Ottawa Conference and the Dairy Industry

Manawatu Times, Volume LV, Issue 6865, 23 May 1932, Page 3

Ottawa Conference and the Dairy Industry

“A. Sioux and his squaw from Dakota, ; Wera asked what' they thought of the quota, From their speech which was queer And uncouth to the ear They seemed not to care an. iota.”—(Punch, Dec. 30, 1931.) To the Editor. Sir,—l think.this about sums up the general attitude of the public to the coming Ottawa Conference despite the .possibility that the repercussions from this important meeting of Empire statesmen and advisers may have a very far-reaching:ieffect on the dairy and meat industries of thi3 country. Before the delegates leave for the conference, it is surely important that the dairy and allied industries should immediately consider the quota proposition from every possiblo angle, lest support be prematurely, given to proposals inimical to the best interests of this country. If the scheme submitted to tho conference by 'the -United Kingdom representatives absorbs the whole of our butter and cheese under a ten per cent, preference and our delegates can satisfy the United Kingdom with a quid pro quo in United Kingdom products, then presumably, no change of any kind need be made in the present marketing conditions, and freedom to sell c.i.f. or send on open consignment, will continue through the present importing and wholesale * channels. In the absence of any knowledge of the proposals which tho United Kingdom representatives may decide to place before the conference, the following propositions may be worth considering:— r ' (a) What is to bo our attitude it United Kingdom offers'to accept free of duty only 85 per cent, of our butter and all our cheese, and how is it intended to apportion this quota of butter to New Zealand factories? (b) What will we do with the remaining 15 per cent, of butter, if shut out by tho United Kingdom? (c) What further preference are wc prepared to give to United Kingdom products? (d) If the extent of our preference is insufficient to satisfy United King-, dom’s needs, will our representatives accept a lower quota? ( e ) Will our delegates support the scheme if it involves sending all out dairy produce forward to United Kingdom on open consignment? (f) Does the quota system involve arbitrary control of New Zealand produce and fixation of prices by some 'Government body in tho United Kingdom in co-ordination with representatives in London of the New Zealand Dairy Board? (g) If it does, then how is it proposed to deal with factories which prefer to sell f.o.b. or c.i.f. for wllol ° 01 part of their produce? (h) Will the New Zealand Dairy Board continue to regulate shipments, er will monthly arrivals be governed by the British authorities? The sub-coinmitteo set up by ihc Imperial Conference in 1930 to consider the butter quota system, import boards. - fend bulk purchasing schemes, comprised eleven representatives from the Lnitcd Kingdom, Canada, Australia, Irish Free State and New Zealand under the chairmanship of Mr. A. W. Street, UXE; New Zealand was represented by Dr. G. Craig, C.M.G.L.L.D., and Mr. W. Ferguson ■ r This committee's findings, which I enclose herewith, indicate that the application of a quota schemo would be a fairly involved process, and they further state that if an import board were constituted they estimate it would be necessary to liavo a standing credit of about £5,000,000 for butter alone. • It seems to mo that no scheme will benefit us which docs not allow all our produce to be exported to the United Kingdom and provide for the continued

expansion of the dairy industry in this country. To what extent are we prepared to givo way to obtain from, tho United Kingdom this preference? Tho wholo question should be seriously considered by every dairy factory directorate in New Zealand and their opinions transmitted to the Government. J. T. MARTIN. Wellington, May 20, 1932. IMPERIAL CONFERENCE, 1930. FINDINGS OF DAIRY PRODUCE. SUB-COMMITTEE. Butter: The total quantity of butter, consumed in the United Kingdom liom all sources was 12 per cent, from the United Kingdom, 37 per cent, from Dominions and 51 per cent, from foreign countries. Quota Scheme. ■ We first considered the possibility of applying to butter a scheme similar to that already consider by the committee on economic co-operation in relation to wheat and flour, designed to ensure that certain minimum proportions of tho total United Kingdom consumption should be of United Kingdom and Dominion origin. In the butter trade thcro is no process analogous to that of floui milling through which all supplies of wheat ioi human consumption must pass. Imported butter may bo sold by shippers or importers to retailers direct or more usually through one or mote wholesalers. Our consideration of the existing conditions in the trade led us to examine a method of administering a butter quota schcmo whereby tho. importer would bo required to produco documentary evidence (in tho form of ccitificates as in tho wheat quota plan) of tho purchase of the prescribed proportions of United Kingdom and Dominion butter before ho could effect clearance through the Customs; as regards butter produced in the United Kingdom, it would probably only be practicable for certificates to be issued in respect of tho comparatively small'proportion passing through factories. Wo considered whether it woind bo possible to cxcrciso the-necessary control over tho whole distributor, in place of tho importer. The difficulties, heie are:— * (a) Many wholesalers arc also engaged in varying degrees in tho import trade and in "the retail trade, and consequently functions tend to overlap. (b) An elaborate system of policing the quota would bo necessary, an®? it would be difficult to prevent evasion. (c) Some organisation would have to bo established to regulate and facilitate tho interchange of butter certificates. (d) It is by no means certain on whom the extra cost of butter certificates would, in practice, fall. Any system of applying a quota to butter would seem to involye the following further difficulties: — (a) Butters from Dominion and foreign sources aro unevenly distributed throughout the United Kingdom, and this would necessitate extensive traffic in butter certificates. (b) Tho butter certificates ivould have varying values at different seasons owing to the variations in tho relative supplies of Empire and foreign butters. * (c) Butter is perishable at normal temperatures, and the anxiety of importers to avoid cold storage charges and transit delays might at timcs ; give certificates an enhanced speculative value. (d) The obligations and restrictions imposed on traders would be regarded as unnecessarily irksome and might set up a hostile reaction towards Empire produco in tho minds not only of the traders themselves but also of consumers-. If it were practicable to’ devise a means of meeting those and Other difficulties, it is conceivable that, a quota plan would bo capable of: — (a) Enabling Dominion butters more efficiently to penetrate northern markets in the United Kingdom; and

