BURDEN OF COSTS

Waikato Times, Volume 123, Issue 20692, 30 December 1938, Page 2

BURDEN OF COSTS

MANUFACTURERS’ TRIALS PLEA FOR MORE PROTECTION NATIONAL TOBACCO YEAR Seme of th#» difficulties with whieh manufacturers have to contend are discussed in Hip report of the National Tobacco Company, Ltd. The report *tate>. in part:— “The past year has brought with K new worries and disappointments; it has been a try ins time from start to finish. Our sales have been quite satisfactory and we have fully maintained our turnover, but it is the mounting eost of everything connected with the manufacture of our goods that is operating against us “To start with, there is the New Zealand-crown leaf which forms the basis of our manufacture. To-day we are paying the grower from 15 to 25 per cent more than a few years ago, and at least 60 per cent more than a similar grade could be bought at. by comparison in the United States, for instance. Then there is the packing material such as tins and canis- * ters. which have gone up from 10'to 15 ppr cent in price, labels and printing by 10 per cput. and other requiaites correspondingly. “Another factor is labour, not so much the higher wages as the shorter hours, which are not consistent with a ; oontinuous processing system such as ours. All this places us at a disadvantage with the manufacturer overseas. And if is against him that we have to compete. He has not.to contend with irksome restrictions, pays lower wages, can work all hours, and what is more, buys bis leaf and packing material at a fraction of the price It costs us here. Small wonder he dan produce his tobacco or cigarettes more cheaply, the more so as he turns them out in huge quantities, by the millions of pounds against our thousands Dumping Possible “It is a well-established fact that the bigger your output, using your plant to full rapacity, the lower your cost per unit, and it is for these reasons that the foreign manufacturer can dump on the New Zealand market his surplus at prices against which it is hopeless for the local manufacturer trying to compete. We are at his mercy, and it is only the tariff that will stop him. Unfortunately the margin is too narrow, and we have no adequate protection under the existent tariff. We enjoyed a fair measure of protection in years gone by, but later legislation undid this all. It was in 1034 when the tariff was altered reducing the Customs duty on imported cigarettes by 24 per cent, practically wiping out the preference accorded to the local industry, and thereby opening the door to overseas manufacturers, who were not slow in responding to the invitation. As a result the New Zealand market was swamped with cheap cigarettes and tobacco at cut prices. “All these hundreds of millions of cigarettes and hundreds of thousands of pounds of manufactured tobacco now annually imported from abroad could easily be supplied by the local Industry if it were not for a tariff that favours such imports. Take the case of cut tobacco- On every pound manufactured we have to pay is 6d excise and in addition 2s per lb Customs duty on the foreign leaf we are using for blending with the local, and which is indispensable for producing flavour and aroma. Without the admixture of a certain proportion of forZ eign leaf we cannot turn New Zealandgrown tobacco into a smoke that will satisfy the average smoker, and that being so, the 2s duty amounts to a penalty that operates against the verj industry which the tariff aims to protect. Comparison of Duties “Comparing the duties on the imported manufactured article with the charges on the locally manufactured, we arrive at the following result: Customs duty on imported manufactured cut tobacco 6s lOd per lb. against excise and Customs on the locally manufactured tobacco 6s 6d per lb, leaving thus the local manufacturer a microscopic margin of -id per lb to fight his mighty opposition with. It means a farthing an ounce, surely not an obstacle that will restrain the foreign manufacturer from dumping his surplus on the New Zealand market. “Similar, if not quite as bad. is the position concerning cigarettes. The protecting margin between importec and locally made cigarettes is somet* what wider, but here again the dut\ V we have to pay on the imported leal required for blending, reduces this margin to a point where it loses it* protecting power“As will thus be seen, we are having a hard struggle, and although wt managed fully to maintain our lurnover it has not been done without i sacrifice. The balance-sheet fells it: ~. own tale, the higher cost of the rav leaf and material combined with shorter working hours have practically eat on the whole of our profits, and aftei making the usual writings off for de predation there is little or nothing lef for shareholders. This is indeed mos disheartening, and poor compensatioi for a whole year's strenuous work The only party that has reason to b' gratified is the Exchequer, which bene fits again to the tune of more than quarter of a million pounds in the lorn of excise duty ’•