108 Letter from Bentley to Evans

Wellington, 14 November 1980

CONFIDENTIAL

While I was in Canberra last week there was a further CER meeting (albeit of mini working parties) here in Wellington. The meeting focused on technical questions such as access, safeguards and export incentives, matters on which people like David Hawes and Newton Lind are the experts. Not being an expert in these matters I shall not go into details, but I have a few comments from Beath and Groser in MFA which might round out the picture.

List 3 (the deferred category)

The New Zealanders presented to last week's meeting a paper on principles for List 3, the effect of which would be to achieve a full free trade area automatically by 1998. For what it is worth, both Beath and Groser were surprised at the ease with which the paper was accepted by the Official's Economic Committee, some members of which seemed not to grasp the effect of a system which would automatically empty List 3. The Cabinet Economic Committee which considered the paper on 4 November was more switched on. Muldoon opened with the words: 'Here is one Minister who will not accept this approach', but ultimately he did, along with the remainder of the Committee as a basis for discussion. I now attach1 Newton Lind's redraft of List 3, which you may already have. So far as I can gather the New Zealanders are quite happy with this revision and are happy to do some further work at Newton Lind's suggestion to reformulate the wording on positive criteria. The New Zealanders do not intend to go back to the Cabinet Economic Committee on this subject until after the forthcoming joint working party meeting in Canberra.

Safeguards

As I understand it, the New Zealanders are committed to preparing a paper on safeguards for the joint working party meeting. I discern two approaches here. One, the Bathgate (Customs)/Donovan (Trade) view that the equivalent of a new article 92 be negotiated. The other, the view which seems to be shared by most other Departments that there be no article 9 equivalent at all. MFA, in fact, seems to take the view that there should be little or no protection of infant industries but concede that other Departments would not be prepared to go this far. The MFA view is that if safeguards are to be provided they should be tightly defined and relate only to national development projects. Temporary duties only would apply and there should be no question of quantitative restrictions.

Export Incentives

MFA sees little chance at this stage of narrowing the gap between the Australian and New Zealand positions. Beath said categorically that New Zealand was not planning to modify its position. He could not see New Zealand being able to articulate a firm commitment to phase out incentives. On the other hand, natural forces (and Treasury pressure) would bring about the collapse of the present scheme: as exports increase, the Government will simply be unable to finance its current incentive schemes.

Quantitative Restrictions (QRs) in Liberal Trade Areas

At least some New Zealanders are looking at ways of dismantling QRs in those areas where trade is considered to be liberal (i.e. in areas where imports account for 20% or so of the market). The formal New Zealand position is that we have sufficient access and that it does not matter if licences continue in these areas. Our view, as you know, is if it does not matter, abolish QRs altogether. MFA is quietly working away on a scheme to [do]3 just that. The scheme provides for licences to be abolished on goods as duty reaches zero, but Beath and Graser enter the caveat, however, that New Zealand would wish first to consider the contents of List 3.

In this context MFA has made the point that at the next working party meeting, Trade & Industry Secretary Clark will wish to focus on the real implications for New Zealand trade as a result of the sort of agreement we are heading towards. Much will depend on what is in List 3 in the end. While there is recognition on the part of officials here that all goods in List 3 will ultimately move through List 2 and 1 to duty free status, they see a presentational need for New Zealand to have early access in the dairy and whiteware areas.

In another development here, Clark and other officials were pressing to take Douglas of the Manufacturers Federation through the vast bulk of the New Zealand working party papers on 13 November. I shall let you know when I have some reaction. New Zealand industry views on CER are beginning to polarise more sharply as the prospect of a new trade agreement draws closer. The attached National Business review report is relevant.

[NAA: A1838, 370/1/19/18, xx]