THE TUESDAY, JUNE 19, 1979. Both cheer and gloom

Press, 19 June 1979, Page 18

THE TUESDAY, JUNE 19, 1979. Both cheer and gloom

Mr Muldoon has returned from his short trip to the United States and Europe with the prediction that oil prices might double during 1979, with the observation that Europe is concentrating on energy, and with the further prediction that conservation measures may be taken internationally. He was cheered by the reception given to his speech to the Organisation for Economic Co-operation and Development and by the attitude taken by Mrs Thatcher, the British Prime Minister, to New Zealand trade. He was also cheered by the support his O.E.C.D. speech had from Australia, the United States, and Canada. Whatever the outcome he used his opportunity well to make the points about agricultural protectionism.

It would be good if the O.E.C.D. countries put into action their vaguely worded undertaking to encourage freer trade. The “rich man’s club” of the 24 O.E.C.D. countries does not contain all of New Zealand’s markets for agricultural produce but it contains most of them. Any rethinking of agricultural protectionism within that group would have profound effects on the outlook for New Zealand.

The O.E.C.D. talks came not long after New Zealand saw many of its real hopes for reform of world agricultural trade dimmed after the Toyko round of the Multilateral Trade Negotiations ended with the clear implication that Southern Hemisphere temperate zone agricultural producers could not expect an expansion of trade in Northern Hemisphere countries. After that, there were few places New Zealand could turn to for justice in trade. The assurance given to Mr Muldoon by two Japanese Ministers at the O.E.C.D. talks that Japan would buy more of New Zealand’s produce was therefore doubly welcome.

The gloomy view on energy taken by Mr Muldoon may well be justified.

The Organisation of Petroleum Exporting Countries appears to be determined that the surplus of oil and the consequently lower prices which occurred after the 1973-1974 crisis should not occur again. Besides that, a number of oil exporters, including Iran, would have had balance-of-payments deficits even if oil had remained at the same price and output at the same level. Higher prices for less oil would appeal to such countries, and Middle East countries, particularly Saudi Arabia, are no longer inclined to give the same weight to the possibility that high oil prices might produce a recession in the West. One question for New Zealand concerns the effect that Europe’s shortage of energy will have on New Zealand’s trade with Europe. Two obvious effects are that, as Europe pays more for oil, it will have less money to spend on other imports. That condition also applies to the individual European. One long-term effect may be that Europe will look hard at its own energy-intensive farming. In economic terms New Zealand farming is one of the least energy intensive in the world. Preliminary economic studies done at Lincoln College suggest that, even when the cost of energy for transport is taken into account, New Zealand should still be competitive in cost. This will not necessarily influence the European Economic Community, for even now New Zealand produce is competitive in Europe and its sale is being discouraged.

The politics of the farm vote, not economics, have long determined Europe’s attitudes to imports of farm produce. It may be that the increasing costs of energy will force Europe to evaluate its production of food differently, but that is not an assured outcome. For all that, Mr Muldoon’s message to the other O.E.C.D. members had to be given, and will no doubt be given again.