U.S. threat to N.Z. trade incentives

Press, 25 August 1980, Page 1

U.S. threat to N.Z. trade incentives

NZPA Washington A New Zealand company and the Government have been accused of combining to drive an American industry out of business, a public hearing in Washington was told on Friday. The product involved was plastic identification ear tags for animals, and the score or so people present heard an outline of what is undoubtedly one of the great New Zealand export success stories. But there could be serious implications for New Zealand’s use of export trade incentives. They heard how a small company called Delta Plastics, Ltd, of Palmerston North, began making the ear tags for New

Zealand farmers in 1966. Delta began exporting, mainly to Australia, in 1973. In 1974 it started selling in the United States and had sales worth $NZ26,000.

In the last year, sales in the United States had risen to almost SNZ4 million — a 15,000 per cent increase. Delta now exports to more than 30 countries, continues to search for more markets, and plans a joint venture manufacturing plant in the United States. Delta was unquestion-

ably helped in its export growth by the New Zealand Government’s export tax incentive scheme. Therein lies the reason for this success story’s being related to the International Trade Commission in Washington. An American company that also makes plastic tags for animals asserts that Delta’s success has had a drastic effect on the United States ■ industry, causing two companies to go out of business, another to seek Federal aid, and others to reduce pro-

duction, lay off staff, and suffer falling sales and profits.

The company asserts that Delta owes its success to the export tax incentives it receives from the New Zealand Government and that these amount to an export subsidy.

“We will accept fair competition but we do not feel like competing with the . New Zealand Government,” Mr Roger Heins, president of the Y-Tex Corporation of Cody,

Wyoming, told the hearing. “Y-Tex versus the New Zealand Treasury — that is unfair.” Y-Tex complained to the commission and asked for countervailing duties to be imposed on the New Zealand product, thus raising prices and allowing American producers to compete. But evidence was given that the Delta tags already cost more than their competitors,. Delta saying that farmers were willing to

pay extra for a better product. The issue goes beyond animal ear tags. It challenges New Zealand’s entire export tax incentive programme, and the outcome could affect most New Zealand exports to the United States, ineluding manufactured goods and lamb, together now worth about SNZIOO million. ■ With this in mind, three members of the trade staff at the New Zealand Embassy attended Friday’s

hearing, though they left the presentation of evidence to the representatives of Delta Plastics and its distributors. Both Delta and Y-Tex agreed that in the six years the New Zealand tags had been sold in the United States they 7 had become the market leader.

They differed on the reasons why. Delta said it was because its product is so superior, of a kind that did not exist in the United States until it introduced it.

The American makers had copied the Delta designs, which had opened up a new market Far from damaging the American industry. Delta had, in fact, created it, said the New Zealand company’s counsel, Mr E. J. Farrell.’

Y-Tex said that Delta had seriously eroded the American industry, and that export subsidies it received had helped it spend large s'/as on promotion and advertising, giving it the edge in a competitive market.

A recommendation on whether the commission should continue with a full investigation into the complaint, or drop the matter immediately, is expected by September 9.