THE PRESS SATURDAY AUGUST 16, 1980. Trans-Tasman garment trade

Press, 16 August 1980, Page 14

THE PRESS SATURDAY AUGUST 16, 1980. Trans-Tasman garment trade

The collapse of the clothing agreement between New Zealand and Australia is • significant both because of the effect it will have on trade and because of the timing. The agreement allowed New Zealand to export about $2O million worth of clothing to Australia and permitted Australia to. obtain licences to export to New Zealand. The Australian exports were limited to 4 per cent of the New Zealand market in any one line. New Zealand lines to. Australia were limited by quota. The advantage to New Zealand lay in the fact that it had a quota separate from other exporters to Australia. The advantage to Australia lay in the granting of import licences which had hot been available, to the same extent before 1977, when the agreement was reached. • ’ : . • . •

The effect will be to exclude Australian clothing from the New Zealand market and to force New Zealand exports to Australia to compete with other exporters. Some New Zealand clothing, exporters will undoubtedly manage to sell a certain amount in Australia, as. they did before the considerable increase in exports of clothing which occurred in the mid-19705. It is highly unlikely that this will amount to much —perhaps a few hundred thousand dollars worth a year. The biggest effect' will not show immediately because arrangements are being made which should allow the fulfilment of orders already placed. Yet it cannot be disguised that New Zealand has lost its export market for clothing in Australia, and. Australia has lost its. market for clothing in New Zealand.

Some blame attaches to both sides for the collapse. -When New Zealand clothing manufacturers approached filling the quotas for certain lines that they were allowed in Australia, the quota was sometimes reduced. Aus-, tralian manufacturers were accused of breaching the rule under which they imported clothing from cheap-labour countries and re-exported it to New Zealand without the allowed added value. New Zealand manufacturers, in spite of continued warnings about pushing the' Australian market too hard, .did so to the extent that they caused concern among Australian manufacturers and unions. : ! "

The Australians did not always find easy access to New Zealand. When the agreement first came into effect it. was almost 1 ■ a licence-on-demand arrange-" ’ ment. ; New Zealand said that the imports would be .; monitored, but eventually this came to mean, and was formally-accepted as. meaning last year, that Australian clothing manufacturers . would be allowed 4 per cent of the ■; New Zealand market in whatever line . .-A. was.being sold. . •

The collapse of the talks was probably because of this arrangement. Australia wanted a guarantee that it would be allowed to fill the 4 per cent.

There is some evidence that it was not being allowed to do so. Import licences for clothing worth 58.3 million were issued during the year but only $5.5 million worth were taken up. Some New Zealand manufacturers apparently took the licences and sat on them. The sense of unfairness that this created was not likely, to ease the talks.

While' neither side .is blameless, the New Zealand Textile and Garment Federation appears to have been a prime mover in the action. The federation’s president, Mr J. Penney, apparently hopes that the clothing firms will not be affected greatly because they will be able to supply the gap left by the Australian manufacturers. The arithmetic to support his calculations is not immediately obvious. New Zealand manufacturers seem to be giving away an assured market worth $2O million for a market, which even if they claimed it all, ■is worth: $5.5/ntillion. : The loss of export earnings and; the loss of a: known and assured market that can hardly fail (to reduce demand is'; not all. The .New f Zealand consumer will'.be offered a smaller choice. The timing may have , effects which will be long lasting. .The collapse has occurred while talks are under way for a;wider economic , relationship with Australia. . The trend has been to free trade. It. is , true that the clothing industry in any country is sensitive? It is a large employer of much unskilled or semiskilled labour and often.provides work' in areas where other jobs are not avail-, able. The closing of several factories in New Zealand has been harmful to various areas. Yet. many of these closings occurred not because of competition from. Australia but because the factories ; made items bf clothing for which the demand had disappeared. If more factories close, it will almost surely be because a major market for clothing has been thrown away. .

Several lessons are to be read from the 'collapse of the arrangement. One 'is that a manufacturing group has been so intent on . protection ■of the home market that' it is prepared to sacrifice an external market. even, it would seem, in spite of the .commercial benefits to be had from export incentives. The: group has apparently had enough power to force the decision on the Government. Second, the system ,by which manufacturers can obtain import licences and not use them seems to call for remedy.; Third, the collapse seems to indicate that the New ZealandAustralia Free Trade Agreement, under which the agreement was - negotiated and has. collapsed, is showing signs of no longer being an adequate vehicle for sound trade. The collapse of the clothing agreement should give impetus to the talks bn a closer economic relationship. The spirit' that brought about the collapse, evident on both sides of the Tasman, should, be kept .separate from the talks on a clos< relationship.