Export incentives help to ease unemployment

Press, 21 November 1981, Page 14

Export incentives help to ease unemployment

By

DAVID BOWRON,

President of the Canterbury Manufacturers’ Association

In an article in “The Press” on Thursday, November 12, Professor Richard Manning taxes issue with current export incentives for manufacturers and suggests devaluation of the New Zealand dollar and control of monetary expansion as alternatives. It is only during the latter part of this century that New Zealand industry has developed — a short space of time compared with tne United States, Europe and Japan. Our small population scattered over a comparatively large area provides a limited domestic market and a high internal cost structure. Our distance from ' overseas markets and their tariffs against New Zealand goods, add further to the difficulties of competing internationally. It. is. therefore, indeed remarkable that over the last decade only, our New Zealand industry has expanded its exports to the current value of $l5OO million annually. As an exporter and President of the Canterbury Manufacturers’ Association, I know that export incentives have suostamially increased exports over what they would have been without the incentives. Most developed countries not only protect their own industrial sectors with quotas and tariffs against new Zealand goods, but also subsidise or otherwise assist their own export : • sectors by various methods. Japan imposes both tariffs .and import licensing on many ;; types: of goods, the EEC.-has. strictly controlled quotas' ■ on /imported agricultural items-’ and • protective tariffs to quote but two examples. Assistance to exporters is given' in the* form of special low interest rates and export < j —

credits in the United States and the United Kingdom. New Zealand is no exception to these general practices. While New Zealand manufacturers do receive incentives, similar benefits are bestowed on the sectors of horticulture, tourism and agriculture. In the latter case, the present Government subsidies under the supplementary minimum prices system are, more generous than those provided to industry. Professor Manning singles out one sector of the New Zealand economy and advocates devaluation to overcome what he considers a major inequality. Such devaluation, if it replaced export incentives, may rectify this particular problem, but it would also affect the whole New Zealand economy. We would need to devalue by at least 25 per cent. This clearly would give a major boost to inflation at a time when it is already rising and an inflation rate in excess of 30 per cent would be quite likely. While in theory Professor Manning’s devaluation suggestion may work, in practice most manufacturers soon find devaluation of temporary benefit at best. Successive devaluations have not helped Brazil over recent years — rather they have increased inflation to astronomical rates with all the accompanying disaavantages and unrest in that country. It is generally recognised that incentives are essential to each New Zealand export sector if New Zealand is to correct the imbalance of overseas payments. The whole matter of incentives is both politically sensitive and complex. What is needed is further consultation between the country A decision

makers, the politicians, the economists and the exporting groups to evolve the best and most acceptable incentive system. To select one exporting group and berate it because of perceived inequalities is to maintain the out-worn principle of dividing our society. Suggestions that incentives distort investment and employment flows in an undesirable way, are not realistic. I am sure'many fellow Cantabrians, concerned that Canterbury has one of the highest rates of unemployment in New Zealand, would agree that proposals about restructuring at a time of economic and employment difficulties usually end up causing more unemployment. The problem which we have is not resource allocation, but simply getting more, people -back to work — and to do that we need more exports and more industry. Export incentives help create more employment, not only at productive levels but flow through to other sectors, for instance, transport, and at a far less cost to the nation than the cost of unemployment payments and increased social problems. The leaders of our community, including the universities, have tne obligation .to encourage a spirit of unity and to contribute their abilities in the preparation of such a system for tne ..development of. New Zealand. By so doing they will promote the. interests not only of Canteroury. which is currently suffering from one of the hignest unemployment rates, but also of New Zealand whose economic development needs the support of all sectors ana the community at large.