U.S. duty on N.Z. lamb

Press, 24 June 1985, Page 12

U.S. duty on N.Z. lamb

Once American lamb producers had laid complaints against exports of New Zealand lamb to the United States, it became almost inevitable that a countervailing duty would be imposed. What was less certain was the size of the duty. It has proved to be 1? cents a pound, which is substantial. The fee is being described as a bond, which means that if price support on lamb is revised downwards then presumably some of the bond will be refunded. The reason for the imposition is that lamb exports from New Zealand have received price support; the countervailing duty is an attempt to offset the Government support given to New Zealand lamb producers. The 12 cents bond is a preliminary finding. An American team will visit New Zealand soon to investigate the subsidy schemes on which the preliminary finding is based. New Zealand lamb had managed to avoid a countervailing duty previously because it was covered by what was known as the injury test in the United States. Under this test it was not sufficient for an American producer merely to complain about an export that was subsidised; it was also necessary for the American producer to demonstrate to the appropriate American Government authority that the subsidised export was injurious to the commercial interest of domestic American producers. The injury test no longer applies to New Zealand because New Zealand has not conformed to the subsidies code in the provisions of the General Agreement on Tariffs and Trade. The United States gave notice that it expected New Zealand to conform by April 1, 1985. When it did not, the United States withdrew the protection of the injury test. From the point of view of the United States, considerable warning had been given to New Zealand. After New Zealand signed the subsidies code in 1981, it undertook to eliminate subsidies forbidden under the code within a reasonable period; the United States was more specific about the period and said that April 1, 1985, gave a reasonable period in which to end subsidies. On April 1, 1985, New Zealand still retained some of the subsidies. The Minister of Overseas Trade and Marketing, Mr Moore, had hoped that because the subsidies were being eliminated the United States would delay lifting the exemption. The United States stuck to its original decision. Apart from any view that might have

existed, within the American Administration, that New Zealand had been given long enough, it was not surprising that the United States pressed ahead at this time with a countervailing duty.

The administration is under severe pressure to limit imports, because of job losses and the deteriorating balance of payments in the United States. Imports from Japan and the European Economic Community have become some of the touchiest issues in American politics. Had the United States Commerce Department not acted against New Zealand it is highly likely that Congress would have taken action. It would not be in New Zealand’s interest to have Congress single out New Zealand, or for New Zealand to provide the occasion for more American protectionist legislation. The New Zealand Government is reducing subsidies fairly rapidly on agricultural products and no faster moves against farmers should be considered at this time. New Zealand is left with no option but to accept the new American bond. New Zealand will need to explain its case fully to the American investigating team which will shortly come to this country. As the subsidies decrease, the countervailing duty will decrease. The action taken by the lamb producers of the United States may be a forerunner of actions to be taken by domestic producers of other commodities or manufactures. If this proves to be the case, additional countervailing duties are almost bound to follow.

New Zealand manufacturers would then be able to refuse export incentives, but they could not do this for the American market alone if they hoped to avoid the countervailing duties. If the incentives, or other subsidies, were retained on sales to other markets, then a calculation could be made in the United States about the extent to which domestic production was still being subsidised. One definite outcome of the action of the American lamb producers is that New Zealand will not consider itself bound any further by any gentlemen’s agreement to be restrained about selling to the United States. Chilled New Zealand lamb, for instance, could compete directly with American lamb in a way that frozen lamb does not. Economic considerations might still restrain New Zealand, but not sentiment.