Tariff Dispute With Canada

Manawatu Times, Volume LIV, Issue 6628, 15 August 1931, Page 2

Tariff Dispute With Canada

lr Forbes and Mr Bennett

PULL TEXT OF CORRESPONDENCE

The Prime Minister (Et. Hon. G. W. Forbes) has released for publication the correspondence which has passed between himself and the Prime Minister of Canada concerning tariff negotiations. Following is the full text of the cables sent and the replies received:— Telegram From Prime Minister KZ. to Prime Minister Canada Tour telegram. 29t.h. May. 1. I regrot very mucn that the New Zealand Government have been unable to defer longer the action, indicated in my telegram 26th. May last and adumbrated in numerous former communications. 2. I note your statement that you are unable to regard the summary contained in my telegram of 26th. May as making adequate recognition of the endeavours of the Canadian Government to come to a satisfactory agreement and that since assuming office you have sought, every opportunity to confer with, the New Zealand Government. Will you allow me to say in reply that any such efforts have not been apparent to the New Zealand Government who retain tho impression that the Canadian Government having in effect prohibited the importation of butter from Now Zealand have been in no haste to enter- into definite negotiations. His Majesty’s Government in New Zealand have not failed to note that two occasions on which they were prepared for these conversations, namely at Ottawa and at London were allowed to pass without any attempt on tho part of the Canadian Government to give detailed and effective consideration to the matter. Further your telegram of the 14th. May indicated no prospect of immediate negotiations and indeed it would now appear that the Canadian Government, notwithstanding the New Zealand Government’s anxiety to dispose of the question at an early date, contemplated the possibility of deferring conversations until the meeting of the proposed Economic Conference which at its earliest would have rendered impossible the implementing of consequent agreement until tho meeting of the New Zealand Parliament in June 1932.

3. I note with pleasure the indication which may I think be inferred from the second paragraph of your telegram that the Canadian Government do not now regard themselves as precluded from making a concession on New Zealand butter. Neither at Ottawa nor at London nor indeed at any time subsequently was I given any definite •indication that such a concession could be made and though my telegram of the 18th March last specifically notified tho Canadian Government that the action now taken could be postponed only if tho Canadian Government found such a concession to be possible, your reply of the 14th. May gave no indication'of anything beyond a “continuance” of preference. The Nerw Zealand Government will of course be happy to learn whonever the Canadian Government consider the time appropriate,, what concessions they propose to make. 4. His Majesty’s Government in New Zealand cannot agree that an abnormal trade situation was created by the importations of New Zealand butter into Canada in 1929-1930 or that the butter was, as you suggest, being rushed into Canada to take advantage of the prevailing low rate of one cent. The figures for that year indicate merely the progressive annual increase since New Zealand butter was placed on an equalfooting with Australian butter in 1925. Even, howeveT, if the situation could be regarded as abnormal the Canadian Government will no doubt have noted: —

(a). That the importation in. no way amounted to dumping; New Zealand butter entered into normal

competition with other (including domestic) butters on the Canadian market after paying all freight and incidental charges from New Zealand anl without any subsidies or bounties obtained or granted in New Zealand.

(b) That notwithstanding the importations of New Zealand butter in 3929-1930, Canada still enjoyed a balance of trado over Now Zealand.

5. I note your contention, that the Canadian action in respect of New Zealand buttcT cannot properly be regarded as penal. You must allow His Majesty’s Government in New Zealand to retain their belief that the imposition of a prohibitive tariff duty on Now Zealand butter, which was not imposed generally on all butter importations and which, has had the effect of terminating the importation of New Zealand butter while stimulating the importation of butter from another source may rightly he regarded as a penal measure. It may well be that Canada as you state is to-day granting to New Zealand its British preferential rate on all products. Where, however, the British preferential rate is not the lowest rate and is in itself prohibitive, it is a matter of little moment What higher rates may be fixed. As you have already been advised the New Zealand Government can attach importance to tho preferential tariff treatment of their products only if and so far as this preferential treatment is capable ot leading to actual trade and as a further indication of the attitude of the Canadian Government towards New Zealand trade I understand that in the new Canadian tariff an increase of four coats a lb. has been imposed on New Zealand meat. 6. The New Zealand Government’s action has not been taken as you assume on ary special grounds of reciprocity but, as I have already explained, on’ the ground that the New Zealand Government are not disposed and indeed cannot afford to make remissions of taxation without corresponding advantages. It is their policy to encourage the importation of goods from those countries which themselves are prepared to purchase Now Zealand products. Tho New Zealand Government have, however, attempted to retain a true reciprocity with Canada by providing for a remission of customs duties on' Canadian goods estimated to be at least equal to the Canadian remission cf customs duties on New Zealand goods. 7. I have noted with interest your comments with reference to Canadian purchases of wool and I trust with you that the outlook in respect of this commodity is promising. I have observed

