TARIFF INQUIRY

Dominion, Volume 27, Issue 36, 6 November 1933, Page 11

TARIFF INQUIRY

Case for Protection REPLY TO FARMERS Manufacturers’ Arguments BEQUESTS TO COMMISSION Arguments against proposals made by representatives of the farming interests of New ■ Zealand for a reduction or the abolition of the tariff on goods entering the Dominion from Great Britain were presented to the Tariff Commission on Saturday morning by Mr. A. E. Mander, general secretary of the New Zealand Manufacturers’ Federation. Mr. Mander stressed a statement made by Major Elliot, British Minister of Agriculture, that concessions on British goods entering New Zealand would not. meet Britain’s requirements in regard to a quota, his concern being the protection of British fanners against excessive importations. The Comptroller of Customs, Dr. G. Craig, presided, and associated with him were Professor B. E. Murphy, Mr. J. B. Gow and Mr. G. A. Pascoe. Mr. Mander said that there had been three arguments advanced by the spokesmen of the farmers for a reduction or the abolition of the tariff. They were that the Ottawa Agreement required New Zealand to reduce its tariff, that by reducing her tariff New Zealand might be able to avoid the imposition of a quota on her exports to Great Britain, and that the tariff raised prices to the consumer and increased farm costs. With regard to the Ottawa Agreement, Mr. Mander said it seemed to have been generally' forgotten in the country that after the Ottawa Conference New Zealand at once abolished the surtax on all imports from United Kingdom, which meant an average reduction of duty equal to about 6 per cent, ad valorem. Moreover, on one class of imports. ajaparel, probably the largest class of all. the lowering of the tariff and the removal of the surtax together accounted for a reduction of over 12i per cent, ad valorem. This was effected immediately after Ottawa. Other reductions were made on hosiery, confectionery and silk piece goods. Standardised Formula. ' Apart from these actual reductions which the Ottawa Agreement required, New Zealand, by the formula of article 8, was pledged to keep all her protective duties below a certain specified level. The fact that article 8 was incorporated In our agreement did not, however, raise any presumption that the New Zealand tariff was at that time higher than the Ottawa Agreement allowed.. The same formula was written into Great Britain’s agreement with each of the Dominions. It was a stndardised formula applied to all the Dominions alike, and equally to the high-tariff Dominions, such as Australia, and the low-tariff. Dominion, New Zealand. Mr. Mander quoted statements made by responsible persons in England and New Zealand, which, he said, indicated beyond doubt that although the same formula, article 8, was written into our agreements .at the same time . it was written into the other agreements with the high-tariff Dominions ' in order to avoid any appearance of discrimination, yet Britain herself recognised that it was, in our case, merely a matter of form. We were already, and always bad been, well below the level of maximum duties which the Ottawa formula allowed. - ■ Question of Quotas,. • In regard to the question of quotas, Mr. Mander said that the spokesmen of the farmers’ organisation, urging a reduction of the tariff,. had urged that this would assist in preserving a “free” market, in other words, exemption from duty or quota, for our farm products exported to Britain. He referred to a statement made by Major Elliot, British Minister of Agriculture, in refutation of a statement made oy Mr. Polson, president of the New Zealand Farmers’ Union, in which Major Elliot reaffirmed that concessions on British goods entering New Zealand would not meet his requirement in regard to a quota, his concern being the protection- of British farmers against excessive importations. Even this, Mr.,Mander said, was not sufficient for the New Zealand spokesmen, and. they continued their cry that British farmers, would, forgo their quota if We abolished the tariff. Then Mr. Baxter, representing the British farmers, declared flatly that, there could be no possible connection whatever between our tariff on British manufactured goods and the British farmers’ demand for a quota on farm produce. Raising of Prices. The third contention of the farmers’ spokesmen had been that the existence of a protective tariff, and the existence of Dominion industries behind our low tariff wall, had necessarily had the effect of raising prices to the consumer, and thus of Increasing the farmers’ costs, Mr. Mander continued. They had simply taken this for granted as a parrot-cry, without any inquiry Into the actual facts. He was confident that the commissioners must have been impressed by the vast amount of evidence which had been placed before them to prove over and over again that the existence of our Dominion industries had „ forced down or kept down the prices of competing imports. The public of New Zealand would almost certainly have paid more for their goods, not less, if there had been no protective tariff and no Dominion industries to force Importers to keep their prices down. It was the competition of Dominion industries which forced overseas manufacturers and our own importers to keep their prices of imports down and be content with smaller profits. No doubt that was why they were so anxious to have the tariff reduced and the New Zealand industries wiped out. Professor Murphy : Is it not. a general principle that every person selling goods and services on a competitive market will charge what that market will bear, taking all factors into consideration? Everyone will charge that amount which will maximise his profit. That applies equally to farmers, manufacturers, importers, and exporters. Dr. Craig: Brices of goods depend upon competition. Mr. Mander: Quite. Professor Murphy: No seller will deliberately take less for his goods than he can get in ordinary business. Why should he? It had been stated, Mr, Mander continued, that “New Zealand farmers have to buy in a protected market and nell in an unprotected market,” and that this placed them at a disadvantage in world competition. One needed

