NEW ZEALAND'S TARIFF.

Press, Volume LXIX, Issue 20905, 12 July 1933, Page 10

NEW ZEALAND'S TARIFF.

DOMINION TOBACCO. GREATER PROTECTION SOUGHT. REPRESENTATIONS MADE TO COMMISSION. [THE PBZBB SpecUl Sirnce.j WELLINGTON, July 11. Representations on behalf of the Motueka tobacco growers for greater protection for New Zealand-grown leaf were made to the Tariff Commis«ion to-day. Mr S. G. Smith, chairman of the executive of the Moteueka Tobacco Growers* Association, and Mr K. J. Holyoake, M.P., presented the case for the growers. Mr Smith said that they represented 700 growers in the Motueka district, and they claimed that a measure of protection was necessary if the industry was to continue to nourish. From time to time, and when the duties were altered last session, they had waited on the Government in order to impress upon the Cabinet the necessity of maintaining a ratio between the import duty on foreign leaf and the excise on locally-manufactured tobacco. This had not been done, in so far as in 1930 the excise duty was Is 8d per lb (on cut and plug tobacco) and the import duty on unmanufactured leaf was 3s per lb, while in 1931 the import duty was lowered to 2s 6d per lb, and the excise was raised to 3s 8d per lb. The duties were now the same on imported leaf, while the excise had been raised to 4s Old per lb on all cut pipe tobacco manufactured in New Zealand and entered for home consumption. As a result, more foreign leaf was being imported into New Zealand than the amount of local tobacco used, and far more than was reasonably necessary for blending purposes. It would appear therefore, that under the existing duties it wa3 cheaper for manufacturing companies to import and use foreign leaf than to use the local article. Expansion of Industry. In the growers' view, in order to enable the growing industry to expand in New Zealand, the import duty on foreign leaf should be so regulated that it would have the effect of discouraging the manufacturing companies from importing too large a quantity. The duties on foreignmanufactured tobaccos should perhaps also be adjusted in order to allow Dominion manufacturers to compete on --» more favourable basis. The growers suggested an import duty of 3s 2d per lb on unmanufactured leaf, which would be a rise of 8d on the present duty, and which would be a direct encouragement to local manufacturers to U3e more New Zealand leaf. Dr. G. Craig (chairman of the commission) asked if they wanted an increase in the duty on imported manufactured tobacco. Mr Smith said that they were not stipulating any definite figure; but if the duty were increased it would be an additional encouragement to the local industry. Professor B. E. Murphy (a member of the commission): You want as much as you can get? Mr Smith: Yes.

Professor Murphy: In that respect you don't differ very much from other sections of the community. Mr Smith: We don't want a prohibitive duty at aIL Our idea is that there should be a small increase for ihe purpose of educating the public to use local leaf. If a prohibitive duty were imposed, it might mean that the companies would use SO or 90 per cent, of the local leaf, and the public might not like it—the change-over would be too sudden.

Margin of Protection. He said that they could not see how the suggested duties would in any way detrimentally affect the manufacturing companies who used their leaf. Apart from one suggestion they had made, they left it to the commission to decide the best method of increasing the present margin of protection in favour of the New Zealand grower. At the present time, the tobacco crop from the Motueka district was valued at about £200,000. The industry was confined to small areas, and tobacco was about the only product that would yield a sufficiently high return an acre to enable a man to make a living off a small area. The New Zealand grower had to contend with the American grower, whose costs of production, owing to black labour, were very much lower than in New Zealand; and at the present time, the American grower was also being subsidised by his government. The imposition of a higher duty would not contravene the Ottawa Agreements, as it would affect a foreign country; and If a duty were imposed, the present sales tax on locally manufactured pipe tobacco could be removed. "Unless increased protection is given," said Mr Smith, "we fear that the growing industry has practically reached its peak or will decline." Professor Murphy: Won't it decline in any case with the present outlook? Mr Smith: We hope that if the companies are encouraged to use more local leaf, there will be a gradual expansion. Professor Murphy: The immediate outlook is not good. There is an overcompetitive and impoverished market. You think that will pass? Mr Smith: We don't think it will continue. Mr Holyoake: There is still plenty of room for the local leaf. The Ottawa Agreement. Dr. Craig pointed out that the tooacco was manufactured in the United Kingdom, and that under the Ottawa Agreement they were bound to place the United Kingdom manufacturer on the basis of the domestic competitor. Mr Holyoake said that a small increase of duty on the imported leaf would not contravene the Ottawa Agreement. Professor Murphy: Don't you think the consumer should have a say in this? Mr Smith said that if more local leaf were used, the effect in the long run would be to cheapen the price of cigarettes. Mr G. A. Pascoe (a member of the commission) said that he could not see how tne uicreasing of the import' duty would cheapen the price of tobacco. Mr Holyoake said that if a larger amount of New Zealand tobacco were used the price would not rise. Mr Smith said tnat that had been the experience in Australia, where a local grower had a greater measure of protection than in New Zealand. Professor Murphy: I can't see how i the raising of the tax on imported tobacco can cheapen tobacco to the consumer. Mr Holyoake: At present the New Zealand consumer demands an im-

■» ported leaf because he has not been educated to New Zealand tobacco. Professor Murphy: When you talk about "educating" the New Zealand consumer, I think you really mean "compelling" the New Zealand consumer. Mr Holyoake: It is a matter of terms. Professor Murphy: Yes. I think you want the coercive type of education. If New Zealand leaf was preferred by the consumer your problems would disappear. You want a tariff to force him to use your prodect? Mr Smith: That is so to a certain extent. We don't want a prohibitive tariff. Professor Murphy: You want to pi' the consumer in the position where if he insists on his demand for imported tobacco, he must pay for the privilege? How this can be consistent with a lowering of the price of tobacco to the consumer is not clear to me. The Excise Duty. Mr Smith said that the alternative would be to lower the excise duty on New Zealand tobacco. This ■■ ould put cheaper tobacco on the market. In answer to Mr J. B. Gow (a member of the commission), Mr Holyoake said that it would be possible to place another 1000 families in the tobaccogrowing industry. They were satisfied with the price they had been obtaining, and all they desired was a gradual expansion of the industry. "The crux of the whole matter," he said, "is that the duties on tobacco are being levied for revenue purposes, and we want them arranged in such a way as to permit the industry to be fostered in New Zealand instead of in the United States." Mr G. L. McClure, representing H. J. Heinz and Co!, Ltd., London, asked for a reduction to 5 per cent, of the present duty of 20 per cent, on baked beans, cooked spaghetti, and soups.