BUTTER QUOTAS

New Zealand Herald, Volume LXX, Issue 21449, 24 March 1933, Page 11

BUTTER QUOTAS

*' A PERNICIOUS SYSTEM"

'ADVICE TO NEW ZEALAND

FREE TRADE WITH BRITAIN

SURVEY, BY MR. GOODFELLOW

"I have done my best to induce the New Zealand Dairy Board not to agre'3 to any restriction on the imports of our butter intp the United Kingdom, because I believo it will be better to fight the matter out, even if prices do go a little lower," said Mr. W. Goodfellow, advisory director of the New Zealand Co-operative Dairy Company, Ltd., when addressing the Auckland Chamber of Commerce at luncheon yesterday. Discussing New Zealand's position under ihe Ottawa agreement, Mr. GoodfeMov said the United Kingdom had given the Dominion a free market for three years, and had penalised the foreigner to the extent of imposing a duty of 15s a cwt on butter and 15 per cent on cheese. Larger quantities of foreign dairy produce were coming into the United Kingdom meanwhile, because the Continental countries could not absorb all they were producing. However, he believed that the situation would right itself with an improvement in the international position.

On its part, New Zealand had agreed not to develop uneconomic secondary industries, and to reduce the duties on certain British goods to enable the British manufacturers to compete reasonably with local manufacturers. Further, when it could afford to do so, the Dominion had promised to abolish the 3 per cent primage-

Reservation in Agreement

Discussing the terms on which Britain bad agreed to give a free market to Empire dairy produce for three years, Mr. [ioodfellow referred to tha following significant reservation: "As regards eggs, poultry, butter, cheese and other muk products, free entry for New Zealand produce will be continued for three year? certain. The United Kingdom Government, however, reserves to itself the right after the expiration of three years,, if it considers it necessary in the, interests of the United Kingdom producer to do so, to review the basis of preference so far 83 it relates to the articles enumerated, and, after notifying the New Zealand Government, either to impose a ''preferential duty on New Zealand produce, while maintaining existing preference margins, or in consulation with the New Zealand Government, to bring such produce within any syitem which may be put into operation for the quantitative regulation of supplies from all sources in the United Kingdom market." "In plain English that reservation means that at the end of the period Britain reserves the right to tax our food and limit the amount going into the United Kingdom," he said. Exchange Move Countered

New Zealand had been slow in carrying out its part of the agreement. The duties had been reduced on several items, but the tariff commission still had to sit to revise the general tariff. By increasing the exchange rate without making a corresponding reduction in duties New Zealand had broken the agreement and placed a farther disability of 15 per cent on British goods. Although Britain had made no direct reference to that action, it had countered it by suggesting a restriction on New Zealand dairy produce exports. That had been done in spite of the fact that the Ottawa agreement still had about two and a-half years to run, and was caused, he was forced to conclude, by New Zealand's action in raising the exchange. Mr. Goodfellow referred to the restrictions proposal as "a pernicious system," and one likely to play into the hands of the foreigners. It had'been suggested that foreign butter should be restricted to two tons for every one ton restriction placed on Empire butter. Denmark, Holland and the Baltic States were all highly developed as far as their dairying industry was concerned, and it was questionable whether they could produce much more. In the face of the duty of 15a a cwt., or about l|d a pound, they were consuming more of their own butter,« and would_ have substantially less to sell to Britain. By igreeing to the restrictions, therefore, the Northern European countries were probably only accepting a position which would coma about automatically in a few years

Dominions Will Suffer Most Mr. Goodfellow said Denmark had alternative markets. If the British market were restricted, the Danes would get a higher price for the produce they sold in the "United Kingdom, because of the restriction on Empire countries, and would still have the rest of Europe in which to dispose of its surplus, even if lower prices had to be accepted in those countries. Therefore, the restrictions would probably hurt the Dominions more than the foreigners, who might not suffer at all. , Examining the position of the British dairy producer, the speaker said 80 per rent of the cows in the United Kingdom were milked for town supply, which would not be affected by butter and cheese prices, because the British Government was adopting a scheme for rationalising or nationalising the milk supply, fixing the cost of distribution to give the Home producer a fair price. As far as the remaining 20 per cent was concerned, that figure was largely represented by byproducts of the town supply business. As far as he could see, then, the restriction system would not help the Homo producer, but it would help the Continental farmer.

"New Zealand will get into a very difficult jjosition if it agrees to restrict its output," said Mr. Goodfellow. "Increased production is the only way out of our difficulties. I hope and believe the Dairy Board will not agree to the proposal, and that city opinion will support that view.!'

Trading Goods lor Goods It was pointed out by the speaker that, in tfie last two years, New Zealand had bought more from Australia and Canada than it/ had sold to those countries. TJ.e made the point that, even in entering into agreements with other Empire countries, New Zealand should do nothing to stultify its position with the United Kingdom. . Emphasis was also laid on the need for reducing farming costs. The whole trouble arose from the disparity • between costs and prices. A permanent reduction in costs—wages, for instance, were a third higher than in some other countries— Would help the farmer more than bounties and subsidies, which would bo removed ,when the outlook improved. "We should substantially reduce our duties 011 British goods," declared Mr. Good fellow. "I admit that discre'ion has be shown', but it should be a definite Part of the Government's policy to do so, with the ultimate object of having free If atle between New Zealand and the United Kingdom. It is obvious that the United Kingdom is not going to be content to continue the slack methods of the Past, but will trade goods for goods. Sho cannot afford to do otherwise." . In a 'concluding reference to the future Meinational outlook, Mr. Cjoodfellow considered there would be a turn for the better within the next few months, and that one might expect: —(1) An all-round reduction of war debts; (2) a scaling down of tariffs; (3) a return to gold on R new 'basis, involving a devaluation of 25 per cent. One result would be that Germany would bo able to buy largo quantities of wool and butter, because her National obligations would be reduced to about £150,000,000, or less than the National debt of New Zeuland.

" But if t>y?re is a lift in prices," said Goodfellow, "we will still have _to face the problem of permanently holding the British market."