only to point out, to refute this, that the New Zealand farmer sold his dairy produce in Britain under the protection of a tariff of 15/- per cwt on all butter and 15 per cent, on all the cheese sent to that market by his foreign competitors. This wus not selling in an ‘•unsheltered" or “unprotected” market. Moreover, this New Zealand farmer received for his exported produce an additional 25 per cent, through exchange; and he receiver! this 25 per cent, extra (as export parity) also for what he sold In New Zealand. Subsidies to Fanners. “I mention these facts, together with the facts that farmers receive many very substantial subsidies through the Railways Board and otherwise,” Mr. Mander said. “They pay no land tax on farms, if. subject to mortgage, of any value up to £7500 unimproved, while there is an exemption of the first £5OO unimproved value of land not subject .to' mortgage, with a tax of only Id in the £ payable on the balance. They pay no income tax, even in good years, unless their farms are valued at over £3OOO unimproved. Practically all farmers’ requisites are exempt from sales tax and also from Customs duty. They are granted State loans at low interest from funds raised by pledging the taxpayers’ credit. They can now obtain free and subsidised labour costing the Unemployment Board roughly £450.000 a year. The general taxpayer bears the cost of numerous unprofitable branch railway lines which serve only the farming community. “With all these subsidies, exemptions and concessions, which can be met only at the expense of the cities and towns, and by increasing the burden upon urban industries; and now with the benefit of high exchange, which is equivalent to a bounty (at the expense of the public), giving the farmers a return 25 per cent.’ higher than the much-talked-of ‘world price’ of their produce; 1 submit that the farmers are the last people who should object to a tariff which affords protection averaging less than 25 per cent, to their fellow producers, the manufacturers and industrial workers in the towns. “It may be worth mentioning, also, that the number of ‘exporting’ farmers, according to the evidence of the Farmers’ Union representative, is roughly 40,000, out of a total of about 80,000 farmers and ‘growers’ of all kinds. I do not know the number for whom the Farmers’ Union can claim to speak; but I do know the union's official organ is distributed to a membership of rather less than 12,000 Even of these, however, a great many must be farmers who supply meat, milk and other dairy produce to the towns, and who are therefore dependent entirely upon the Dominion market.” An Anomalous Position. Professor Murphy: Of that 12,000 there are quite a number of protectionists. There is a section of the Farmers’ Union in favour of protection. The position is anomalous In this way: officially the union stands for free trade, but organised sub-branches stood for protection, notably the cereal farmers. . • Mr; Gow: Do you think all this recrimination as between one class and another is futile? Mr. Mander: Not only futile, but utterly regrettable. • Mr. Gow: Why do you indulge in It? •Mr. Mander: What we are suggesting is that there are farmers who live by exporting, and farmers who live by supplying the domestic market. Me think it is wrong that the views of the exporting farmers should he placed before the commission as if they represented all the farming interests. Mr. Gow: Would you tell me what would, happen to New Zealand if there were no exporting farmers? Mr; Mander: I cannot tell you. . Mr. Gow:. Could you not visualise it? Mr. Mander: I could think of only one thing worse —if there were no farmers producing for home consumption. Mr. Gow: Would there not be great economic misery? Is it not vital to the economic existence of New Zealand as at present constituted that there should be external trade? : Mr. Mander: It is, sir, and I think it is second only in importance to the production for domestic consumption. Mr. Gow: In that case is it not vital to the whole community of New Zealand, urban and rural, that exporting farmers be enabled, to carry on? Mr. Mander: I think it is more desirable, provided only it is not at the expense of those producing primary or secondary products for the domestic market. Mr. Gow: You do not make yourself clear. „ Two Sections of Production. Mr. Mander: There are two sections of production, one for exporting and one for home consumption. The. latter section includes manufacturers and 40,000 farmers producing for the New Zealand market. The more important is that producing for the home market, because if they do not do so, we starve. Mr. Gow: If a certain proportion of the products of the primary industries is used in the country, there is so much less for exporting. And if the exports were stopped, say by a blockade, would it not mean that the whole of the products would be concentrated in this market? Is it not unwise to cut them into two classes, as exporting and local farmers, but better to take the primary producers as a unit, whose product is divided In certain proportions, a certain proportion to the local market, and a certain proportion for exporting. Is that hot the position? Mr. Mander: I do not think so. The large part of the farmers are not included in the exporting section at all. Mr. Gow: Do you think you can maintain this artificial division which you are seeking to maintain? Mr. Mander: I suggest I have not. made a division. This division has been made for us, and I am merely quoting it. . . . I would say, if exports ceased, we would be in a hole, but If production for home consumption ceased, we would starve, so that those producing for the home market seem to.be more important than those producing for export. Mr. Gow: You agree the whole of the population of New Zealand is so intimately associated with each other that what injures one section, injures the other? Mr. Mander: I agree absolutely. Mr. Gow: Therefore these arguments you have been putting forward about special help being given to one or the other fall to the ground? Mr. Mander: No. sir. I do not think so. Cuts Two Ways. Mr. Gow: It cuts two ways. You are asking fori a tariff in order to assist local industries, and for the general benefit of New Zealand, but on the other hand you are claiming if the other side gets any benefits, it Injures your clients. Mr. Mander: No, sir. I think you have quite misunderstood my argument. I say with all these subsidies and concessions given to one section of the community, the farmers should be the last persons to object to a duty for their fellow-producers in the towns. Mr. Gow: Your suggestion is that they all should he helped. Mr. Mander: All or none. Professor Murphy said the position in New Zealand was, as in every other country, that each section tried to improve its own position. Mr. Mander; Bernard BMW’s defini-

