110 Minute from Lang to Evans

Canberra, 27 November 1980

CONFIDENTIAL

NZ-CER Joint Working Party

The problems that I mentioned briefly to you at the NZHC on Tuesday evening had grown by the time the meeting ended on Wednesday afternoon.1 As matters stand, all the contentious issues, which have been readily identifiable from the outset, remain unresolved and will almost certainly be the main matters for discussion when Permanent Heads meet in Wellington. There is no change to my assessment that the ground is not sufficiently well prepared for a Permanent Heads Meeting, but the momentum seems too great.2

  1. There is no problem about the mechanism for the scaling down of tariffs. There is no problem about the harmonisation of customs procedures. But New Zealand has not prepared a List 3 of items exempt from both tariff reduction and the liberalised access provision. Their industry consultations are not complete (as I forecast they probably would not be), and the document we were given in exchange for our more or less complete List 3 included whole chapters of their tariff code, and a list of all times on which representations had been made to the government by industry groups. Anderson told Woodfield, and Woodfield appeared to accept, that if we did not have detailed information on the contents of New Zealand's List 3 and on base levels of access for goods in which no trade is now flowing by close of business on Tuesday, 2 December, we would not be able to brief Permanent Heads properly for their meeting in Wellington. My guess would be that Woodfield appreciated that perfectly well, and intends to try to capitalise on it at the Wellington meeting. There is little likelihood of that information being available by Tuesday next.
  2. Differences remain on Export Incentives. The New Zealanders will not commit themselves to a review aimed at the harmonisation or elimination o[f] incentives for trans-Tasman trade, and the decision not to do so was taken (as we know from Geoff Bentley's reporting) by the Cabinet Economic Committee at Muldoon's instigation. The reason is obvious. New Zealand's incentive scheme was intended to give New Zealand exports a competitive edge in the Australian market, and seems to have done so.
  3. Government purchasing continues to be a stalemate, with the New Zealanders continuing to insist that their Government's preference is worth the preference of both the Commonwealth and State Governments on our side. The further we look into their claim that the Commonwealth Government does not purchase the same range of goods of interest to New Zealand suppliers that the State Governments do, the more doubtful the claim becomes.
  4. The intermediate goods problem has not been entirely solved by the paper that was agreed to at the last Joint Working Party meeting in Wellington. That paper contained only general prescriptions. To remove from our List 3 the whiteware goods that New Zealand wants to get onto the Australian market, specific solutions to the intermediate goods problems in that area need to be agreed upon.
  5. The most depressing feature of the talks was the long-postponed discussion on the dairy industry. The veil that has for months been drawn over this subject had enabled the Australian side, it seems, to imagine that the New Zealanders understood our sensitivity on this, and would not press for anything but cosmetic changes to present arrangements. The same veil had enabled the New Zealanders to convince themselves that, against all expectation, we were apparently prepared to apply the same 'base level and 10% real annual increase in access' formula to the dairy industry as was to be applied in other areas where quantitative restrictions now exist. In short, we are not. It is Primary Industry's expectation, which I probably share, that Cabinet will not seek to impose on our dairy industry pressures for accelerated rationalisation such as would flow from automatic increases in access for New Zealand cheese. The paper on agricultural commodities in the section on dairy produce, states: 'The principal New Zealand objective under CER is to secure unrestricted duty free access on a fair basis for NZ dairy produce into the Australian market. New Zealand would see existing trade barriers in the dairy sector, such as they are, being subject to the accepted formula.'
  6. The Australian reply states: 'The Australian side also believed that in order for New Zealand to take full advantage of opportunities in the Australian maket it will be necessary for it to exercise voluntary restraint on all dairy products in its own interest and that the formula approach to liberalisation proposed by New Zealand is inappropriate in the case of dairy products.'
  7. At this stage I cannot see where a compromise might lie, and although further talks might help, it is not as thought this problem has never been intensively examined before.3
  8. Woodfield reminded the meeting, in rejecting the Australian position, that if there was no deal on dairy products there would be no agreement. How Cabinet will resolve the matter is hard to say, but it will have to take into account the stance of the CAl, which has told us that members do not much care whether there is a CER or not. My point is that the argument cannot now be made that our dairy industry needs to be sacrificed for the sake of securing for our manufacturing industry objectives which are important to it. Geoff Bentley has seen, and generally agreed with, this report.4

[NAA: A1838, 37011/19/18, xx]