FARMERS' CASE

Evening Post, Volume CXV, Issue 138, 14 June 1933, Page 12

FARMERS' CASE

TARIFF COMMISSION PROTECTION OPPOSED DOMINION'S TRADE '

'- Tho { gradual abolition of all tariff .duties, except those for Taising revenue, was,advocated by Mr. J. Pow, secretary', of the New Zealand Farmers' Union/ in a statement on behalf of the union before the Tariff Commission today! ': He argued.that New Zeaiand was in 'the''main a primary producing country- and ihould foster trade with. tht/TJnited Kingdom, which was the dominion's best customer. Tho existing fiscal burden imposed upon tho consuming public, he asserted, was in excess of what it should have to bear, and .if a revenue tariff of moderate dimensions, -balanced by countervailing excisel duties,, was put into operation, the .union would bo prepared to sacrifice any subsidies or protection it at present enjoyed. Mr. Pow said that it was only when dutiei were levied for the purpose of penalising foreign supplies in favour of" home industry that .the tariff issue arose. Customs duties were a suitablo form-of revenue in a new country, •where the population was scattered and ppor, bat these duties had allowed manufacturers to gerainato, though in any ca»e.they would have developed .sooner or- later. These protected interests had become 'organised, articulate, con-tagions,-and greedy, and tho burden of protection fell on the non-protected section' of; the community, which included the ■farmers, the professional classes, and-the workers not employed in protected ' industries. The New Zealand farmers had to tako world parity for their goods, and protection increased their costs of production. They did not advocate' that the existing protective tariffs should be removed in toto immediately, as that would lead to internal trade chaos, but tho removal should, be gradual, with the definite objective' of having them materially reduced before the terms of the Ottawa Agreement -were next considered. The New. Zealand market consumed only from 3 to s'per cent, of the Dominion's wool, 7 per cent, of the lamb, 0 per cent, of the cheese, and 45 per cent. of the mutton, and the great bulk of the exports were taken by Great Britain. If,the,farmers cut-off the market for their'imports,'they, must necessarily in the long run cut off the market for some exports. .If they did not buy British goods in large bulk, Britain would-be compelled to buy # her goods where., she . sold her exports. Britain was their most dependablo customer, and no substitute could be found. Although they had always enjoyed the sympathy of the Conservative Party, it was probablo that they would not enjoy much tariff goodwill from the manufacturing and labour interests in Britain, and . they' were likely to be reinforced ,by the demands of the British 'farmer which were . steadily growing more urgent and mote articulate. Apart from this, it was only common sense for New Zealand to adopt a :policy which\would gradually distribute its labour and capital into those avenues of industry where it could be used .to"the best advantage. "Wo do sibt' favour quotas or any form of restriction on the quantity of primary produce . exported '• to Great Britain,' 'ho said,"and we f ee ] certain that if Britain's exports were made to pay for her imports there would be no further talfe of trade restrictions." SPECIALISATION. ■ Mr. Pow said that H the specialisation of industry were common throughout the dominions, hundreds of factories and looms would reopen, in England 'arid the operatives would be able to purchase the surplus primary produce from, the Dominions. In addition the purchasers of hosiery, footwear, etc., in' New' Zealand' would get their goods cheaper.l New. Zealand could not'be s6lf-supporting, neither cou^l Britain, and -the, present interchange of commodities. was the safest, cheapest, and surest. They were opposed to all forms of protective duties and subsidies for infant - industries, but-4f .tho Government .thought it. worth while to encourage an. infant industry, they would prefer a'subsidy which would not cost ■any more than a protective duty and the public would see where they wero paying^ increased costs. The farmers had ■no objection to secondary industries. They welcomed them because they de-sired-a-well-balanced economic life, but 3ooked askance at all forms of protection to: which the high cost of living ■was in a great measuro attributable. If an industry could not stand on its owi feet the consumers as a whole were icing taxed, to support it. While the farmers had searched tho world for markets, the -secondary industries had failed'to put'a single article on an export basis. With few exceptions, every time, thtf-farmer purchased an article '.lie paid.a bonus over.world parity to a local manufacturer, and there were few countries. in the world in which the ahanufactured goods cost as much as in Now Zealand. Tho "following table of index figures of comparative manufacturing costs for luanuf&ctnrcd articles in 1932 had been compiled from official sources:— United Kingdom: 67 (base 1924 = 100).. 'u.5.A:'101.4 (base 1913 - 100). Canada: 108.5 (base 1913. - 100). Germany: 117.9 (base 1913 = 100). ' New Zealand:-132.7 (base 1913 = lO'ff). ■ . 'fWe maintain," said Mr. Pow, " that this ■ high index figure for New Zealand is.-largely due to: (a) Multiplicity of factories producing similar goods—e.g., 244 clothing and waterproof factories, 72 boot and shoo factories, 23' hosiery factories, and 12 woollen mills.;• (b) Want of efficiency, due to wide range of manufacture in the -same industry—e.g., most of our woollen mills, manufacture all kinds of •woollen .goods from blankets to sox. We also/contend that factory overhead expenses would be considerably reduced through, the removal of protective tariff*, and their necessarily accruing costs in manufacture. We are thoroughly convinced that if our secondary industries were overhauled and rationalised, and their output specialised and standardised, thero would .be-no need for protection other tfyan. that, of .distance from the British manufacturer." l SUITABLE INDUSTRIES. •Mr. PoWsaid that if Now Zealand wanted British tariff privileges she would, have to give reciprocal privileges in return. New Zealand would never be suited to mass production, but on the ;Other hand tho following industries wore eminently suitablo to conditions ip -this; country:—(l) Farming; (2) manufactures ancillary to farming, such as .butter'and1 cheese production, refrigeration, and the working up of lefrigerated by-products, including fertilisers; (3) cement and heavy transport industries for which raw material is available here; (4) furniture and other articles, metallic or otherwise, whteh are capable of being produced economically on a relatively small scale, and which cater to local tastes and; requirements. The equalisation of competitive con-

