THE PRESS SATURDAY, APRIL 17, 1982. C.E.R. momentum keeps up

Press, 17 April 1982, Page 14

THE PRESS SATURDAY, APRIL 17, 1982. C.E.R. momentum keeps up

The momentum towards Closer Economic Relations between New Zealand and Australia is being sustained. This week the Minister of Trade and Industry, Mr Templeton, paid an important- visit to Tasmania and senior officials of the two countries held talks in Canberra. Next week the Australian Deputy Prime Minister and Minister of Trade and Resources, Mr Anthony, will come to New Zealand. What is being accomplished by all this activity? The answer is that progress is being made but the completion of a new trade agreement between the two countries is by no means certain. One result of all the activity is that, if the plans do not come to fruition, it will be hard to set anything else in motion for a long time. Mr Templeton is surely right in arguing that, if this opportunity passes, it will not come again.

The recent fall of the Labour Government in Tasmania means that an election will be held soon. As a horticultural producer, Tasmania has a particular interest in the C.E.R. negotiations' and there was always the chance that a new trade agreement with New Zealand that allowed certain New Zealand horticultural products more easily into Australia could have become an issue in the Tasmanian state election. Mr Templeton had' become aware of the interest in Tasmania partly through the visit of Australian Parliamentarians to New Zealand. His invitation came particularly from Senators B. R. Archer and J. 0. W. Watson and carried the endorsement of the Tasmanian Premier, Mr Harry Holgate. Mr Templeton spoke to politicians and visited horticultural areas. He gave a speech in which he made a significant concession to allay the fears of Tasmanian horticulturists. The concession made certain New Zealand horticultural products no longer eligible for the rural export suspensory loan scheme. This decision caused some surprise in New Zealand. It was not something .that Mr Templeton decided to do on the spot; it was written into the speech that he had planned to deliver in Tasmania.

While it is too - early to judge the outcome of Mr Templeton’s visit, he certainly gave the impression that, in pursuing the idea of Closer Economic Relations with Australia, he was leaving little to chance. He has probably gone a considerable distance towards reassuring horticulturists in Tasmania that New Zealand is not seeking an unfair advantage. If horticulture is included in the package without undue discomfort, it will join dairying as one of the issues that had the potential for preventing the conclusion of the agreement. \ ■

The talks in Canberra did not reach any major decisions. Considering the importance to New Zealand of two of the outstanding issues—import licensing and export incentives—it is not surprising that decisions on these were deferred. Perhaps the talks that. Mr Anthony will have with the Prime Minister, Mr Muldoon, and others next week will show what progress is to be made on these issues. For New Zealand, one of the outstanding issues is steel. The decision was made to press ahead with the expansion of New Zealand Steel last year as one of the Government’s “think big” projects. The judgment that the expansion was sound economically was based partly on the performance of the company; but there were doubts at the time that the company would be able to compete against the well established Australian steel industry. There are domestic reasons for worry about the New Zealand industry as well; one of the major advantages that New Zealand manufacturers have had is that they have been able to buy their raw material, including steel, from where they wanted to. Now they look as if they will be tied to a supply from N.Z. Steel. The decision to

expand has been questioned from the start and the complications are bound to continue.

The question of State purchasing is still of immense, importance to New Zealand. Australian states, in their Government contracts, give first preference to their own industries and second preference to Australian industries in other states. New Zealand has been seeking an arrangement by which New Zealand industries can also be looked on as sources of supply. This is beyond the control of the federal Government in Australia and New Zealand will have to come to some arrangements with the individual states. Approaches, particularly by Mr Templeton, have already been made. It is difficult, because this is beyond the control of the Federal Government, to include State purchasing among the negotiating points of the moves towards a new agreement. Nevertheless the point is important. Embracing businesses on both sides of the Tasman in such substantial dealings is central to C.E.R.

Exactly what will happen about New Zealand’s import licensing scheme and the export tax incentive scheme remains to be seen. It must be assumed that the officials who went to Canberra had no authority to move on these issues. Australians who have dealt with New Zealand under the existing trade agreement, the New ZealandAustralia Free Trade Agreement, sometimes found that when they had their products included on the duty-free list, they were still barred from entry because of import licensing restrictions. In examining a new trade agreement, Australians are trying to make sure that they do not find their way barred again. There is a lingering doubt in Australia that,Jf New Zealand retains its. import licensing scheme, it may be invoked at some time in the future even though gradual easing of entry is permitted in the meantime. The New Zealand side fears that dropping the import licensing scheme would cause some panic amongst manufacturers. Any changes will have to be brought in gradually, but an assurance that the scheme will go in due course would probably satisfy the Australians and New Zealand businesses would have to learn to stand,on their own feet.

The tax incentives for exports should be a lesser problem. Some form of harmonisation of schemes on both sides of the Tasman is needed here. In time the present form of export tax incentives will have to go because New Zealand has signed the subsidies code of the General Agreement on Tariffs and Trade, just as Australia has. In the meantime the manufacturers have to be able to plan their business activity and the Government is under an obligation to maintain the incentives that it has promised. Like the support prices for farmers, the export incentives for manufacturers are more than a way. of keeping up production' for export; they are another way of paying the price of inflation and artificially keeping our exports competitive in overseas markets. Taxpayers do not like them, even if they acknowledge the reason for the incentives. Harmony with the Australian scheme is needed and eventual abolition is inevitable.

Even if all the trade questions can be settled satisfactorily, other factors could hold up the agreement. The most obvious candidate for doing so is the bad relationship that could develop between New Zealand and Australia if the Springbok tour of last year, and other aspects of the tour, were to upset seriously the Brisbane Commonwealth Games. Another problem is the lack of attention, that has been given to the negotiations until recently by many leading politicians in Australia. A sudden'burst of interest and uneasy questioning could stall further progress.