(b) At least ensuring a market for Dominion butters and probably increasing the eonsumi>tion of such butters in tho United Kingdom. Cheese: Many of the general considerations outlined above regarding butter also apply to cheese, particularly in regard to tho number of points at which sales of tho homo product ivould need to be supervised. Moreover the need for such a system is less, as nearly 90 per cent, of the consumption in (he United Kingdom already comes from United Kingdom and Dominion sources, the remainder being mainly cheeses differing in type from Dominion cheeses. Hence, the expenso and complexity of the administrative machinery uecessary for tJpe issue and collection of cheese quota certificates would be out of all proportion to tho advantages likely to be gained. Import Boards. We next examined the general principles under which an import board—constituted on tho lines ,of a statutory corporation such as tho Port of London Authority or tho Electricity Commission—might possess a monopoly of the purchases of all butter or other commodity (whether produced in the United Kingdom or imported) intended for consumption in tho United Kingdom, khe existing distributors continuing to function as agents of the board. Apart from the precedents established • in this country during the war period, there are precedents m European countries for the establishment of State monopolies of this nature, notably in Norway and Switzerland as regards wheat, and more recently in Germany as regards maize. The following points should bo noted in regard to an import board plan: — (a) It could bo used as an instrument to implement a quota system or otherwise to offset the effects of foreign dumping, and to increase the consumption in the United Kingdom of Empire produce at the expenso of foreign produce. ' (b) There would also be the possibility of friction between Empire Governments arising on such questions as price, variation in quality and value between Dominion products, and tho allocation of purchases between the different Dominions. In any case some system- for appraising quality, for dealing with disputes and providing for arbitrations, appeals, etc., would need to bo established. (c) By reason of its concentrated bargaining power and susceptibility to consumer pressure, an import board might in tho long run prove to bo disadvantageous to Dominion producers. (d) Dominion producers, under present conditions, depend on tho price recorded in tho United Kingdom market for an indication of tho world value of their produce. Any plan involving interference with the free play of competition on that market would tend to invalidate that index, and on-that account, weaken the position of Dominion producers as sellers. (c) With an import board in operation, publicity in favour of Empire buying might be neither necessary nor effective according to circumstances; the rate of expansion of the supplies from any or all of the Dominions might, in fact, depend less on Dominion initiative than on tho policy of tho boards. (f) Tho powers possessed by an import board would need to bo so exercised as to enforce the reorganisation of tho marketing of the United Kingdom product or to ensure, by a licensing system or other such plan, that the greater part of the United Kingdom supply was brought under control. If this were done, the import board scheme would avoid contravening treaty obligations. Further, by creating a bottleneck superior even to that afforded by tho flour mills iu tho wheat quota scheme, the other difficulties to which a quota system would bo subject as applied to dairy produce (see paragraph 2 above) would also bo largely removed. (g) Long-term contracts between the import board and Dominion producers’ organisation would lead to a measure of

price stabilisation which would cnablo United Kingdom and Dominion producers to plan ahead and organise their production more effectively than L> possible under the existing conditions of violent price fluctuations. (h) It would be possible for the import board to negotiate directly with Dominion export organisations. Ly this means and by tho rationalisation of tho distributing trades in the United Kingdom which it would be in a position to effect, involving the control of margins and a quicker adjustment of wholesale and retail prices to changes in world values, savings might be effected to tho advantage of consumers in tho United Kingdom and in tho Dominions. (i) As an indication of the extent of the financial support that would be necessary for an import board, it is estimated that a standing credit of about ,000,000 would be necessary to operate an import board for butter alone, allowance being made for United Kingdom supplies. Further, where any particular commodity is in competition with or closely allied to another; e.g., butter with margerine or butter to cheese it is possible that a monopoly couid not be effectively administered without extending it to related products. From a financial standpoint there is tho overriding risk of financial loss due to noncommercial influences such as political pressure whether in tho United Kingdom or overseas. Organisation of Channels of Trade. Under this heading we consider that tho following suggestions for increasing sale of Dominion dairy produce in tho United Kingdom are worthy of further examination: — (a) The possibility of organisations of Dominion producers negotiating with voluntary groups of importers in tho United Kingdom for tho purpose, inter alia, of concluding trade agreements designed to assure increased sales at prearranged or formula prices. (b) Tho possibility of co-ordinating the separate agencies of the same Dominion and of tho various Dominions which exist in London for tho import and sale of Dominion products. (c) • Tho possibility of using, for purposes of Empiro co-operation the high degree of organisation, which exists among distributors of imported dairy produce both in Loudon and tho principal provincial centres.