however that even on your suggested potential importation of twenty-four million lbs. of wool, and even assuming a price of 9d a lb. (which is considerably above the present market price) tho value of that trade would be less than £1,009,000 per annum. This would scarcely seem to confirm your statement that direct Canadian purchases of New Zealand wool will in tho near future equal New Zealand's former butter trado with Canada, which as you are aware, reached nearly three times that value in 3929-1930.

8. I appreciate the difficult position created between the two Dominions. It is the view of His Majesty’s Government in New Zealand that this difficulty is due solely to the action of the Canadian Government in taking drastic steps against tho New Zealand butter trade before any possibility of negotiations was afforded to the Now Zealand Government and to the Canadian Government’s reluctance to enter into effective conversations. The difficulty' is one which the Now Zealand Government for their part are entirely willing to attempt to remove as soon as the Canadian Government find it possible to undertake definite negotiations to that end, and as already advised, His Majesty’s Government in New Zealand would welcome an early visit by a Canadian Minister for that purpose.

9. Finally may I point out that the Session of the Now Zealand Parliament which opens at the end of this month will certainly be adjourned by November next and probably at an earlier date and that therefore the implement-inu-r of any agreement not completed in time for action at this Session would necessarily be delayed until tho Session which should normally commcnco in June, 1932. 10. I have no objection to tho publication of this telegram and I propose to publish hero should circumstances render it desirable at a later date.

