N.Z. holds whip in car talks

Press, 28 August 1984, Page 20

N.Z. holds whip in car talks

NZPA staff correspondent Canberra The “horse trading” has begun between Australia and New Zealand on the sensitive issues of car and steel imports, with New Zealand for once holding the whip hand.

Both have' arisen under Closer Economic Relations, and are set to cost the Australians big chunks of two of their most important exports across the Tasman. The problem with cars arises from New Zealand’s

new industry plan, which aims to make cars cheaper and the industry more efficient by cutting the import duty on motor-vehicles from third countries from 45 per cent, to a mere 15 per cent. At the same time, the 15 per cent duty at present applying to imports from Australia, will be removed. The Australians have been stung by the blasting away of their substantial preference margin, and according to a senior Australian trade official, see it as the kiss of death for their substantial C.K.D. (car kits) exports to New Zealand. In the last financial year, the New Zealand market was worth more than half of Australia’s sAustloo million vehicle and component trade with New Zealand, and now they see much of that being swallowed up by the Japanese. What also hurts the Australians is that the exports qualify the exporters, particularly General MotorsHolden, for credits against duty of imported components. At the nub of the Australians’ anguish is the fact that New Zealand takes more than 90 per cent of their vehicle exports. The Australians see this damage to a substantial part of the sAust4oo million trade with New Zealand as incongruous in the light of C.E.R. which is ostensibly meant to boost sales between the two countries. What they want from New Zealand is for the duty of vehicle imports from third countries lowered either not as much as planned or more slowly to allow their industry to adjust. The trade-off the New Zealanders are looking for, is increased access for New Zealand-made auto components into the Australian market, and perhaps an arranged inclusion of Austra-lian-built cars. The move by New Zealand is the second time in 10 years that the Australian car industry has received a knock from across the Tasman, according to the official. In 1974, in the wake of the

second oil shock, New Zealand put a differrential sales tax on cars — related to the size of their engines. Australia, with its predominantly six-cylinder vehicles, was hit hardest, but in the circumstances, the Government of the day had little it could say. That is not the case this time round, and the matter is being pursued with vigour by Australian Ministers and officials. The same can be said for steel. According to the trade official, the Australians see the principle as the same. This time the problem centres on New Zealand Steel’s giant new roller mill which will soon be turning out sheet steel — a main component of Australia’ssteel exports to New Zealand which again are worth about sAustlOO million. What New Zealand is intending to do when the Glenbrook mill begins production is to put import duties on sheet steel for five years, in order to give the new plant a head start in getting established. “Here we are moving into free trade between us and New Zealand gets up and says it is putting a barrier on a major item of our trade,” the official said. “The timing could not have been worse in relation to C.E.R.” Because New Zealand has never produced steel itself, there have been no import duties to speak of, and Australia with its recently ailing steel industry, has been glad of the ?AustlOO million it has earned across the

Tasman. The Australians want, as their first preference, continued free and untaxed access to the New Zealand market, and failing that, the best preference possible in duties. The “horse trading” has been going on in Australia as well, but this time the boot is not entirely on the New Zealand foot, because New Zealand Steel will be producing much more than New Zealand can use, and the negotiators are adding insult to injury by asking the Australians to take some of the exports. “It comes down to a question of access,” said the official. “We are losing a major portion of our trade and at the same time you are asking Australia to let some of your steel in here. “Down-stream producers here are worried too.” The two questions are important items on the agendas of negotiators on both sides of the Tasman, and when they are out of the way, further questions loom on the horizon concerning tobacco and clothing, as well as the clothing trade.