THE WOOL CONTRACT

Southland Times, Issue 19510, 9 May 1922, Page 5

THE WOOL CONTRACT

CORRESPONDENCE PUBLISHED COMMENTARY BY MR POLSON GOVERNMENT’S ATTITUDE SOUND. (Per United Press Association.) WANGANUI, May 8. Mr W. J. Polson, president of the Farmers’ Union, informed a Chronicle reporter that the Farmers’ Union had received from the Government the much discussed correspondence and cablegrams relating to the Imperial purchase of the wool clips. "And what do you make out of it?” he was asked. “Looking through this bulky Parliamentary paper one is struck by the fact that the Prime Minister has left no stone unturned to obtain everything possible for the New Zealand woolgrowers, while it throws a good deal of fresh light upon the viewpoint of the Imperial Government and I am bound to say gives one more sympathy with them. The first hint of trouble is contained in a letter from the War Office to the Controller of Imperial Government Supplies in Wellington : “It will not be possible to show the profits earned on the 1916-17 clips separately from those earned on subsequent clips, but a reasonable estimate based on averages can ultimately be made.” “The first important correspondence dealing with the question of profits is contain ed in the telegram from the Secretary of State for the Colonies to the Government on July 3, 1920, which, as will be seen from the following, sets out quite clearly that only a ebare of the profit actually realised was to be paid to New Zealand growers:— “ ‘His Majesty’s Government lias given very full consideration to the question of the interim payments to be made to account of purchase accounts. Up to the beginning of May last the amount at credit 1 of the wool accounts was insufficient to pay interest due to the Treasury, but since then a credit balance has accrued which will steadily increase in proportion to the sales effected month by month. After consultation with the Australian Government His Majesty's Government have offered to pay the Commonwealth about June 30, their share of the profits ascertained from the commencement of the purchase scheme up to March 31, 1919, provided that the auditors’ certificate relating to such profits is accepted as final. His Majesty’s Government are prepared at once to make a similar arrangement with the Government of New Zealand. Accounts just completed for the year ended 31st March, 1919, show that New Zealand’s share of the profits for that year is £991,644, which, added to the sum accruing up to 31st March, 1918 (vide accounts forwarded in my despatch secret of 25th March) make a total of £1,619,069, which His Majesty’s Government are now prepared to pay to the Government of New Zealand provided that the accounts, certified by auditors, are accepted a.s final, and provided that the dividend thus distributed shall be regarded as an interim dividend and final dividends shall be based on the ascertained profits over the whole of the clips purchased. In computing New Zealand’s share of the profits on wool shorn after 30th June, 1918, effect will be given to the arrangement made between the Minister of Munitions and your Prime Minister by letters exchanged with London in August, 1918, which arrangements were confirmed through the High Commissioner on 26th March last, via., that for wool shorn during that period a share of the profit actually realised should be paid to New Zealand calculated at the same rate per pound of wool delivered as is paid to the Commonwealth Government for wool delivered during the same period, always provided that in no case can the bonus paid to New Zealand exceed 100 per cent of the profit actually realised on the two last clips of New Zealand wool. Included in the £991,644 mentioned above is the sum of £22,318 added to the New Zealand share of the profits in accordance with this arrangement in respect of a small portion of the 1918-19 clip marketed before 31st March, 1919.’

“This telegram,” said Mr Polson, “seems 1 to me to be all important. It afforded complete satisfaction to the New Zealand Government, who replied as follows on July 13, 1920: “ Tirstly the information afforded in your cipher telegram of July 3rd was read by the Prime Minister with great satisfaction. Secondly, the terms proposed for payment to New Zealand producers for their share in the profits derived from wool up to 31st March, 1919, are acceptable to the Government of New Zealand. Thirdly, the Government of New Zealand notes with satisfaction that effect will be given to the arrangements between the Minister of Munitions and the Prime Minister of New Zealand regarding the share of profits to be paid to New Zealand on the last two clips of New Zealand wool.’ “So far all had been going smoothly but on November 1, 1920, Mr Massey telegraphed the High Commissioner asking for an approximate estimate of the surplus profits on wool for the year ending March 31, 1920, and received a reply that there would be no profits, and that probably the loss would wipe out New Zealand’s previous two years’ profits. This was a bombshell, and Mr Massey appears to have promptly realised it, because he immediately cabled the High Commissioner emphasising that the purchase of New Zealand clips had been under separate contracts and New Zealand producers would be entitled to any profits on earlier clips without the deduction of any losses on later clips. Then began a voluminous correspondence between Mr Massey, the High Commissioner, Lord Inverforth and his successor, Sir Howard Frank, dealing with this phase of the question. The correspondence is much too long to quote, but certain por tions of it are important, showing clearly that Mr Massey went as far as he could go. “The next communication is a cable gram from the Secretary of State for the Colonies. The following is an extract from the New Zealand Government’s re ply: “ 'lt is clear that there were three successive arrangements with the Government of New Zealand, the first covering the clip up to June 30, 1917, the second covering the clip to June 30, 1918, and the third covering all subsequent clips up to twelve months after the cessation of hostilities, which now means 30th June, 1920. There is no misunderstanding on this point, as is clear from the communications between the New Zealand High Commissioner and the Director of Raw Materials in December last. The agreement as to clips after 30th June. 1918, arrived at in August, 1918, between the Prime Minister and the Director in London contains specific provisions for those subsequent clips, namely that the profits per pound to be paid to New Zealand should be calculated on the basis of the profits realised on the Australian purchase, and should not be less. Therefore the arrangement as to all clips subsequent to June, 1918, contained a term wholly differing from the antecedent arrangements, which were confined to the per centage of the actual profit of the twu previous clips. It is fully conceded by the Government of New Zealand that the arrangement constituted by your telegram to the Governor-General of New Zealand of 3rd July, 1920, and the reply of the Administrator of the New Zealand Government dated 13th July, .1920, and according to its tenor modifies and controls the previous arrangement. The apparent difference between His Majesty’s Government and the Government of New Zealand arises upon the interpretation of the two cablegrams last referred to. The Government of New Zealand did not and could not understand the telegram of last July as a request for their concurrence in combining the two clips ending June, 1917, and June, 1918, respectively, with regard to which a percentage of profits had been agreed upon with the clips subsequent to June, 1918, in respect of which certain definite and separate terms of an entirely different nature have been arrived at. The New Zealand Government understand your

