FACTORIES WILL CLOSE

Evening Post, Volume CXVIII, Issue 9, 11 July 1934, Page 12

FACTORIES WILL CLOSE

MANUFACTURERS' VIEW

INCREASED IMPORTS

The following statement has been issued by the New Zealand Manufacturers' Federation:—

"The New Zealand manufacturers wish first to record their appreciation of the fact that the Government has been strong enough, in th« national interest, to resist the pressure of certain powerful sectional interests in the direction of an even more drastic general lowering of ; the tariff. It is apparent that the Government does recognise, to some extent, the value and national importance of manufacturing industries, and admits that any such lowering of the tariff as would injure these industries must be injurious. also to the Dominion as » whole.

"It is difficult, however, to reconcile j this view with the fact that so many tariff cuts are proposed which, if enacted, will admit a largely-increased volume of imports, which in turn must j mean a reduction of demand for the' corresponding goods made by New Zealand factories and a consequent reduction of the- number of workers who can be employed. The logic of this ap-1 pears to be inescapable. Manufacturers had hoped that industries might be enabled to expand and employ many more workers; but as tho result of this there will bo a contraction, and this will affect all those who arc indirectly dependent on industry and on the spending power of tho workers, as well as those directly concerned. REDUCTION IN WORK AND WAGES. "These proposed changes in the tariff will result immediately in the closing of some factories (where protective tariff has been abolished or drastically reduced), and' other factories being obliged to. put off a substantial number of workers on account of more imported goods and fewer of their own goods being sold. In other cases it is evident that the effect the tariff reduction must be to force a further .wage-reduc-tion. This is clear, for instance, in one very larg© industry in which! the ruhng rate of net profit is less than 3 per cent, on output, but which has suffered a cut of 5 per cent, in tariff. Obviously in such a ease a corresponding reduction in price can be effected only.by means of a reduction in wa^es "Manufacturers therefore feel that the Government should be asked to give further consideration to the > effect which many of these reductions would have upon the industries concerned and through injury or destruction to' them, upon the Dominion as a whole. INTERPRETINO OTTAWA TERMS.

"Moreover; the Manufacturers' Federation definitely dissents from'the view that these proposed reductions are necessary for compliance with the Ottawa Agreement. It is evident that the New Zealand Tariff Commission has adopted a particular interpretation of the agreement; but it should be distinctly recognised that this is not by any means the only possible or reasonable interpretation. In Australia, for instance, an equally competent authority, the Commonwealth Tariff Board has declared that the meaning of Article 8 is something quite different in many respects from the meaning apparently attached to it by the New Zealand Tariff Commission.. The Australian Tariff Board's finding was— That a reasonable duty to protect an efficient economic industry should be lngh enough to raise the landed cost of an overseas product to a level which will—(a) Compensate for the higher cost of•. Australian labour- (b) offset the higher costs of raw materials and overhead charges; (c) provide a marginal advantage in favour of the Australian manufacturer . . . w ia e enough to secure to an efficient Australian industry so much of the market as is represented by goods which can be economically produced in the Commonwealth, but narrow enough to preclude inefficiency or undue pro/it-tak- " 'Further, the board considers that the margin can be justifiably increased:— v ■ (a) "When a new industry i s beine started in competition with imported goods of brands which are well known ... i(b) When, as in the csao of fashion goods, a low margin does not provide sufficient protection against disturbing importations of end-oi-season stocks.' (Commonwealth Tariff Board Report, June, 1933). AN UNTENABLE FORMULA? "The Commonwealth Board reported that such formula was entirely consistent - with the Ottawa Agreement In order to bring down the Australian tariff to this level, considerable reductions of duty were necesary. Nevertheless, it should be carefully noted that, even after all these reductions had been made to comply with the Ottawa Agreement, the new Australian tariff on British, goods was still, on average, considerably more than twieo as high as the old tariff in New Zealand. But if this new Australian tariff satisfies all the requirements of Ottawa, it is obvious that the old New Zealand tariff must always have been a long way below the maximum which the Ottawa Agreement allows. If the terms of Ottawa are satisfied by a tariff twice as high as ours, it is inconceivable that exactly the same formula can require in our tariff any reduction whatever."