The Press MONDAY, DECEMBER 18, 1961. Trans-Tasman Trade

Press, Volume C, Issue 29699, 18 December 1961, Page 14

The Press MONDAY, DECEMBER 18, 1961. Trans-Tasman Trade

The New Zealand Institute of Economic Research has published a timely paper on the question of free trade between Australia and New Zealand. This is the institute's second paper, the first —on economic growth in New Zealand from 1950 to 1960—having been published earlier this year. The paper on economic growth was described as a “ re- - search paper”; the later publication is a “ discussion “ paper The study of economic growth was of interest mainly to policymakers and economists; the discussion of the pros and cons of a free trade area deserves a wider readership. Written with commendable lack of economists’ jargon and technical terms, this paper can be commended to farmers, businessmen, and consumers’ councils in fact, to all producers and consumers. As the title “ discussion “paper” implies, the study aims to promote—or provoke discussion rather than to settle all argument. Even so, ample evidence is adduced to justify the tentative conclusion: “ There “ is a prima facie case for ” increased specialisation “ and exchange between “Australia and New Zea- “ land There is less evidence to support this statement, made at the end of the summary: “A partial “ test of the desirability of “ free trade could take the “form of freeing trade in “ some groups of products ”. Indeed, when discussing the effects of integration on existing industries, the paper says: “ It would prob- “ ably be easy, by excluding “ 15 to 20 per cent, of the “ goods traded between “Australia and New Zea- “ land, to avoid any serious “ injury to any industry in “ either country. Neverthe- “ less, if this sort of thing “ were done, we should be “ denying ourselves the “ major advantages to be “derived from the freeing “of trade, namely the “ transfer of labour and “ resources from less to “ more efficient industries in “ each country ”. Might not the exclusion of 15 to 20 per cent, of the goods traded obscure the substantial advantages to consumers to be gained from their inclusion in the free trade agreement? The paper, in effect, dismisses as irrelevant the ingrained preoccupation with the bilateral balancing of trade between the two countries. It is much more concerned “ to examine possible “ changes in trade policies “ with the objects of im- “ proving the efficiency of “ the two economies ...” The paper commends the recent New Zealand conces-

sion to Australia in valuing; Australian imports, for the purpose of assessing duty, in a manner consistent with the current rate of exchange. On the subject of the exchange rate, the paper says the existing rate cannot be regarded as “ sancrosanct ” and that it J would be important before a free trade area was estab- 1 lished “ to determine “whether any change was: “justified”. The New Zea-1 land pound is obviously, over-valued in relation to, the Australian; and a devaluation of the order of 10 per cent, to 20 per cent.! would probably be required. In case there are some who still regard Australia and New Zealand as “growth economies”, it is worth quoting from the paper: “In New Zealand's “case the rate of growth “of productivity has been! “one of the slowest in the “world in the past decade “. . . Australia’s rate of "growth has recently been “ a good deal higher than “ ours, but it is by no “ means high by world stan- i “ dards ”. The view that the smaller partner in a free trade area inevitably loses ground to the larger is contested in the paper. “ We “should not be pessimistic' “about the ability of New “ Zealand manufacturers, “generally to compete on “level terms with their “Australian competitors”.' The paper does not under-! estimate the practical and political difficulties of the establishment of a free, trade area. The more ineffi-i cient industries in each' country will, logically, be' the most severely hurt “although it is highly un-| “likely that any industry; “would be completely ex-: “terminated”. The Australian dairy industry, it is implied, would be one of the “ losers ” by such an arrangement. The New Zealand motor assembly, industry might have been' mentioned as another. Curi-; ously, the paper nowhere! discusses the implications! for the consumers in both , countries of a free trade area. Butter, for instance,! would be cheaper in Aus-, tralia, and motor-cars, cheaper in New Zealand.;

The effects of economic! policy on the man in the! street and on the house-! wife are too often ignored by Governments and pres-i sure groups, which is all, the more reason why they! should not be overlooked in! a publication of this nature. If the wishes of the consumer carried half as much weight as those of wellorganised producer groups, the proposal for a transTasman free trade area would be sure of more sympathetic official study. I