Summary

According to Schiantarelli (2005) the main stylised facts about product market regulation that can be identified by the data obtained from these surveys are:

• Regulatory burdens vary widely across the world. In particular, regulation tends to be more intrusive in poor countries compared to the richer countries;
• The dispersion of regulatory regimes is greater in developing countries compared to in developed countries;
• There has been a general trend towards the relaxation of regulation concerning entry, accompanied by a decrease over time in tariff and non-tariff barriers to trade in manufacturing; and
• There has been substantial deregulation of the service sectors (such as telecommunications, utilities, and transport) in many OECD countries.

Table 3 summarises some of the results found for New Zealand across the different surveys. More specifically, it shows the areas where the surveys appear to reach a consensus and areas where there are inconsistencies between the surveys.

a: This ranking is based on data for 1997.

The different surveys tell us consistently that New Zealand has a low level of price controls. The OECD rank New Zealand 1^st on their price controls index, while the IMD ranks New Zealand 5^th.[12] The Heritage Foundation ranks New Zealand 2^nd equal on its Wages and Prices indicator.

For hiring and firing regulations, however, there seems to be some disagreement across the surveys as to how New Zealand compares with other countries. The WEF ranks New Zealand 54^th on their indicator of hiring and firing, while the World Bank ranks New Zealand 4^th on this score.[13]

On outward-orientated policies, New Zealand does well compared with other countries on trade barriers. The WEF ranks New Zealand 2^nd on its ‘prevalence of trade barriers’ index, while the OECD ranks New Zealand 3^rd equal on its tariff score. In contrast, the World Bank has New Zealand at a slightly less flattering 15^th on ‘trading across borders’ while the Heritage Foundation ranks New Zealand 39^th on its ‘trade policy’ indicator.

Note that the World Bank’s ‘trading across borders’ indicator is quite a different measure to the others. It is a measure of all the documents and signatures required to export and import goods, as well as how long it takes to export and import goods. It is unclear why the Heritage Foundation measure should rank New Zealand so much lower than the OECD ranks New Zealand – the Heritage Foundation uses World Bank data on weighted average tariff rates (weighted by imports) while the OECD uses the simple average of most-favoured-nation tariffs.[14]

However, New Zealand does not do so well on ‘Foreign Ownership barriers’: the OECD ranks New Zealand 21^st equal on this component.[15] The WEF ranks New Zealand slightly better at 11^th place on ‘Foreign Ownership restrictions’. The Heritage Foundation ranks New Zealand 13^th equal on their ‘Capital Flows and Foreign Investment’ factor, while the IMD ranks New Zealand 54^th on the attractiveness of investment incentives to foreign investors. Therefore, there seems to be a broad consensus among these surveys that New Zealand’s outward-orientated regulation policies (with the exclusion of tariffs) are one area where New Zealand might improve relative to other countries. Of course, certain other countries (European countries, in particular) have cross-border arrangements with each other that lower the cost of investment. Given New Zealand is more geographically isolated than European Union countries, and more politically and economically independent, it would be difficult to imitate their investment rules. Also, preserving local ownership of certain land and resources is a recognised cultural objective. It might also be noted that these surveys precede the passage of the Overseas Investment Act 2005, and the establishment of the Overseas Investment Office.

Another area where inconsistencies arise is administrative regulations. In the WEF survey, New Zealand ranked 39^th on their question related to administrative requirements. However, in the OECD survey, New Zealand ranked 10^th on their index of administrative regulations.[16]

New Zealand scores well in the Heritage Foundation survey’s ‘Banking and Finance’ component, ranking 1^st equal. This includes government ownership of financial institutions, restrictions on the ability of foreign banks to open branches, government influence over the allocation of credit, government regulations, and freedom to offer all types of financial services, securities, and insurance policies. The Fraser Institute also ranks New Zealand 2^nd on its indicator of credit market regulations. New Zealand ranks 10^th on the IMD’s index of banking regulation, where respondents were asked whether it hinders or does not hinder competitiveness.

Contradictory results, or idiosyncratic ones, may warrant further study. If New Zealand is the 39^th worst at anything, the 54^th best, it may be a matter of concern. Such results invite further research, perhaps to confirm or refute them, but certainly to understand them.

Another area in which the surveys suggest New Zealand may need to take a closer look at is the size of government. Gwartney and Lawson ranked New Zealand 33^rd on this factor, while the Heritage Foundation ranked New Zealand very low (101^st) for the fiscal burden of government (which is a measure of the tax burden and government spending). When respondents in the IMD survey were asked whether personal taxes discouraged people from working or seeking advancement, New Zealand ranked 40^th, while a similar question on corporate taxes (hampering business activity) saw New Zealand ranked 43^rd.

Another finding worthy of note comes from the IMD survey, which ranked New Zealand 61^st out of 61 countries on whether Environmental Laws and compliance was seen to hinder the competitiveness of businesses. The World Economic Forum survey also suggests that New Zealand has the 10^th most stringent environmental regulations out of 117 countries. (The Heritage Foundation bundles environmental, consumer safety and worker health regulations without reporting separate scores in each category.)

One thing to note about all of these surveys is that they generally do not try and measure the positive impacts of regulation, or how effective they are at achieving their stated policy goals. The main focus is on the ease of doing business, as it affects starting a business, business operations or the ease of trade. There are no assessments, for example, on how consumer welfare is affected by consumer protection regulations, or on how distributional outcomes are being met through service obligations imposed on monopoly industries. One reason for this omission is that those who do the surveys intend to treat the political and social goals of regulation as a given, and ask instead “How much does it cost for a country to pursue its goals?” But this makes comparing countries difficult: a “poor” score on some index might beg the question of whether or not the intervention is achieving some greater good. On the other hand, where policy goals and independent conditions are similar, ranks and scores provide information about how well the regulation is imposed.

An unequivocal response to most of these indices is impossible, because they tend not to provide information on the positive impact of regulation. A “low” rank is not necessarily bad, and a high rank is not necessarily good. It all depends on a country’s policy goals and how effective its regulations are at meeting those goals. Results between countries and over time can be meaningful information, but only when placed in a policy context.