Farmers obsessed with industry’s gains?

Press, 21 August 1979, Page 3

Farmers obsessed with industry’s gains?

New Zealand f arme. s teemed to have a fixation that agriculture was missing out on something and that Industry was gain.ng something at agriculture’s expense, said the Under-Secre-tary for Agriculture (Mr Talbot) yesterday. This view stemmed from the apparent traditional conflict between agiiculture and Industry, he told the twentyfifth anniversary convention of the Institute of Agricultural Science at Lincoln College.

Mr Talbot was commenting on the inclusion in the convention’s programme of a debate on the subject, “That protection of the manufacturing industry is harmful to New Zealand agriculture.” He queried whether the topic had any direct relevance to farmers and asked if its debate would increase fheir production or income. “I would not like to think

that such a topic for debate has been chosen merely to provide a form of entertainment for those attending this convention,” he said. Speaking on the negative side of the debate, Mr W. Rosenberg, a reader in economics at Canterbury University, said that to talk about agriculture as an independent part of the economy as opposed to manufacturing showed that people did not think of New Zealand as a nation.

Only 110,000 people were employed in agriculture in New Zealand but there had to be employment for everyone.

If a nation was going to be built there had to be trade and industries of all types, and if some were not as efficient as their counterparts overseas then that was part of the nation’s fate. Free traders thought that everything should be done with great efficiency, but

New Zealand industries had to be less efficient than Britain’s and Japan’s. However, if New Zealand was to be a nation it needed both its agriculture and industries, which necessarily had to be weaker than those in larger countries and had to be protected. The leader of the negative side of the debate, Sir Robertson Stewart, a former president of the Manufacturers’ Federation and the Canterbury Manufacturers’ Association and chairman and managing director of P.D.L. Industries, Ltd, likened the protection of industry to fire insurance.

“You pay the premium gladly hoping you will never claim,” he said. “We pay for protection in New Zealand to maintain employment and future job opportunities.”

Sir Robertson said that those who advocated the removal of protection from in-

dustry had no interest in maintaining employment. Manufactured exportsearned a quarter of New Zealand’s total overseas income.

Mr I. G. Douglas, directorgeneral of the Manufacturers’ Federation, said manufacturers were aiming to have a fifth of their output exported. This would have a dramatic effect on the economy. If increase in manufactured exports continued, they would equal or exceeded agriculture as an earner of overseas income by 1984. Professor B. J. Ross, professor of agricultural economics at Lincoln College, said that two special cases could provide rational arguments for protection. One applied to infant industry which, it was claimed, required protection in its early years to become securely established. Once it had reached a certain size, howeiver, it should be able to achieve economies of scale which would enable it to compete effectively with imports.

“When one looks at our manufacturing sector today one gets the impression, that many of our industries are stuck in a Peter Pan phase and that they will never get out of short pants,” said Professor Ross.

Those industries that could now compete effectively with overseas suppliers were mostly industries that would have been competitive, in the absence of protection. New Zealand needed more of the most competitive industries and fewer of the other type.

The most complete study of protection in New Zealand, done in the mid-19605, had demonstrated that the average effective rate of protection was more than 70 per cent. The level of effective protection had possibly been reduced since then by cumulative devaluations but it w.-j obviously still high. Protection riot only reduced total income but altered the distribution of income, which was entirely harmful to agriculture, Professor Ross said.

The higher wages, paid by protected industries increased competition for labour and as a consequence agriculture lost labour and became a relatively smaller sector in the economy. Higher labour costs were reflected in the prices farmers had to pay for goods and in the costs of having their products processed. Thus the net income of farmers was reduced and, as consumers, their incomes bought leSs. Estimates of the size of the income transfer as a result of protection showed that this was much greater than the assistance given to agriculture through subsidies.

Professor R. H. M. Langer, who presided over the debate said that agriculture and industry were inter-linked. The main question raised by the debate had perhaps been, who needed protection, for how long, and how much? :