing (for example marine and furniture).
Cattle ranchers are not excluded from the scheme, however costs of buying animals and feed
for breeding programmes are ineligible.
Q2. Please explain what is considered an early-stage business concept and project?
Reply
The awards assist businesses, entrepreneurs and start-up companies with the development of
well-defined business projects or concepts.  The project/concept should be advanced to the stage
where its commercial potential has been established.  The project/concept must be directed at the
development of the commercial production of goods or services and must fit in to the following
eligible categories of assistance: business development and financial planning, marketing strategies, e-G/SCM/Q2/NZL/11
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commerce or e-business strategies, product design and development, business or operational
excellence or environmental management.
C. BUSINESS GROWTH FUND
Q1. Is assistance under this programme limited to certain industry sectors?  How many
individual firms received aid under this programme?  What are the principal industry sectors
that receive this aid, and what percentage of total aid do they receive?
Reply
No, assistance under the Business Growth Fund is not limited to certain sectors.  Through the
Business Growth Fund 40 firms received assistance in the 2000/2001 financial year.
The principal industry sectors that received assistance under the Business Growth Fund were
ICT, niche manufacturing and wood processing.  Companies in these sectors received almost two-
thirds of total aid.
Q2. Could you please explain in more detail what types of costs are funded under this
programme in order to “help businesses implement strategies for business growth?”  Please also
provide an example of what is considered  “specialist expertise and information”.
Reply
The Business Growth Fund is aimed at enhancing the management and organizational
capability of small and medium-sized firms.
The type of costs funded under this programme are for services such as strategic and business
planning, expansion of operational capabilities and activities, design and technical advice, systems
improvements, marketing assistance.
The most common utilised forms of specialist expertise and information are strategic
planning, financial planning, human resource planning, and systems and operations improvement.
D. MAJOR INVESTMENT FUND
Q1. Please explain how new investment opportunities are identified for support under this
programme.  In particular, what criteria are used to determine eligibility?  Are there any
sectoral requirements, or are all industry sectors eligible?
Reply
The criteria applying to the Major Investment Fund, now termed the Strategic Investment
Fund, are that the potential investment:
- Involves net new investment of at least NZ $50 million over five years, and/or is able
to create 200 new jobs in five years;
- Would not occur in New Zealand without support from the Fund;- Complements New Zealand’s areas of competitive advantage;- Has no negative competitive consequences domestically; andG/SCM/Q2/NZL/11
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- Would involve a high level of clear spill-over benefits.
The Fund provides grants for pre-feasibility and feasibility studies so that potential investors
can quantify substantial investment opportunities.  The criteria for eligibility are:
- Assessment of the commercial viability of the proposed investment;
- Outline of how the investment will be funded; and- Demonstration that the proposed study would be unlikely to proceed without
government support.
The Strategic Investment Fund can also underwrite assistance provided through other
government programmes for significant investment projects.  In effect this acts as a guarantee of
funding for significant projects where this funding is sought from other government programmes (see
1.2 below for a description of the other types of government funding that may be sought in this
context).
In addition, the Fund can provide cash grants for significant projects where funding from
other government programmes is inappropriate or where the programmes do not fit with the project’s
requirements.  The criteria for eligibility for cash grants is the same as for pre-feasibility and
feasibility studies outlined above.
There are no sectoral requirements.  All industry sectors are eligible.
Q2. Please explain how access to other government funding programmes is facilitated under
this programme.  Have all of these other programmes been notified to the Subsidies Committee?If not, does the Government of New Zealand intend to notify such programmes?
Reply
Under the programme, potential foreign investors are advised of Government programmes
that are available to companies in New Zealand.  The programmes have social objectives such as
funding for the recruitment and training of people on long terms unemployed lists, or researchfunding.  The potential investor’s request for support is assessed by the relevant government
department for the sector and the total amount of funding then determined.  The guarantee of funding
serves to assure the investor of a minimum of funding subject to achievement of agreed milestones
relating to job creation and research.
Where any such programmes fulfil the notification requirements under Article 25.1 of the
Agreement they have been notified – for example the 2000/2001 notification (G/SCM/N/71/NZL)
includes notifications in respect of two research funding schemes “Grants for Private Sector Research
and Development Scheme” and the “Technology for Business Growth Scheme”.  New Zealand will
continue to review all assistance schemes to determine whether notification under the Agreement isnecessary.
