N.A.F.T.A. disquiet

Press, 8 November 1978, Page 24

N.A.F.T.A. disquiet

Little happened at the New ZealandAustralia Free Trade Agreement talks in Canberra recently. Perhaps that is just as well or the talks might have been disastrous The feelings of Australian manufacturers towards N.A.F.T.A. have probably not been as hostile since the agreement was made in 1965. But some working parties have now been agreed on to consist of manufacturers from both sides of the Tasman, with officials from New Zealand and Australia present as observers and, if needed, as advisers.

Australian manufacturers are questioning whether N.A.F.T.A. is worth while. The Confederation of Australian Industries has suggested that N.A F.T.A. benefits New Zealand industry but doubts whether it benefits Australian industry It has called on the Australian Government to re-examine N.A.F.T.A. because it sees greater advantages in more extensive trade ties with the countries of South-East Asia. Some hopeful signs may be found in the fact that manufacturers, not just the two Governments, are becoming increasingly involved in the problems: that some Australian manufacturers realise that the chances of their competing with New Zealand manufacturers are greater than with some Asian or SouthEast Asian manufacturers; and that the Australian Prime Minister (Mr Fraser), less protectionist than he was at the beginning of the year, wants Australian industry to be more competitive. Some of the benefits of the tour by the New Zealand Deputy Prime Minister. Mr Talbovs, early this year are also evident.

The Australian disillusionment comes from several sources. The manufacturers see that the conditions under which N.A.F.T.A. has worked have changed and that in manufactures the trade is now about 1:1: over all the trade still runs about 3:2 in Australia's favour. The lower wage rates in New Zealand, the New Zealand export incentives. and a few other things give New Zealand manufacturers an advantage. Not least among the advantages is the New Zealand import licensing scheme. Some items of trade now on Schedule

A. the duty-free list, are controlled by New Zealand through its import licensing scheme. Australian manufacturers have been arguing that if an item on Schedule A is controlled by import licensing in New Zealand, then it should be moved from the duty-free list. If this were effected. N.A.F.T.A. would be going backwards.

The problems are not going to disappear because a few working parties have been established. One of the contentious items is carpet. New Zealand insists that Australian carpet imported has to have at least 80 per cent of wool: Australian manufacturers say that their competitive advantage lies in the synthetic carpet. Synthetic carpet has implications for the New Zealand wool industry, possibly even for the New Zealand sheep industry, but serious thinking will have to be done in NewZealand about, being more flexible about some imports. Another Australian criticism is of the small quota of carpel, 200,000 square metres, New Zealand allows in. Divided among Australian manufacturers this amount produces doubts about whether it is worth while to try to develop the market. New Zealand is allowed to export 2.1 million square metres of carpet to Australia.

For some lime it has been apparent that rethinking on N.A.F.T.A. is needed, if the trade is to be freed. One radical Australian proposal has been that some markets should be integrated. White ware, forest products, and cars have been suggested as suitable industries to examine The domestic policies of both countries would have to be brought into line to make such integration of the market possible. A combined market of 17 million must have its attractions to some industries. Perhaps even more significant for both countries would be the pooling of resources for research and development so that various industries could be more original in their exports. Some risks are present in more radical approaches to the trading relationship between New Zealand and Australia. but risks are also present in policies which put security and inflexibility above all else.