Telegram From Prime Minister, Ottawa, to Prime Minister, Wellington, July 28th. 1. Your telegram 29th. July received. We regret that it was not found possible to admit Canadian goods under contract at rate of duty obtaining before your latest tariff increase but appreciate concession as regards goods in transit. 2. With reference to your concluding enquiry as to prospects of early negotiations with a view to completing satisfactory trade arrangements, we may repeat that our Government is prepared now as at all times since assuming office to undertake negotiations to this end but wo must frankly answer your question by stating further that prospects do not appear promising if your Government maintains • the attitudo taken in recent telegrams and recent policy. 3. We should like to state concisely our views on the chief points you have raised in reeont telegrams, and particularly as to strong criticism of Canadian policy you have voiced. 4. In your telegram of the 9th June you referred to impression of your Government that the Canadian Government has been dilatory in entering upon negotiations for a comprehensive agreement. I am sure that you will agree that the fundamental difficulty not only during the past months but for some years past has been the absence of a direct agreement between Now Zealand and Canada based upon full consideration of market opportunities and producers’ interests in both countries. In 1925 the Canadian Government, in addition to continuing British Preferential rates, extended to New Zealand without seeking any special advantage in return, tho concessions granted to Australia under the Trade Agreement with that. Dominion. It was obvious that concessions of this unilateral character, dependent on fortunes of agreement with another Dominion, did not afford a permanent basis of trade, and that in its own interests New Zealand might have been expected to seek a direct agreement. Aside from a suggestion in 192 S which was not followed up by New Zealand, this does not appear to have been done until the. sudden expansion of butter exports complicated tho situation. The present Canadian Government on assuming office in August last year was faced with announcement of your intention to impose the former General Tariff rates on Canadian motor cars in consequence of notice given in April of termination of extension of Australian Trado Agreement to New Zealand. Whilst indicating obvious inadequate one cent rate on butter could not be revived, we did everything posiblo to provide for a personal discussion and negotiation of comprehensive direct agreement in which provision as to butter would find an appropriate place. Wo regret on your icurnoy through Canada to London ami in London our discussions did not yield definite results, but so far as this was due to any factor other than lack of adequate time wo must decline to accept more than. a reasonable share of that responsibility. We suggested that your delegation should return through Canada, as was done by Australian Minister of Commerce, in which case a comprehensive agreement might have been reached in time for both our Parliaments this Session, and regret you could not adopt that course. The telegrams which have been exchanged since have been an inadequate substitute for personal discussion. 5. Your further objection that Canada extended during the past year more favourable rates on butter to Australia than to New Zealand overlooks the essential factor that in Australia’s case these rates were part of a definite agreement, the extension of which to New Zealand terminated on October 12. In view of the fact that from October 1 1925 to October 1, 1930, inclusive, total Canadian importation of butter from Australia to which a low tariff rate had been accorded in return for Australian concessions on Canadian goods amounted to only slightly more than firre milieu pounds, whilst importation from Now Zealand, which had made no agreement and received concessions only indirectly, exceeded 96 million pounds, it is apparent that if any Dominion has ground for complaint it is not New Zealand. 6. As to butter,- it is essential to 'bear in mind that Canada is itself a dairy country, and a pioneer in Government assistance towards improvement in quality, in co-operative marketing and in development of overseas markets. The circumstances which led to the change from an exporting surplus of 24 milion pounds in the fiscal year 1926 to net importation of more than 40 milion pounds in 1930, including lessening of dairy production and diversion to other forms than butter, were cleatiy abnormal and could not continue. Quite aside from tariff rates New Zealand could not have reasonably expected continuance of huge exports of this period. As a result of development during the past year Canada is again on export basis. It is out policy to foster this natural and essential industry and we anticipate normally Canadian producers will supply the home market, but it is probable winter shortage will recur and in any case so

far as imports are necessary it is our . desire to give pefcrence to supplies from reciprocating Dominions. Canadian Preferential Tariff rate of 4 conts which led to your cancelling of preference on motor cars was in many ways loss-than New Zealand rate on Canadian butter. Present tariff accords New Zealand a preference of 6 cents and %ve have already indicated willingness to consider the question further as part of General Agreement. The new Trade Agreement with Australia provides for 9 cents! preference. 7. Canadian Government is also prepared to consider extending preference on. other New Zealand products; and has in fact made careful survey of fields. In any case, we have always been prepared to receive any specific suggestions as to products . op which preference was specialv desired. We have hitherto continued to grant New Zealand our full British Preferential Tariff in spite of the fact that your Government not only cancelled preference on motor cars in consequence of withdrawal of butter, preference but has since in addition cancelled greater, part of British Preferential Tariff accorded to other Canadian exports. S. As to basis of preferential relations. we take no exception to policy set forth in your''telegram of May. 26 of increasing duty on products which New Zealand can easily supply herself and of increasing duty to meet revenue needs. We must, however, take exception to views in your telegram of June 9 that a true reciprocity would consist in cutting down preferences or remissions of duty on Canadian exports to New Zealand to equal Canadian remissions on New Zealand goods. Wo do not consider any such meticulous balance of advantages or any endeavour to insure that one Dominion will not export more to another than it impoits would be in true spirit of Imperial cooperation. We feel confident you will adhere to views expressed by the representatives of both Now Zealand and Canada at Imperial Conference of 1930 that subject, to primary duty of considering interests of our own producers we should each sock to direct as much ot our import trade as possible into Empire channels. , 9 You will recall informing tne imperial Conference of steps which your Government Ims taken to divert; part of its import trade from the United States to the British Empire. I fcol sure vou will therefore regret to len.rn that the direct result of your Government’s recent action has been to divert, a lareo trade from Canada to tho United States, much of which may be pcimanentlv lost. . 10. It is. however, not our wish to spend further time in assessing.responsibility for the unfortunate situation which lias developed. Canada sets a high value on a close trading connection with New Zealand, both because of the value of tho market, for our producers and because of special friendliness which has always marked our ic lations. You are about to enter upon a general election; wc assume it would not be appropriate or possible to enter upon negotiations at the present time. 31. Wc assume that you will give the same publicity to this dispatch winch you have given to your own recent telegrams under reference.

