THE New Zealand Herald AND DAILY SOUTHERN CROSS SATURDAY, JANUARY 12, 1935 MOTOR-VEHICLE DUTIES

New Zealand Herald, Volume LXXII, Issue 22006, 12 January 1935, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS SATURDAY, JANUARY 12, 1935 MOTOR-VEHICLE DUTIES

The new differentiation in duties on assembled and on completely knocked-down motor-vehicles, which became effective at the beginning of this year, is causing perturbation to some British manufacturing firms. There is now a difference of 10 per cent ad valorem between the duties on vehicles in the two conditions. On those in a completely knockeddown condition the rate is 5 per cent ad valorem under the British preferential tariff, and 50 per cent under the general tariff. For assembled vehicles the respective rates are 15 per cent and 60 per cent. The same margin of preference is maintained, and it is substantial. However, to the British manufacturers there are evidently difficulties, and their protests are entitled to examination. First it may be said that the Tariff Commission approved the assembly of motor-cars from completely knocked-down imported parts and local materials as an industry suitable to New Zealand. Its report said: "This appears to be an industry suited to conditions in the Dominion. Figures which have been produced to the commission show that, owing to freight and other savings, this industry can be economically carried on without special protection." The verdict on the suitability of the business has been accepted by the Government, but not the suggestion that no protection is needed. Actually, the concession to vehicles assembled locally has been made by reducing the duty the commission recommended. It suggested 15 per cent ad valorem as a reasonable duty under the British preferential tariff. The lower rate for vehicles which. are assembled after landing is therefore a substantial reduction on the revenue duty the commission advised as suitable for imported motor-vehicles. The protests of the British manufacturers are entitled to a certain measure of sympathy. If they do not make arrangements to assemble vehicles here, the margin of preference they enjoy over foreign, makes will be reduced to 35 per cent if their competitors do export in a completely knocked-down condition. What is more serious, they will be at a 10 per cent disadvantage compared with cars entering under the British preferential rate in an unassembled condition. "When it is remembered this can apply to Canadian exports, it can easily be seen that this may become a very serious handicap. Superficially, of course, it might be said that the remedy was a simple one; let the British manufacturer do what the duties were designed to encourage, assemble his cars in this country. It is not quite so simple as that. A great deal depends on quantity. The question becomes one of turnover—whether it will pay better to suffer the handicap of the difference in duty or to instal plant for assembling the cars, a development which may require shipments to be concentrated at one port. As British manufacturers tend to be individualistic in their methods and their organisation, meeting the situation in this way might require a number of small plants to be established with a good deal of overlapping and a possible swelling of overhead costs. These points were raised during consideration of the item by Parliament. It was suggested by some members that Canada would be given .an advantage, to which the country was not entitled in the trading circumstances, by the way the duties were shaped. This raises the wider question whether the British preferential rate might not be made more effectively what the name implies, a prefei-ence to Great Britain. It "-is a difficult issue, especially in the present uncertain state of economic relations, but it arises as strongly in the case of motor-vehicles as of any article imported. Further general questions were opened up by British motor manufacturers in their discussion of the subject, during which, by the way, they seemed to concentrate particularly on New Zealand. One of them, referring to the Dominions generally, said "they overlook the fact that every item of labour which is transferred from Great Britain to the Dominions results in a reduced purchasing power for their primary products." If this argument had been produced two or three years ago it would have been very difficult to answer at all. Now it can be replied that those who are shaping British policy overlook the fact that every restriction placed on the entry of Empire goods tends to reduce the purchasing power of the primary producer for motor-vehicles as for every class of manufactured article. The threat of contraction in the all-important, market to which countries like New Zealand look has forced attention upon just such avenues of employ-

ment as the assembling of motorvehicles. It may be demonstrable that in the long run it would tend to greater efficiency and to a better opportunity for the producer in the Dominions if the original manufacturer were encouraged to send out his motor-car completely finished and assembled. That holds good only if the producer is given, in return, unfettered access to the return market. In no other way can truly reciprocal trading be conducted. The manufacturers of motor - vehicles probably did not intend to open up such wide issues, but they cannot be escaped if the situation is to be viewed as a whole. The extreme economic nationalism which is rightly regarded as one of the most threatening features of the world situation may be represented by the efforts the Dominions, including New Zealand, are making to promote the assembly of motor-vehicles within their own borders; but the fault is not all on one side, and that point has to be recognised if a properly impartial view is taken of the subject.