Manufacturing trade: The changing demand for apparel in New Zealand and import protection

New Zealand import protection was been reduced from amongst the highest in the developed world in the 1980’s to about the OECD average in 1999. At that point, Government stopped further reductions that had been planned. That policy has left import protection on apparel goods (clothing and footwear) at high levels and restricted imports from many important trading partners, particularly in Asia. Future import protection in apparel goods may need to be revisited as New Zealand continues negotiations on free trade agreements with China and other countries. The consumer gains that could be made from further reductions in apparel tariffs and anti-dumping duties will be influenced by recent market changes in New Zealand. Markets have changed a great deal over the last few decades in response to a range of demand and supply side factors. This paper reports on consumer demand elasticities estimated over the last twenty years for apparel items purchased by New Zealand households that would be useful in evaluating further reductions in import protection. The Rotterdam model parameter estimates indicate that the demand for particular apparel items has been very price-elastic with significant cross-price elasticities. This would imply that the overall consumer gains from reductions in import protection for apparel might be less than in the past.