telegram of 3rd July to mean that with regard to all clips after July, 1918, there should be no differentiation between clips and the profits should be arrived at upon the whole output of the years subsequent to June, 1918, without differentiation of clips, but the Government of New Zealand never anticipated nor understood that such a confusion as must necessarily arise if the exactly ascertained or ascertainable profits of the two previous yean were mixed with the hypothetical profits or deficiency on clips for the subsequent year as suggested, and therefore the New Zealand Government understood the proposal to then to be that the two clips ending June, 1917, and June, 1918, should be dealt with and accounted for separately, and that the profits on all subsequent clips should be arrived at without reference to the year of clip or possible difference of ownership of the several clips. The Government of NewZealand, having again carefully considered the telegrams of 3rd July and 13th July, can see no ground for the contention that the telegram of 3rd July is reasonably capable of a nniterpretation other than that which they placed upon it and upon which they have acted and to which they still adhere. New Zealand had then and has still to consider not only the arrangements which would be most conveniet to the two Governments, but also the fact that they had made arrangements on be half of the wool of the first two clips and they could not have agreed to have disregard to the accrued profits to the owners of the wool of the first two clips and throw those profits into an account leading to ultimate extinction without the consent of the owners of the clips who were entitled to them.’ “This is the most important portion of the telegram,” continued Mr Polson. “It is too long to quote in full. A subsequent telegram from the High Commissioner set* out the position from the Imperial point of view very tersely as follows : “ 'Have received from Goldfinch estimated results of final liquidation of New Zealan wools under three alternative methods of settlement. Stocks of Nos. 1 and 2 dip wools on hand about 75,000 bales nominally valued at £5 per bale. Stock consists of sediment of those clips, so that this value is probably too sanguine. Moreover, the Ministry is fighting very serious claims for damage on 100,000 bales on which an allowance might have to be made. Subsequent to these reservations under the first method and accepting your interpretation it is estimated that the further sum due to New Zealand as half share of the profits of the first two clips will be £685,000, leaving the Imperial Government to bear a loss on the last two clips of about £5,400,000. Under the second method if telegrams of 3rd July is adhered to, New Zea land will have to refund £1,600,000 already paid to the Imperial’ Government’s net loss will be over £3,000,000. Uunder the third method, if a compromise is agreed to, New Zealand would retain £1,600,000 already paid and the Imperial Government’s net loss would be £4,750,000. In the last two estimates the remaining stocks of third and fourth clips are valued at 60 per cent, below cost, but even at that fig , ure the stock could scarcely be disposed of to-day. Goldfinch expresses hope that i seeing how heavy Imperial Government’s [ loss must necessarily be and how small a sum would be due to New Zealand if the L supreme interpretation were accepted, you • will be able without much difficulty to L agree to a compromise.’ “Mr Massey then went Home,* continued ‘ Mr Polson, “and correspondence took place between himself and Lord Inverforth who, ( however, strongly opposed the New Zealand J view. Subsequently the correspondence was continued between Mr Massey and Lord In--1 verforth’s successor, Sir Howard Frank. 1 In the course of it the latter criticises very j strongly the attitude of the New Zealand j Government.

“Having given some consideration* to the question and having carefully read the correspondence,” said Mr Polson in summing up, “I think the Government is right in informing the Farmers’ Union that it cannot see its way to consent to a friendly suit being brought against the Imperial Government.”