Lamb exports not guilty

Press, 29 May 1984, Page 16

Lamb exports not guilty

A welcome ruling has come from the United States International Trade Commission that imports of New Zealand lamb into the United States are not causing material injury to the three lamb companies that brought the case against New Zealand. This ruling means that no countervailing duty will be imposed on the cuts of New Zealand lamb that are exported to the United States. Because the exports are of cut lamb, they are eligible for export incentives in New Zealand. These export incentives contravene the subsidies code of the General Agreement on Tariffs and Trade and have already been found to amount to unfair subsidies under American law. All that had to be proved was that the lamb cuts were materially damaging domestic producers in the United States. The present complaint can be taken no further. In 1981, a similar action taken by American lamb producers went much further. This was at a time when there were no supplementary minimum prices; but the lamb cuts were eligible for the export incentives and general farm subsidies, including the fertiliser subsidy. These were examined by the Office of Investigations Of the United States Commerce Department. The Commerce Department set a countervailing duty which New Zealand would have to pay. Before all of this could take effect, New Zealand agreed to sign the subsidies code of the General Agreement on Tariffs and Trade. The American lamb producers thereupon withdrew their action and New Zealand did not have to pay the extra duty. New Zealand was reluctant to sign the code and had resisted it for some years. New Zealand was finally persuaded to sign by the 1981 action against the lamb. The United States will apply the injury test — that is, to decide if a subsidised export is hurting the interests of domestic producers — only if the exporting country has signed the subsidies code. Once New Zealand found that it was vulnerable because of the export incentives, which

amounted to subsidies or bounties under American law, the rest seemed inevitable. Many countries require it to be established that subsidised imports materially injure domestic producers before countervailing duties are imposed. So New Zealand signed the code to take advantage of the injury test in the United States, or at least to enable a demonstration that no harm was being done to American producers. The G.A.T.T. subsidies code specifically bans export subsidies of the type that New Zealand uses. New Zealand did not immediately agree to cease paying the incentives to exporters, but undertook to do so “within a reasonable period.” The United States acknowledged the New Zealand undertaking, but said that a “reasonable period” would be until April 1,1985. New Zealand has not defined what it considers would be a reasonable period. Export incentives as they affect goods sold to Australia will be diminished from 1985 on, and will be abandoned by 1987 under the Closer Economic Relations agreement. The C.E.R. agreement suggests that New Zealand does not intend to abandon all export incentives entirely by 1985. New Zealand manufacturers are aware that the Government is bound, under the subsidies, code, eventually to abandon the export incentives, hut are keen to know what will take the place of the subsidies. The export incentives appear to have played a role in making New Zealand manufacturers more conscious of exporting. Another incentive to export has been the downturn in the New Zealand economy: manufacturers have felt the pinch of the small home market under pressure. Whether the manufacturers can survive by exporting without subsidies is one of the questions that must be addressed by the Government. On both the manufacturing front and on the primary producers’ front, the Government is likely to have news in this year’s Budget — possibly bad news about incentives and subsidies.