Economists Discuss Possibilities Of Australian-N.Z. Free Trade

Press, Volume C, Issue 29435, 10 February 1961, Page 19

Economists Discuss Possibilities Of Australian-N.Z. Free Trade

(From Our Own Reporter)

WELLINGTON. Feb. 9. Possibilities of a free trade area between Australia and New Zealand were discussed today at the opening session of the conference of the New Zealand Association of Economists. Discussion on the papers centred on political difficulties, with some reference to particular industries such as Australian dairy farming. Nearly all speakers considered a tree trade area would benefit both economies. Two specialists in international trade, one an Australian and one a New Zealander, each presented a paper on the subject They agreed generally on the theoretical advantages of such an association, and differed only in their suggestions as to how It might be accomplished. The possibility of a free trade area between Australia and New Zealand should- be taken seriously in both countries, said Professor F. W. Holmes. Macarthy professor of economics at Victoria University. He said he did not claim to have proved the desirability of such an arrangement—it was obvious that much detailed work would have to be done to examine the issues before it could be contemplated.

The political climate in both countries was not at present conducive to rapid progress towards complete free trade.

"But if the possibility is admitted that there might be advantages in complete free trade in the longer run. It is likely that we shall take more interest than we have so far in making in the immediate future co-operative arrangements, less far-reaching than a free trade area, whidh might provide a partial test of the desirability of going further.

"For example, we might consider the possibility of freeing trade in one or two selected groups of products. You may recall that the six members of the E.E.C. began the process of integration by creating a coal and steel community, and that this was given the blessing of G.A.T.T. Could Australia and New Zealand do something similar in the case of pulp and paper, or perhaps iron and steel? “Moves by governments and by business interests to create closer ties between the two countries and to help to break down the fears which cloud our vision at present are more likely to receive positive action if we see a complete freeing of trade as an ultimate possibility, than if we rule out this possibility entirely. "Making arrangements for increased specialisation and exchange between Australia and New Zealand would not provide any panacea for the problems with which our countries are confronted,” Professor Holmes said. “What matters most in reducing our vulnerability and raising our standards of living is that each country should make better and more scientific use of its available resources. Other things, such as the level and nature of our capital investment, and our ability to improve the skill and enterprise of our labour force are more important than our international trading arrangements in achieving this objective. "I hope, however, that I have shown that there is a prima facie case that increased specialisation and exchange between Australia and New Zealand might make a useful contribution to improving the efficiency of our economies, and that, therefore, our governments and people might look much more seriouslv than they have in the past at the posmeasure of integration of our economies.” Australian View

The Australian, Mr H. D. Black, a senior lecturer in economics, outlined conditions in which a tree trade area would "grow, evolve, rather than be contrived.”

“If we learn to co-operate by doing things together along these lines, then I see a basis slowly growing for the gradual acceptance of a common policy of actively expanding our direct trade contacts. In this sense, a free trade area would, as I see it, not so much be a plan devised or imposed.” he said.

After tracing the history of trans-Tasman trade, which Mr Black said was characterised

by ad hoc, empirical policies, he asked was a larger concept, "such as a free trade area.” conceivable. He quoted Mr R. G. C. Parry Okeden, chairman and managing director of John Lysaght, Pty.. Ltd, as saying: "The possibility of an Austra-lian-New Zealand trade bloc has been canvassed on both sides of the Tasman and the possibility should definitely be explored.” Mr Black deplored “intense national pride” when it took the form of fostering unsound industries at the expense of trade relations. “The economies which Australia enjoys from her growing size and more populous market are

presumably worth enjoying by New Zealanders in purchases from us where competitive, e.g, with the United Kingdom, in price. The same applies to Australia.” Possible Moves Mr Black listed the following possibilities of public action by governments "in ascending order”:— (1) Leave the course and content of trans-Tasman trade largely to businessmen. (2) Develop Ministerial and official consultation. (3) Set up a joint commission on economic growth. (4) Concert economic development by appropriate tariff action. If such policies were followed, said Mr Black, he believed a free trade area would evolve. "We would find we had begun to construct it, without having gone through the process of signing, so to speak a treaty of Rome or a free trade convention.” Mr W. Rosenberg, senior lecturer on economics at the University of Canterbury, said the formation of a customs union between the two countries would affect the inflow of capital to the two countries. Because Australian rates of tax were lower foreign capital would be diverted from New Zealand to Australia. Australian tax rates were lower because social benefits were lower than New Zealand's. Thu suggested that tax rates and social benefits needed to be made more equal than at present before a customs union could be contemplated by New Zealand. Higher benefits in New Zealand to some extent were offset by higher wages in Australia, said Professor Holmes in reply.