Two views of trans-Tasman trade plan

Press, 26 March 1980, Page 16

Two views of trans-Tasman trade plan

By

STUART McMILLAN

Was the basis for a new trade relationship between New Zealand and Australia forged at the meeting of the two Prime Ministers in Wellington last Friday? That is the question left after the talks. Although no-one close to the talks expected that any new form of trade relationship would be entered into last Friday, at least the direction was expected to be seen. A basic approach was outlined, though not adopted. But the communique and its annex are open to at least two views or interpretation: View one: positive. The talks really accomplished something. The tariff proposals are sweeping. Into one box will go all items of trans-Tasman trade which now have tariffs of 10 per cent or less. These would be all traded duty free. Into a second box would go practically everything else, and everyone who traded in these items would be given one year to think about the arrangements, and then tariffs would start to come off until at the end of five years the goods would be traded duty free. Into a third box would go (if anyone can think of anything) any items on which

a decision would be deferred for special reasons, including any industry inquiries. Now that the two Prime Ministers have said that they think the whole thing a good idea, it may be assumed that they will be - prepared to accept the political consequences of cutting tariffs and the third box will contain as little as possible. Once an item is in the first or second boxes there is no provision for review of the tariffs. Thus, in a few years, New Zealand and Australia will have a full free trade area as far as tariffs are concerned, with the possible exception of a handful of items in the third category. Similar proposals have been made concerning access. Into one box will go all items traded duty free. Where there are import quotas or import licences these will be phased out in equal stages over a 10-year period. Where there are quantitative restrictions and no trade then a base will be established and reduced by 10 per cent a year. The amount permitted in both boxes will be big enough to be worth while commercially. In access too, a free trade area would be created, All the limitations which

had bedevilled the New Zealand-Australia Free Trade Agreement in the past would be done away with at one fell swoop. Items. that got stuck in one .of the N.A.F.T.A. categories, or were accommodated under N.A.F.T.A. as firm-to-firm agreements, would be heaped into the appropriate box and the process would become automatic. N.A.F.T.A., as it was, could rest in the peace that it had never known. View two: negative N.A.F.T.A. lived by categories (schedules it insisted on calling them) which were lists of items which could be traded duty free, or experimentally duty-free, or by some arrangement between firms. The agreement last Friday, in the true tradition of N.A.F.T.A., created a few more categories. Now an Australian manufacturer who has an item on (he duty-free list, but which is restricted by New Zealand import licensing, will find that he may be able to get a few more of the items into New Zealand if he is covered by the 10 per cent reduction in quantitative restrictions. Will he have to go through a further maddening process of making sure that he gets in the 10 per cent reduction list? More lists, more categories. In any case how do things

get on the duty free list? At the moment, Government officials and manufacturers decide and any manufacturer can stop something, if he really wants to. So, is the whole N.A.F.T.A. mechanism of consultation between officials and manufacturers going to be dismantled? There is always something of a struggle between officials and manufacturers. Have the officials won? Is it not much more likely that the present processes will continue? And they, it has to be admitted, have become bogged down. So what really happened last Friday? Not only was it simply _ an addition to the categories (and because of the provision for automatic changes there will be greater hesitation in getting things on to the categories), but the whole system of ifem-by-item trading, and possibly the whole mechanism of making decisions, has been preserved. The box into which the deferred decisions will go will appear better and bigger than the others. N.A.F.T.A. is not dead but living, grown fatter not by more trade, but by more complications. Co-existence The two views of the communique and the annex — the one of a new agree-

ment in embryo, the other of a grafting of new clauses on to the old agreement — are likely to co-exist for some time. The proposed arrangement, Mr Muldoon said at the news conference after the meeting, would supplement and not replace the existing New Zealand - Australia Free Trade Agreement. “N.A.F.T.A. is still there, it is working, it is very valuable,” he said. Time will tell whether Mr Muldoon will choose the view that something new has been created. At this stage it would seem that he is keeping his options open. Eventually, the two countries will have to choose which of the views is going to come to fulfilment. Which view emerges on top depends on a number of factors. The positive view’ would’ seem to be supported by the fact that the two Prime Ministers came to the opinion that each would give the other preferential trade. They might have chosen to treat all comers the same, to have gone the multilateral way. Such a path would have placed in jeopardy their own biggest markets for manufactured goods, as well as casting the relationship between the two countries to the winds. Yet it might have happened. The positive view would also seem to be supported by

the fact that so much work has been done by senior and able public servants on both sides of the Tasman that a minor modification of N.A.F.T.A. would be hard to justify. However, the work of public sen-ants has been ignored before. The negative view would seem to be supported by the fact that attempts have been made before to free transTasman trade by trying to introduce items into" the dutyfree list. The existing processes might slow the whole movement. Two factors would seem to determine which line will be taken. ’One is time. While they co-exist, the view that a new type of agreement has been started will be gradually absorbed into the existing processes, which will mean, in effect, a grafting on to N.A.F.T.A. There is no time scale for the introduction of the new arrangement. If the Australians should dally because they have an election this year, and the New Zealanders dally because they have an election next year, time would act against the positive view. The second factor is a public commitment by the two Prime Ministers to the positive view. Perhaps they should meet and discuss it some time.