N.Z. AND THE E.E.C—II SOLUTION TO N.Z. PROBLEM “SHOULD NOT BE DIFFICULT”

Press, Volume CVI, Issue 31359, 3 May 1967, Page 16

N.Z. AND THE E.E.C—II SOLUTION TO N.Z. PROBLEM “SHOULD NOT BE DIFFICULT”

New Zealand lamb accounts for over 25 per cent of all the meat imported into Britain. In recent years such exports to Britain have been worth approximately £6O million in New Zealand. For the most part Continental Europeans do not eat lamb, although more people are wanting it now as a result of publicity campaigns initiated by New Zealand. At present, the Common Market countries do not have a common agricultural policy regulation for sheepmeats; nevertheless, there are tariffs in each country of about 20 per cent and some members also impose severe quantitative restrictions on lamb. For example, France bans frozen lamb; and Germany admits, under quota, amounts which are very small in relation to the potential demand.

Because the Common Market countries need to import meat, particularly beef—they are net exporters of dairy roducts—the common agricultural policy regulations in respect of meat are generally less restrictive than those relating to dairy products. Sooner or later the Common Market will formulate a regulation for sheepmeats. It is difficult to say what form such a regulation might take but it is inconceivable that it would include the terms under which Britain today imports New Zealand lamb completely free either of dutv or of quantitative restriction. If Britain joined the Common Market and some form of levy svstem were introduced. New Zealand lamb would be placed at a considerable disadvantage in relation to supnlies of meat from the Common Market countries. The consequent increase in price in the United Kingdom could result in a fall in Consumption. To some extent, also, lamb •might well be replaced by other types of meat in the average household in Britain. Joint Products Under New Zealand farming conditions, lamb and wool are joint products. This makes the export of lamb at satisfactory prices a matter of particular national importance. If New Zealand cannot continue to sell its lamb its developing wool production will be retarded. Exports of wool returned New Zealand over £l2O million in 1966. New Zealand would moreover suffer as a result of lower production of skins, tallow, sausage casings and other by-products, exports of which in 1965-66 added nearly £3O million to New Zealand’s overseas earnings. In some respects lamb can be looked at in the same way as butter. Both are basic products in New Zealand’s export trade. The Common Market countries are, however, not significant producers of sheepmeats but rather potential importers. The problem of accommodating New Zealand’s lamb exports within the trading pattern of an enlarged Common Market should not present very great difficulties. In recent years, New Zealand has sought to reduce its substantial reliance on the British market for the sale of

the agricultural products on which its economy rests so heavily. Output is rising because of increasing productivity. New Zealand is devoting a great deal of attention and effort to finding new markets. Trade figures show that this move towards diversification is meeting with some success. Between 1956 and 1966, the value of New Zealand’s ex-

ports increased by over £lOO million to a total of £376 million. This increase came from sales in markets other than Britain. It is of great importance that new markets have been opened up, but it is necessary to note the types of goods that are being sold jn them. Increased sales of wool, hides and skins to the industrial countries have been a major element. So has the development of the United States market for beef; the Japanese market for mutton; the Australian market for timber products; and the markets in Asia for milk powders.

Interlocking Markets Unfortunately, there has not been a comparable development of new markets for the key products—butter, cheese and lamb. When set against New Zealand's rising levels of production, these new markets are only partly absorbing the increased output of these three commodities. New Zealand remains heavily dependent on the British market for butter, cheese and lamb. It is a paradox that New Zealand's efforts to diversify its trade have heightened the significance of the British market. The fact is that New Zealand’s ability to sell wool and milk powders to markets in Europe, the United States and Asia depends largely on its sales to Britain of lamb and butter. Were New Zealand to lose the access it has now to the British market, the whole structure of its production for export would be threatened.

Why hasn’t New Zealand found other markets for butter and lamb? In the developing countries, there is a problem of taste and dietary customs. Lack of purchasing power is even more important. In Europe, where there is a demand for dairy products and meat, and people have the money to satisfy it, governmental regulations either prohibit, or severely limit, the freedom of traders to buy from New Zealand. The European Economic Community and many European countries severely restrict the importation of butter, cheese and lamb; the United States also severely restricts imports of butter and, to some extent, cheese.

Market In Japan Much is said about the potential market in Japan for New Zealand exports. It is true that, as a result of sustained efforts on New Zealand’s part, Japan is buying more from New Zealand. In 1966 New Zealand sold Japan over 50,000 tons of mutton, in addition to increasing quantities of dairy products. Even so, it will probably be many years before the levels of income in Japan are sufficient to create a significant demand for New Zealand butter and lamb. On the most optimistic assumption, Japan offers scope for the sale of little more than the projected increase in New Zealand’s output of these products.

In spite of all the thought, ingenuity and effort that has been brought to bear on the problem of finding, encouraging and opening up new markets, the hard fact remains that New Zealand’s programme of market diversification cannot, in the foreseeable future, substantially reduce dependence on the United Kingdom. The inescapable truth is that whatever room there mav be for diversification, New Zealand will still depend upon its continued ability to sell in Britain the bulk of three of its principal exports.

i Diversifying Inhibited Although the search for new markets has not been altogether unrewarding, attempts to diversify agriculture have been largely inhibited because New Zealand soils are not naturally fertile and much of the country is mountainous. The land is quite unsuited to the intensive, arable cropping which is so notable a feature of much of Britain’s countryside. What New Zealand’s poorer soils have been coaxed to do in a climate with adequate sunshine and a sufficient and well-distributed rainfall is to produce an abundance of grass for livestock farming. Even the latest technological developments seem unlikely to alter this situation. As far as New Zealand is concerned, it would do no good to make the attempt to change to cereal crops of sugar beet. They can be grown much more

economically in other parts of the world, and there are already surpluses of these commodities in international markets. Diversification of this kind would accentuate other people’s problems without helping to solve New Zealand’s. No-one would be better off. On the other hand, because the long-term prospects in world markets for beef look

considerably brighter, ways and means of expanding beef production, particularly from dairy herds, are being closely studied in New Zealand. Undoubtedly, beef production from this source will increase. But it is not a feasible alternative to change from intensive dairy farming to beef production because this would not provide sufficient output per acre to give the farmer and his family an adequate livelihood.

Hard-won Prosperity New Zealand's prosperity has not been won easily. Over the years by hard work and by the application of modern production techniques, New Zealand has built up an agricultural industry second to none in its efficiency. Britain’s policy towards the Common Market implies a belief that if Britain joins the Community, under acceptable conditions, Britain's resources—and Europe’s—will be put to more effective use, to the benefit of Britain, of Europe, and of the world. Britain does not fear the fair competition of its prospective partners. Britain's entry into the Common Market would, if special arrangements were not made for New Zealand, cause grave damage to New Zealand's agricultural industry. This is not a declining industry which refuses to accept the challenge of modern technology and the rigours of fair competition. It is the most advanced industry of its kind in the world and it should not be pushed to the wall. In relation to the total European market for butter and meat, New Zealand's exports are not large. It should not be difficult, therefore, given goodwill in the countries concerned, to find a solution to “the New Zealand problem.” New Zealand, like Britain, is not afraid of fair competition. All New Zealand wants is the chance to continue to use its resources in the most productive manner.

The impact of British entry to the European Economic Community on New Zealand’s trading position was set out in a statement issued a few days ago by the High Commissioner for New Zealand in London. For the information of our readers the statement is printed in two parts, the first yesterday, the second today.