tion of a gentleman-is one who tries to put in more than he takes out. Professor Murphy: I do not think Mr. Shaw will come in under his own definition. Mr. Mander said in these difficult times many farmers were admittedly obliged to, sell their produce at prices which did not cover their costs of production. It should be noted, however, that in regard to farming, the term “cost of production” was used to include interest on borrowed capital, which was recorded by the Government Statistician as more than 33 per cent, of the cost of farm production. Production Costs. In manufacturing industries the return on shareholders’ capital was not treated as an item of “production cost”; it had to come out of "net profit,” if any. He thought the average usual net profit in manufacturing industries would turn out to be between 4 and 7 per cent, on most ordinary standard lines. In addition, there were usually interest charges on overdraft debentures, and mortgages, but together these rarely amounted to as much as 4 per cent, of the production costs. The total capital charges on share capital, debentures, mortgages, and overdraft, usually accounted for less than 10 per cent, of the price at which the manufacturer sold his goods. Yet the capital charges on farm production amounted to 33 per cent. There was an enormous difference between this and the 10 per cent, average in the manufacturing industries. How were we to account for the difference? Was it due to gross-inflation of land values, an enormous over-capitalisation of the farming industries? If so, he suggested that it ill-behoved the farmer to come before the commission and refer to manufacturing industries as uneconomic. He did not believe our protective tariff made as much as 1 per cent, difference to the costs of farm production. “God-send for Propaganda.” “In my opening ■statement I referred to the notion that New Zealand is, and always must be, merely an ‘outlying farm’ of England,’’ Mr. Mander continued, “and I then suggested that this country could not support on that basis a popidation of even one million. Since then we have had this idea brought sharply into focus by Sir William Hunt, giving evidence on behalf of the Meat Board. Sir William deliberately stated that ‘Our aim should be to make New Zealand another British county.’ ” Professor Murphy: That is a Godsend to you for propaganda purposes, isn’t it? . . . It. will be a long while before that expression sinks to the bottom. ' (Laughter.) “I beg the commissioners to consider the human as well as the economic consequences,” Mr. Mander continued, “the unmerited suffering, the bitter distress which would result from throwing out of work any number of the workers now engaged in manufacturing industries. You are considering not merely a question of cold economies: your judgment will have a direct effect and supremely important effect upon the lives of many of your fellowcitizens. Moreover, If additional workers are thrown out of jobs as a result of a lowering of the tariff, they will not be men of the shiftless, incompetent class. We can -be' sure that those workers who have still been able to retain their jobs through the slump are all competent and Industrious men and women. The idlers and incompetents have been retrenched long ago. “Where else can they hope to find employment except in the expansion of manufacturing industries? On the land? How many more persons could be settled on the land, per annum, under the most ambitious scheme of land settlement that has'ever yet been devised?” Mr. Gow: You say that the scope for youth on the land is limited. Is the other avenue of employment unlimited? Mr. Mander: No, sir, it is not. Buying Foreign Goods. Dealing with another aspect of the matter, Mr. Mander quoted Mr. H. G. Williams, late Parliamentary Secretary to the. British Board of Trade, who had said that, the purchase of a foreign article In preference to a British article clearly created unemployment in Englund. It therefore imposed the necessity of paying for. the imported article, not merely its direct price, but also the indirect charge represented by the unemployment benefit paid to the persons displaced by the purchase of the imported article. Professor Murphy: It may or it may not. lam not taking an academic view, but I think the first sentence is fallacious in that it goes too far. Take for instance an article “x,” and England has a struggle to get on a competitive basis without a duty, and some other country has an advantage. If you buy the foreign article, clearly somebody in England will not get a job making that article, but on the other hand will not somebody in England get a job making something else for export? Importers and representatives of United Kingdom manufacturers had blamed the tariff for the decline in imports during recent years, Mr. Mander concluded, but obviously the decline had been the result of the fall in prices realised for exports. The shrinkage of dutiable Imports during the lust few years had been rather smaller than the shrinkage of Imports that were duty free. Mr. Mander will conclude his case this morning.