Reasons for optimism

Press, 30 August 1978, Page 28

Reasons for optimism

The reasons for optimism slightly outweigh the reasons for pessimism about world trade at the moment. By the end of September the success or failure of the “Tokyo Round” of Multilateral Trade Negotiations being conducted in Geneva will have become clearer. Success, which will mean freer world trade, would be good for New Zealand: the consequences of failure might mean a rise in protective world trade practices the consequences of which would be frightening for the world at large and New Zealand in particular.

The’ M.T.N. is a comprehensive attempt to refashion world trade. It elimination of tariff and embraces the reduction or non-tariff barriers to trade and the negotiation of codes of conduct aimed at strengthening and interpreting the fundamental rules for world trade established in the General Agreement of Tariffs and Trade more than 30 years ago.

The latest round was launched with the “Tokyo declaration” in September of 1973. Little progress has been made because of the economic and monetary instability which has prevailed since then. The negotiations are important to New Zealand because some of the most serious barriers to New Zealand’s economic recovery lie in the barriers to trade, including quotas and tariffs. The quotas on New Zealand’s dairy products to the European Economic Community, the 20 per cent levy on New Zealand lamb exports to Britain and the restriction on beef and dairy produce to Japan are among the most obvious barriers. In earlier rounds of world trade talks, New

Zealand has not come off well. This is because of the way in which agricultural products have been considered to be separate from industrial products. Several major steps have been taken in freeing world trace in industrial products, and agricultural products have been left to the last and when there has been an agreement reached it has related mainly to grains. This time it should be different. One of the weaknesses in the past has oeen the lack of clout New Zealand has been aoie to exercise. The M.T.N. are conducted in several ways that would make horsetrading seem to be something for the novice. One sort of negotiation consists of offers made by various nations to remove barriers to their awn trade on condition that the whole world trade is similarly freed. Another sort consists of countries making specific demands on other countries and offering something in return. New Zealand depends heavily on trading worldwide, but is a major world trader of significance in only one commodity — dairy products, in which it commands one-third of the world trade. But dairy products are one of the most protected everywhere. New Zealand has ..imply not been able to offer enough in return or bring enough other pressure to bear to get its wav.

What has happened this time is that the United States has become utterly determined to have agricultural products included in any deal at the M.T.N. It has said, in fact, that if there is no movement on agricultural products, then it will walk away from the table. American determination

should have a beneficial effect on New Zealand, though if the most likelv path is taken it will also have some short-term adverse effect on New Zealand. What the United States wants from the European Communities is an abolition of the variable levies imposed against American wheat and other grains and a modification of the European subsidised agriculture. What the Europeans want from the United States is access for dairy products, particularly quota cheese (cheese that costs less than $1 a pound). The American demand on subsidies applies mostly to exports. It is doubtful if even the United States has enough clout to get the E.E.C. to drop the Common Agricultural Policy. The Americans have been so annoyed about the European subsidies that they have practicallv stopped the exports of cheese to the United ■States from Europe. The interests of New Zealand and the United States overlap about the European subsidies. New Zealand’s complaints about the C.A.P. have been two-fold: the subsidies have increased production while the high prices have discouraged consumption, and the subsidies have meant that the E.E.C. has had surplus production to sell on world markets that New Zealand would like for itself. If a deal is made between the United States and Europe, Europe will have to cease exporting heavily-subsidised dairy products. This should provide opportunities for export, for New Zealand. The short-term disadvantage for New Zealand lies in the fact that

while the annoyed Americans have excluded European cheese, New Zealand has become a major supplier, perhaps even the major foreign supplier of quota cheese to the United States. If a deal is made, New Zealand stands to lose some of that market to European cheese manufacturers. However, in the longer term, the fact that there would not be large quantities of subsidised European cheese around for sale to third markets would benefit New Zealand. One of the factors which may affect the outcome just Suggested is the Congressional elections in the United States. Some members of Congress may be prepared to fudge the details of a world trade agreement in the interests of getting re-elected. Congress has not necessarily set its face as hard against trade protectionism as has the Administration. Administratively, dairy products are being discussed in the dairy subgroup of the M.T.N. just as meat is discussed in the meat sub-group. Hosts of other matters in which New Zealand has an interest, though a lesser one, are being discussed. If the package is approved, and the Bonn economic summit in July charged the negotiators with completing the package by December 15, world trade in many items will be different. One of the points to be borne in mind is that the system is one of demand and offer. New Zealand would be required to accept some items at a lower tariff and some items now on import licensing will have barriers put up by New Zealand removed.