COMMERCIAL OPINION OPPOSED TO QUOTA

Dominion, Volume 27, Issue 144, 15 March 1934, Page 13

COMMERCIAL OPINION OPPOSED TO QUOTA

Alternatives Suggested ROOM FOR IMPROVEMENT IN QUALITY OF PRODUCE The following statement on the problems of the dairy industry was Issued by the Associated Chambers of Commerce, following a meeting of the executive: — “The commercial community of New Zealand is naturally greatly concerned with the welfare of the industry, and has given earnest study to the circumstances surrounding the situation of continued low price levels for dairy produce in the Home market, the glut of supplies there as a result of Empire and foreign shipments, and the efforts being made to protect the farmers of Britain from this influx, and to secure them an adequate return on their supplies. The commercial community of New Zealand realises that, while the whole problem is essentially one for the New Zealand dairy industry itself, it is competent for the business people to express their views on a subject so vitally affecting the whole country, and to draw attention to certain relevant factors which it feels should be carefully considered in the interests of the community generally. “A Radical Device.” “First —to tabulate results before examining the causes--there is no doubt that the unofficial appeals being made by the British Government for a voluntary agreement by New Zealand to a quota on our dairy produce exports to Great Britain are causing the greatest concern here, and this is one of the most immediate problems confronting the industry. The quota is a most radical device, and carries with it the danger of disastrous consequences to New Zealand. “One of the principal arguments advanced in favour of the acceptance of the quota restriction is one of fear. It is said that by acquiescing now we will probably get off with a reduction of 10 per cent., whereas if we stand firm on the Ottawa Agreement, although we may have free entry to Great Britain until the end of the three-year period we may then expect a much heavier restriction to be imposed under the freedom of action the British Government will possess, with possibly a tariff against us. “Without avoiding the issue by holding fast to the promises made at Ottawa —and there is no question that the British Government will meet its just obligation, just as we feel there can be no question that this country will do the same —it is essential that New Zealand should fully realise what a quota would mean. It would mean : (1) a restriction of production; (2) to secure this, a system of deliberate planning, which is immediately beset with tremendous problems in the securing of equity as between different producers; (3) the ruin of many farmers; (4) the sale elsewhere, or; if that is impossible, the financing meantime and the ultimate waste of surplus production ; (5) an arbitrary and probably permanent restriction of that freedom of development which the dairy industry has enjoyed since its initiation, arid of which it has taken such wonderful advantage hitherto; (6) a permanent handicap on our efforts to encourage and promote land settlement, and a permanent check on the immigration from the United Kingdom of that type of settler which has done so muehjin the past to develop the natural resources of the country; (7) the consequent restriction of New Zealand’s resources from which to meet its interest obligations on debts to overseas lenders —payment made possible only by a sufficient excess of exports over imports. Disposal of Surpluses. “Apart from what seems to be the essential unsoundness of a scheme that aims at restricting to a definite quantity the production of a commodity that must necessarily vary according to the bountifulness of the season, any attempts at control must be by a bureauracy, whose ability to organise and handle the situation would be very much open to doubt. The logical and inevitable development would be the official control of all avenues of Industrial and commercial activity. So far as we are aware, no scheme to limit and control the products of the soil has in the long run proved an economic success, as witness efforts in this direction in regard to rubber, coffee, sugar, sisal, cotton, wheat, peaches, and other schemes of a similar nature. The second main argument in favour Of the quota is that a reduction in supply will so Increase the price at which it sells that the total receipts also will be Increased. This is often quoted by supporters of the principle of the quota, but with regard to dairy produce there is nothing to show that the English market is So Inflexible as to conveniently prove this principle for the benefit of New Zealand. The number of persons in Great Britain consuming New Zealand butter has increased, and there is no doubt that this is very largely ■due to low prices, and the consequent displacement of margarine. It has to be remembered also that New Zealand is not the only supplier of butter to the United Kingdom. The argument that prices will rise substantially if the supply to the market is reduced is sound only if the market has the purchasing power, and if there is no satisfactory substitute at a competitive price. “From what we know, the power of absorption by the English market falls rapidly as the price of butter advances, margarine becoming an effective competitor as soon as butter leaves the low price field. Another material consideration is the huge milk marketing scheme being undertaken in Great Britain, under which domestic milk producers are guaranteed high prices by the Government. thus counteracting any shortening of supplies in the market by a quota imposition on New Zealand, and ensuring low prices for butter and cheese owing to the encouragement given by the scheme to domestic production. “As regards the disposal of the surplus production under a quota. this must be a serious problem. Stocks in stores cannot go on mounting up indefinitely, and while this accumulation would compel a keener search for new markets, there is no substantial immediate outlet in sight for surpluses. Views Summarised. “Concentration on quality in butter and particularly cheese is of outstand- . Ing Importance, and the improvement can be effected if the industry so wills. Along with the improvement in cheese quality, there are possibilities in the local market for increased cheese sales. Raw milk sales could almost certainly be increased by suitable propaganda. “We would summarise our views as follows:—(1) We view with very grave concern the imposition of a quota on New Zealand dairy produce, and suggest that every possible alternative

moans of agreement wilh the British Government should be explored: (2) New Zealand should strive by every possible means to improve the quality of its dairy produce, more especially of its cheese; (3) we should face the facts of the present situation and cease forthwith the various devices which have been brought into operation with a view to maintaining and expanding uneconomic production of butter-fat; (4) we should explore every possibility of finding markets other than the United Kingdom for our dairy produce, if necessary by the extension of trade agreements with other countries; (5) the industry should examine closely the possibilities of production alternative to the production of butter-fat. and every encouragement should be given to those persons who cannot produce butterfat at today’s prices to develop alternative lines of production.”