THE PRESS SATURDAY, AUGUST 10, 1985. Towards tariffs

Press, 10 August 1985, Page 18

THE PRESS SATURDAY, AUGUST 10, 1985. Towards tariffs

The talks held this week between the Minister of Trade and Industry, Mr Caygill, and manufacturers were one of a series. Three have been held, and at least another two are likely. The talks became necessary after the previous Government secured the agreement of the manufacturers to change from New Zealand’s 50-year-old system of import licensing to a system of tariffs. The Labour Government was very much in favour of the change and would no doubt have pressed for it had the National Government not done so already. The meetings are designed to establish a system of setting tariffs, the levels of tariffs, and the dates for their introduction. The Government obtains some guidance through the system of tendering for import licences. What importers are prepared to pay for import licences is an indication of what the trade is worth and the tariffs can be calculated accordingly. Many import licences will be phased out within a couple of years; some have already been phased out (Mr Caygill abolished licences on 35 food items earlier this year); and all are expected to be gone within five years. The change from import licensing as the main means of protecting New Zealand’s industry to tariffs is far more than a technical matter. The idea of protection through import licensing has become part of the psychological make-up of many manufacturers. To their credit many have been prepared to look at other options. Nevertheless there is a degree of caution about accepting the principle that if a firm from another country can pay the tariff and still compete in the marketplace in New Zealand, then the firm should be allowed to do so. Once the typical procedure was for a New Zealand manufacturer to decide to make an item, go to the Government, say that the item could be made in New Zealand, and ask the Government of the day to impose import licensing against foreign manufacturers of the same item. More often than not the New Zealand-made item cost more, but the manufacturer did not have to worry because the foreign item could not enter New Zealand. New Zealand is not a country of very high tariffs. About 2500 items are listed as tariff

items. Of these 700 are now free of duty, 500 have tariffs of 10 per cent or less, about 1000 range from 11 per cent to 40 per cent, and 120 have tariffs of more than 40 per cent. Some of the items are subject to industry plans. Of the others, the Government proposed to the manufacturers that all the high tariff items should gradually be reduced to 25 per cent. The manufacturers are protesting against this. The Government is talking to the Manufacturers’ Federation, but also to the Retailers’ Federation, and to the Bureau of Importers. It is also heeding the views of farmers, who argue that high tariffs, particularly on such items as farm machinery, are a charge against farmers and that farmers have to bear not only the costs of inflation and high interest rates as well as a loss of the subsidies, but are also subject to fluctuating prices for their produce. The Government is trying to balance the interests of the manufacturers, the consumers, farmers, and other sections of the community. The interests are frequently in direct conflict. The Government also needs to bear in mind its aims for the domestic economy and its international aims. The domestic aims are to make the economy more efficient. It is attempting to do this by removing both subsidies and various forms of protection as well as allowing the value of the New Zealand dollar to find its own level internationally. What the Government needs to achieve internationally is to encourage free trade, particularly in agricultural products. Its hopes are set on a new round of multilateral trade talks under the General Agreement on Tariffs and Trade.

Under such circumstances, New Zealand is going to need a few cards to play and care will need to be taken that tariffs are not reduced too rapidly lest New Zealand be put in the position of having nothing to give away. Some of the manufacturers have been arguing that New Zealand should not reduce tariffs unilaterally because it is getting nothing in return. The point is reasonable, but should not be simply an excuse to delay the reforms that are needed and which the Government is trying to bring about.