Q3. How many individual investors received aid under this programme?  What are the
principal industry sectors that these investors represent?
Reply
Two individual investors received aid under this programme in the 2000/2001 financial year.
As mentioned above, all sectors are eligible for assistance under the programme.  The two investorsG/SCM/Q2/NZL/11
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that received assistance under the programme in the 2000/2001 financial year were in the marine and
automotive component manufacturing sectors.
E. REGIONAL PARTNERSHIP PROGRAMME
Q1. Is assistance under this programme granted to individual enterprises or only to
“governance groups” such as local authorities?  Can you please define what is considered a
“governance group”?
Reply
Assistance is granted to governance groups only.
Governance groups are established by regions to drive economic development.  They include
representation from local authorities, iwi (indigenous tribal groups), business and industry leaders and
community organizations.
Q2. With regard to the form of assistance, please explain what is meant by “strategic audits”
and “capability building”.
Reply
The approach that New Zealand has taken is based upon creating sustainable local
competitive advantage, making the most of valuable local resources, business and people rather than
providing a vehicle for transfers from other regions.  A strategic audit identifies these resources.
Capability building concerns building local capacity to implement the regional economic development
strategy.  It may include designing practical project plans informed by the strategic plans, undertakingadditional studies and helping develop local economic development skills.
F. GRANTS FOR PRIVATE SECTOR RESEARCH AND DEVELOPMENT SCHEME
Q1. How many individual firms received aid under this programme?  What are the
principal industry sectors that receive aid, and the percentage of total aid they received?
Reply
There were 223 grants approved through the Grants for Private Sector Research and
Development from the scheme’s inception on 11 September 2000 through to 30 June 2001.
The principal industry sectors that received assistance under the Grants for Private Sector
Research and Development Scheme were electrical and electronic goods, engineering and technical
consultants, manufacturing and software.  Companies in these sectors received over 60 per cent of
total aid.
Q2. Is funding limited to the R&D stage or is funding available throughout the production
cycle of the product in question?
Reply
Support provided under the Grants for Private Sector Research and Development Scheme is
awarded for increases in 'experimental development' research as defined in the OECD Frascati
Manual.  (Note: The Frascati Manual is the intern ationally recognized methodology for collecting andG/SCM/Q2/NZL/11
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using research and development  statistics, and includes definitions of basic concepts.)  The firms
must co-fund a minimum of 67 per cent of each project.  The recipients are mainly small firms.
G. TECHNOLOGY FOR BUSINESS GROWTH SCHEME
Q1. Please explain what criteria must be met for a firm to meet the definition of
“technologically capable”.  Is funding under this programme available to any size firm?  How
many firms have received aid under this programme?  What are the principal industry sectors
that receive aid?
Reply
The definition of “technologically capable” firms as it relates to the Technology for Business
Growth Scheme (TBG) is as follows, "Technologically capable firms are those firms that, in the
Foundation's view, have developed a comprehensive set of competencies in the area of technological
innovation and recognised that research, science and technology capability is fundamental to
sustained competitive advantage".
This is distinct from a related definition that is used for the Grants for Private Sector Research
and Development Scheme (GPSRD) for technologically  aware firms.  The definition used to define
technologically aware firms in th e GPSRD scheme is as follows, "Technologically aware firms are
those firms that, in the Foundation's view, have developed a basic set of competencies in the area oftechnological innovation and recognise that increa sed investment in research and development can
lead to improved business performance".
Any firm can apply but a 'technological stretch' test relative to the firm’s current capability is
applied, so as to weed out 'business as usual' proposals that are likely to proceed anyway, and soshould not receive public funding support.  Support is restricted to early-stage experimental
development and a minimum of 50 per cent co-funding from the firm is obligatory.
In the 2000/01 financial year, the Technology for Business Growth Scheme funded 200
projects.
The principal industry sectors that received assistance under the Technology for Business
Growth Scheme  ICT, electronic, agriculture and primary industries services.  Companies in these
sectors received approximately two-thirds of the total aid.
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