An Analysis of State Aid from Europe to New Zealand

Abstract

Where state aid is distorting competition and creating inefficiencies it should and can be (self-)regulated. The European system of external monitoring and disciplines that the countries within the European Union are agreeing to have imposed on themselves has proven to reduce state aid levels and thereby increase overall welfare. Other than those that stem from its WTO commitments New Zealand has no such monitoring mechanisms or disciplines yet does as do many other countries provide state aid in various forms across different sectors of the economy including public services. It is therefore important to understand the rationales behind the provision of different types of state aid as well as its potentially negative effects on welfare. The European experience can then function as a benchmark for New Zealand and other countries in the Asia-Pacific region when considering the design of state aid rules in the future.