N.Z. “Lulled” By Failure Of E.E.C. Talks

Press, Volume CII, Issue 30267, 21 October 1963, Page 14

N.Z. “Lulled” By Failure Of E.E.C. Talks

(From Out Own Reporter) H ANMER SPRINGS, October 20. Since Common Market negotiations had fallen through New Zealanders had been lulled into a false sense of security, Mr L. H. Govan said in his presidential address yesterday to the New Zealand Textile and Garment Manufacturers’ Federation conference at Hanmer Springs. “This is wrong and dangerous,” said Mr Govan. “We know not what the future may hold, but one thing is sure —we must strengthen our position.”

It was valuable to look at the E.E.C. in view erf the proposed customs union between New Zealand and Australia, Mr Govan said. During 1963 the growth of the Six had slowed somewhat while Britain’s economic activity bad strengthened. If and when Britain’s membership was reconsidered she would be talking from greater strength, but the community she sought to join would not be the same one that General de Gaulle had high-handedly debarred her from entering. “No longer can a country of E.E.C. have its own policy in isolation—it must conform to what the other countries want. This leads us to thoughts on an AustralianNew Zealand customs union. “I believe there are certain industries which eagerly seek such a union, and on your behalf I wish them the best of Australasian luck. I observe that these industries will not be hurt by Australian imports into New Zealand but will be able to export to Australia with ease. Naturally also, one finds that the same industries in Australia are against the idea. The dairy industry and some aspects of the timber and timber products industries •re classic examples. “Maybe there are some industries which will not be affected by a customs union, and to that extent it will be a good thing. We realise that an omelette cannot be made without breaking eggs,

but we don’t want any politician playing bell with a big stick and a basket of ‘our’ eggs.” N.Z. Company Tax

New Zealand company tax, which was 50 per cen t higher than Australian, would have to be equalised—the only pleasant thought in the whole study, Mr Govan said. If words on the subject of export manufacturers were exportable at one penny each, the exchange crises in New Zealand would be nonexistent, but only when incentives reached the level where it was almost as profitable to export as to sell locally would exports of manufactured products show any appreciable rise. The two-tier coverage of the Arbitration Court also impinged on the export problem, and the “general order” system was methodical madness which placed New Zealand in a disadvantageous position on the export marked. If there had to be “general orders” they should apply only to people who had not had an increase since the previous one, Mr Govan suggested. An allied subject- was that of oversees capital invested in New Zealand. Canada was cited as a horrible example of this, and Australia was also spoken of with a knowing nod. It was said tha-t New Zealand must not fall into this trap.

The two problems were how overseas investment could be kept to a minimum and how overseas interests obtained the funds to invest. New Zealand companies and individuals did invest their surplus moneys in New Zealand industry and commerce, but after living and paying taxes they simply did not have enough left to invest in capital formation at the desired level. ‘‘We tax those who earn. The more they earn, the more they're taxed. Apparently it is a sin to earn and one must pay the penalty. Tax on Spending “Tais highlights the advantages and basic sense of a tax on spending—a sales tax. No doubt it is an unpopular proposal, but it would certainly discourage spending and leave more funds available for investment,” Mr Govan said.

It had to be acknowledged that a provision would be needed in this case to protect the low income group, but if New Zealand insisted on her high standards of living she would have to rely on overseas investment to expand the economy and provide the jobs to maintain the high standards of living. Oversees investors worked harder, were taxed less, saved more, and thus had excess funds to invest. Manufacturers had been shaken by the change of rules in the import licensing game —or running fight, said Mr Govan. However, there was still a restricted opportunity for manufacturers to get import licences in their own hands, and it was imperative that this should be done wherever possible. Where any trade group felt the need for tariff or import control protection, it should arrange a private meeting of producer and user to establish the extent of their common ground, and the public arguments would be brought to a minimum, to the benefit of all concerned.