THE PRESS WEDNESDAY, APRIL 29, 1981. Attack on lamb exports

Press, 29 April 1981, Page 20

THE PRESS WEDNESDAY, APRIL 29, 1981. Attack on lamb exports

The long-threatened move by lamb producers in the United States in trying to get New Zealand lamb exports restrained has now been made. The National Woolgrowers’ Association is not leaving much to chance. Not only has it cited the export tax incentives scheme but has cited the very existence of the New Zealand Meat Board and even New Zealand's floating exchange rate as evidence of subsidies and of New Zealand exporters having an unfair advantage on .the American market. Such measures work on the “gun-shot” principle — the hope that if one pellet does not hit the target another will. If all of them struck, or even a goodly number struck, New Zealand’s meat trade with the United States might stagger; there is, happily, little chance of that happening. Serious damage may nevertheless be done.

The formal procedure has been for the Woolgrowers’ Association and a subsidiary group of the association to file a petition with the Commerce Department in the United States. The Commerce Department will have to consider which aspects of New Zealand practice could be said to offend against American law embodied in the Trade Agreements Act, 1979, which amended legislation of 1930. The 1979 amendment took into account agreements reached in the Multilateral Trade Negotiations conducted under the auspices of the General Agreement on Tariffs and Trade. Most aspects of the petition filed are likely to be dismissed by the Commerce Department. It is not that such matters as conditions for loans from the Rural Bank in New Zealand do not amount to subsidies for agriculture, but rather that they do not offend any particular law.

The export tax incentives scheme used by New Zealand is quite another matter. The Commerce Department has already ruled that it contravenes American law and makes such exports to the United States liable for a countervailing duty. The

precedent was the sale within the United States of ear-tags exported by a Palmerston North firm. No countervailing duty was imposed in the instance of the ear tags. This was for a minor technical reason: ear tags entered the United States duty free and the firm that petitioned the Commerce Department had also to demonstrate that .its products were materially harmed by the New Zealand product. The firm failed to convince the Commerce Department on this point and no duty was imposed. The same condition does not apply to exports of lamb to the United States.

Several avenues are now open to New Zealand. The first and most obvious is for the Meat Export Development Company (Devco) to forgo the export incentives. This would immediately remove the substantive grounds of the petition. It would not remove the possibility of other measures intended to restrain New Zealand lamb exports to the United States. The second avenue open to New Zealand would be to sign the Subsidies Code of G.A.T.T. This would ensure that the American interest complaining about the New Zealand export not only has to demonstrate that a subsidy applies, but that the export harms the American product materially. This might be difficult to prove.

Until recently sheep numbers in the United States have been declining. New Zealand has so far shown every sign of wanting to retain its export tax incentive scheme and the United States is unwilling to see New Zealand become a signatory to the code while it retains the scheme. The third option is the one New Zealand is following. It is seeking a form of wording with the United States authorities to try to ensure that an American interest has to demonstrate material harm before a countervailing duty is imposed. If this works, it will remove the crisis; if it does not, a more radical approach is going to be needed.