RATES OF DUTIES

Otago Daily Times, Issue 22354, 30 August 1934, Page 7

RATES OF DUTIES

OFFSETTING HIGHER EXCHANGE THE DIFFICULTIES OUTLINED (From Our Parliamentary Reporter.) WELLINGTON', August 29. The difficulties of fixing the reduced rates of duties to offset the advantages conferred on local manufacturers by the present rate of exchange were enumerated by the Minister of Customs (Mr J. G. Coates), when replying in the House of Representatives to-day to the remarks made earlier in the debate by Mr Downie Stewart (.Dunedin West). “T understood Mr Stewart to be in favour of the system recently adopted in Australia of making a reduction in the rate of duty to offset the exchange, ’ said Mr Coates. “ I do not intend to deal further with the principles which govern the problem, but merely to examine it from a practical point _of view. The principal elements which enter into the production costs arc materials, labour and overhead charges. First I am going to - consider thei material costs in goods and the effect of the exchange thereon when prices of such materials are governed by world parity. I propose to take as an example one of the principal industries in Mr Stewart’s own city—the manufacturing of, woollen yarns, woollens and clothing.” Mr Coates said that the material clement affected by the exchange in production costs of those three classes of goods must vary in each case. If one took the percentage of the total production costs represented by the materials in yarns as 60 per cent., it would, he thought, be reasonable if the, percentage of such materials, excluding labour charges, etc,, in‘the production costs of woollens were taken as 30 per cent., and that in clothing as 14 per cent. If allowance was to be made by way of a reduction of duty on yarns based*on the figure already stated, it was obvious that a different allowance would have to be made in respect of woollens, and still another allowance in respect of clothing made from such material.

“So far I have dealt solely with the material elements in costs,” said Mr Coates, “ this being the only item on which the effect of the exchange can be determined with any degree of certainty, and can be said to have operated immediately. It is recognised, however, that other factors, such as labour costs and overhead charges, are also subject to influence by the exchange, although in such cases the influence is indirect and the time when it exercises its full effect on production costs cannot be determined with certainty. Here then is the position in the material element. In the production costs different reductions have to be made in different articles made from the same basic material, and in labour costs and other charges no information can be obtained which would enable any particular rate of reduction to be determined. These considerations show,- I think, how difficult it is to fix any reduced rate of duty to offset the advantages that may be obtained temporarily by local manufacturers through the existing exchange situation.

“ The tariff position here is quite different from that in Australia. There the tariff is so high that all lowering on account of exchange will not affect a local industry. The case is quite different in New. Zealand. If a redaction were made to meet the case of woollen clothing it might well happen that such reduction, if applied to woollens or to woollen yarns, might inflict an irreparable injury on local industries, and at the same time impose on goods a lower rate of duty than is provided for under the Ottawa agreement.

“ The only alternative,” added Mr Coates, “is to go in for an elaborate system of duties based on the various factors affecting production costs, and that is assuming that those effects are determinable. Even if such a scale of adjusting duties cpuld be determined today no one could say that in a few weeks the whole system might not require amendment. Nothing is more damaging to trade or tends to restrict manufacturing enterprises more than the, uncertainty as to tariffs.”

Mr Coates said that, after all, the budgetary position had improved, and it was very difficult when one faced up to the position to say that the conditions had been made worse on account of the exchange. He thought the opposite had been the effect. If one overlooked theoretical arguments one was bound to admit that the position looked very much better. Mr Stewart: You were born under a lucky star. Mr Coates: Reading newspapers and listening to what people say , about me, I don’t think there is anything lucky about me.

Some figures showing the volume of the importations into New Zealand before and after the raising of the exchange rate were quoted by Mr Coates to show that the fall in imports into New Zealand came before the rate was raised.