Telegram of August sth, 1931, From the Prime Minister, Ottawa, to the Prime Minister, Wellington

Press dispatches slate you have announced receipt of my telegram of July 28, and are making a statement concerning it shortly. I assume you would therefore have no objection to it being made public here.

Telegram of August 12th, 1931, From the Prime Minister, Wellington to the Prime Minister, Ottawa. Your telegram July 2S. 1. I note your statement in paragraph 2 that"the Canadian Government is now prepared as at all times since assuming office to undertake negotiations for a trade agreement with New Zealand, and a similar statement in paragraph 4 that the Canadian Government has done everything possible to provide for a personal discussion and negotiation of a comprehensive direct agreement in which a provision for butter would find an appropriate place. It is with extreme regret that I find myself unable to concur with this statement of the position.

2. During the course of telegraphic correspondence since April 12, 1930, the New Zealand Government has intimated to the Canadian Government on not less than seven distinct occasions its desire to enter into direct conversations. Tho Canadian Government for its part not only declined to postpone its drastic action against New Zealand butter until such time as negotiations could take place, but in point of fact before conversations were possible actually doubled the prohibitive rate originally proposed, and during a period of 16 months it has taken no definite stops to accede to our repeated requests for a conference to discuss in detail the questions at issue. 3. Indeed, on the two occasions when New Zealand Ministers actually put themselves in personal touch with Canadian Ministers, tho results entirely failed to convince the New Zealand Government of any desire on the part of the Canadian Government to enter upon effective discussions. On the first occasion, on the day of my arrival at Ottawa (where I had been invited by the Canadian Government to discuss the matter), I was met with a heavy additional increase in tho duty on New Zealand butter, while the Canadian Government was unable to enter into any detailed negotiations whatever; and on the second occasion, at London, an abortive exchange of views took place, but no suggestion was communicated to me then, or on any subsequent date, that I should return to New Zealand via Canada for the purpose of participating in yet a third scries of conversations.

4. I am unable to agree that the fundamental difficulty has been the absence of a direct agreement between New Zealand and Canada (though such an agreement was suggested by us in 1929, and since April, 1930, the New Zealand Government has fruitlessly made every effort to enter into the negotiations necessary to arrive at such an agreement). Notwithstanding the fact that tho balance of trade between tho two Dominions was heavily against New Zealand, the New " Zealand Government raised no objection to the arrangement existing prior to Canada’s termination of the extension to New Zealand of the rates accorded to New Zealand butter, though it would seem plain that if either Dominion had ground for complaint owing to the absence of such a trading agreement it was not Canada. Even now I must repeat that New Zealand continues to grant remissions on Canadian goods to a greater estimated value than Canadian remissions upon New Zealand goods, and that Canadian motor cars on admission to Now Zealand are still

accorded a preference of at least 18 per cent, ad valorem over foreign motor cars.

5. The New Zealand Government shares your view that telegrams arc an inadequate substitute for personal discussion, and with you it appreciates the futility of spending further time in assessing the responsibility, for the unfortunate situation that has developed, though it must be allowed to retain the views it has already expressed in this connection. It notes with regret, however, that the Canadian Government regards the forthcoming general election in New Zealand as necessitating a further delay in the initiation of conversations. The New Zealand Government does not share this view and must accordingly reiterate its continued willingness to receive a Canadian Minister at tho earliest possible date, and its deside to enter into negotiations with the least possible delay. It has, liowt ever, no option but to await a notification from the Canadian Government as to when a definite date for the contemplated discussions can be fixed. 6. With reference to your telegram of August 5 I have no objection, to your publishing any of my communications to you; indeed, I should be grateful for your concurrence in the publication of tho whole of our telegraphic correspondence on this subject. In any case I propose on August 15 to publish this telegram, your telegram of July 28 and my telegram of June 9 (which has not yet been published here).