M.F.L.P. Replies

Press, Volume CIV, Issue 30879, 12 October 1965, Page 9

M.F.L.P. Replies

Our reviewer replies: “If Mr Rosenberg read my reply, he would surely have withdrawn his statement about Mr Gainer Jackson, for not to withdraw it in face of the evidence, is irresponsible. “Mr Rosenberg does not answer my inquiry as to how much extra employment has been created by the establishment of a cycle industry or explain where the £70,000 extra which must be found because of the higher prices of New Zealand bicycles comes from. It is no use arguing that the cycle industry is only a very little one. Many other industrial enterprises started in just the same way and have ended with the same results with respect to higher prices and inability to tackle all foreign comers competitively. This is what monopoly of the market gives the enterprises and although there may be several firms within the protected industry, they all enjoy the monopoly which protection gives them. Some New Zealanders are able to evade the monopoly by going overseas and bringing back goods purchased at a lower price than in New Zealand. Just lately observers at the docks in Wellington and Auckland have commented on the number of bicycles being brought in by New Zealanders returning home. “If Mr Rosenberg read my reply, he would also have noted the conditions I laid down for the establishment of new industries in New Zealand. They are in fact, much the same as those professed to be laid down by the Department of Industries and Commerce when proposals for new industries come up for recommendation. That is, reasonable price comparability and maintenance of quality are looked for. The New Zealand content of the product should be as high as is economically possible. New industrial development should strengthen New Zealand’s economic structure through reducing the dependence on imports or producing new commodities which can be exported or both. Each new project should be able to show a positive contribution to the balance of payments. The possibility of developing new skills and techniques is also taken into account.

“I do not suggest that New Zealand should never work up imported materials but I do hold that the utmost care should be taken to select industrial activity which will lead to over-all gain. Mr Rosenberg talks grandly of volume added in production and says- that it makes no economic difference if the raw materials are indigenous or come from any other country. If I decide to put eyes in dolls and I import the eyes plus the dolls, no doubt by employing people for this enterprise so as to sell dolls in New Zealand I add value in production (pay wages and get profits for my pains) but I also add a burden to the balance of payments by im-

porting dolls and eyes. Does Mr Rosenberg really contend that this makes no economic difference? It might of course be useful if the fitting of the eyes and the finish of the dolls were so splendid and efficient that the dolls could be exported and on balance, add to New Zealand's gains from exports. But what I fear is that eyes and dolls would be imported and the net result would be a dear doll which would have to be bought whether badly or well made because it was New Zealand produced and no foreign dolls complete with eyes would be imparted because of the danger of competition. Has not this been the pattern? “No one would be better pleased than I if New Zealand possessed the wherewithal to run a successful cotton industry which could supply internal needs plus a large volume of exports as did the British industry, or if New Zealand could imitate Switzerland and make watches which could earn world renown. But what article of New Zealand manufacture promises success of this kind? “I do not welcome the fact that New Zealand has to kotow to foreign lenders, but if this country puts herself in a position where she must borrow (and personally I am alarmed that further borrowings have to be made in times of favourable export prices) she will find lenders will impose conditions and it may well be (as in the case of Australia and Japan) that the abolition or restricted use of import licensing will be one. Foreign lenders suspect that New Zealand's balance-of-payment difficulties are of her own making and indeed that the proliferation of small industrial concerns producing at high cost and involving New Zealand in heavy importing of producers’ goods and equipment does not serve the country. “What I would welcome is a comprehensive investigation into the protected industries to find out whether they fulfil the conditions laid down for them at their inauguration. The Tariff and Development Board suggested in 1963 that, where appropriate, the situation might be examined with a view to determining whether protection was serving the best interests of the community or whether the industry was operating and developing along lines most satisfactory in the national interests. Many of the concerns have been going for a long time now and we should be able to draw up a profit and loss account. I consider that it is now possible and desirable to decide which industries, if any, have contributed to New Zealand’s national well-being. “In short, I think that the policy of industrialisationshould be carefully reexamined. But—from those who believe that any sort of industrial activity is acceptable—l say, ‘God defend New Zealand.’ ” —M.F.L.P.