ditions as between British and local manufacturers had no precise "meaning, :ts it would be impossible to determine the conditions in which such equalisation could take place, or to carry out such a policy of equalisation in any consistent or intelligible manner. It was further, submitted thnt even it' this could be done it would bo undesirable in the public interest. The position of. importers and local manufacturers differed so materially, and industrial conditions wero so fluid, that even if by chance or design competitive conditions were equalised, tho state oi: equilibrium could not long be maintained. Equalisation of competitive conditions, if it were attainable, would mean an attempt to stereotype a given organisation of production and distribution, and also trading conditions and currency conditions. CREATION OF INDUSTRY. A tariff would not create new industries. Industries could bo created only by labour and capital, and a tariff could divert these from one channel to another, but could not call them into being. It was true that industries from outside might be induced to settle inside tho tariff walls. This, however, would not help our local manufacturers, but-would only build up new competition against them, "Making work" was no valid argument. If that wero so earthquakes would tie a blessing, since they made plenty of work. Our aim should bo to concentrate our resources where they would produce most wealth. The farmers refused to admit the principle that a reduction in the protective tariffs would have tho effect of reducing the number of people employed. It was absurd to assume that every operative would "down" tools and every factory close if protective tariffs were removed tomorrow. "Although the Official Year Book gives the total number of factory employees as 80,829," said Mr. Pow, "wo would like to emphasise the following points:— 1. Our economically sound secondary industries would be unaffected; in fact, if these were rationalised and specialised many more operatives would bo absorbed. 2. Our semi-primary industries, e.g., dairy factories, freezing works, etc., would be unaffected and probably increased. 3. Operatives in repair shops, etc., would be unaffected. 4. Out of the national savings through the removal of protective tariffs, and their pernicious perpetuation from factory to consumer considerable absorption of labour would result. PERNICIOUS POLICY. "Wo now come to the most vital part of our evidence, for we strongly assert that tho existing fiscal policy imposes upon the consujning public a burden -far in excess of what it should have to bear. We maintain that millions are spent needlessly every year owing to this pernicious' policy. "The tariff system, as wo view its operations, consists of two separate aspects:—(l) The imposition of duties both for revenue and protective purposes; (2) tho bolstering up of local prices, together with their ever-increas-ing burden on the consuming public. '' The average annual collection .of Customs duties for the period 1927-3^l has been £7,440,050; if this sum is necessary as revenue, we offer no objection to its collection. But extra additions to the cost of imported commodities do not rest here. When profits are being calculated in /the course of trade between importer and consumer, they include profits on £ 7,440,050. Assume the profits between Customhouse and consumer to aggregate 33 1-3 per cent. —quite a reasonable assumption— then the profits on the Customs duties which have been added on to the landed cost would total £2,480,000. In other words, if the goods could have been landed in the importers' warehouses free of duty, nearly £10,000,000 would have been saved by the consumers of tho Dominion. "But tho more iniquitous aspect of our existing fiscal policy is that of protected production. By this wo_ mean that local prices oscillate around import parity, really independent of costs of production.' Furthermore, in tho different stages of business, the added profits always include profits on this protective excrescence or leech, so that ultimately the consumer has to pay very dearly for tho privilege of local production. ' "Wo contend that about £18,000,000 additional is added to tho cost of commodities, through the protective fiscal system and its ramifications, but as £7,500,000 is required annual for the Consolidated Fund, we are content to assess the excess cost at about £10,750,000. . "The Farmers' Union has no objection to a true revenue tariff of moderate dimensions balanced where appropriate by countervailing excise duties.- If this policy were carried out the union would b9 prepared to sacrifice any subsidies and protection it at present enjoys,, which are purely defensive' reactions to a misconceived tariff policy. "In'any case, it seems to .us that the country has not much choice in the matter. An early or marked rise of world prices appears improbable, and until tho costs are lowered (and this cannot be done under indiscriminate protection) farming will remain in an unprofitable position, and so will local secondary industries, because they depend on the strength of the local market." -