128 Telegram from Beath to Norrish

Canberra, 14 August 1980

No 2533. CONFIDENTIAL PRIORITY

NAFTA Ministerial Meeting and CER

Personal for Norrish from Beath.1

Text of communique and delegation report have been cabled separately. As I won't be back in Wellington until the 25th I thought you might find the following observations useful:

NAFTA

  1. The message conveyed by Australian Ministers and officials was straightforward. There will be no new access proposals agreed under NAFTA, or old arrangements renewed, unless they result in what the Australians are calling 'equivalence of opportunity'. They have not defined very precisely what they mean by this but it is clear enough that substantially balanced access opportunities are the underlying idea. This is not a new concept. But at this meeting it was a principle that was articulated with considerable force. None of the proposals put forward by the New Zealand side were considered by the Australians to meet this basic principle-and that is why it was not possible to renew the special apparel arrangement, or to reach agreement on leather wallets.
  2. Any NZ proposal based on limited access by Australia to the NZ market (through the provision of import licence) and unrestricted access by NZ to the Australian market is not going to be acceptable: equivalence of opportunity to the Australians means either limited access both ways, on the basis of dollar-forĀ­ dollar trade, or unrestricted access both ways. [matter omitted]2
  1. It would be an exaggeration to say that NAFTA is 'dead'. For example current contractual arrangements not subject to review will remain in force and two-way trade showed an increase last year of around 24 percent. But the proportion being traded under NAFTA, whilst still high (72 percent), is declining and there has been no significant movement towards a meaningful expansion of Schedule A for some years. (I set aside particle accelerators and wooden utensils excluding knives and spoons.)
  2. Australia has agreed formally that it will continue to consider new proposals for Schedule A and B access or 3:7 deals. But unless these meet the requirement for 'balanced' trade there is no prospect of them being approved. And, in practical terms, the impression I have (but not shared by NZ trade officials here) is that the resources that have normally been devoted within the Australian Government to NAFTA administration have been substantially diverted to the CER exercise. A skeleton crew has been left to man the ship but I doubt if it has more than a minimal capacity to put in the effort that trade access proposals of the leather wallet sort have traditionally required.
  3. To sum up, the message from this NAFTA meeting is plain: the NAFTA will continue in a formal sense for as long as it may take to negotiate a new trading arrangement, but it is clear that the Australians at least have lost interest in it as a vehicle for expanding duty free or preferential trade across the Tasman. They simply don't believe the work required to negotiate Schedule A or 3:7 arrangements, and the results that can be expected, is worth the effort. Leather wallets have come to symbolise that.

CER

  1. The studies seem to be pretty well on track. I was disappointed initially by the rather general nature of the papers handed to us by Australian officials. From corridor discussions, however, I gather that work here is well advanced-they are further ahead than the papers we have seen indicate but are not yet ready to participate in a full exchange. My suspicions that more papers were not made available because of an Australian fear that these would find their way back to the Australian press via the MANFED/CAI link (possibly before the Australian election) appear not to be well founded. Though there may be something in this the difficulties appear to be more of an interdepartmental nature. But whatever the difficulty the Australians have agreed to a NZ proposal for a formal timetable for future meetings and exchanges of papers (set out below)3 and this will no doubt be a useful spur both in Canberra and in Wellington to get the work done. [matter monitted]
  2. The objective on both sides is to complete sufficient work by about the end of November or early December to allow governments to form an assessment as to whether the prospects for negotiating a balanced package are sufficiently encouraging to warrant a renewed commitment and progression to the major negotiating phase in which common lists will be derived and a new arrangement put together.
  3. As an aside, it is important to note that the Australians are no longer talking about a 'hybrid'. They are now openly and unequivocally talking about the CER as a 'free trade area'. They are able to do this because they feel that the concerns which motivated them to begin advancing the idea of a customs union in 1978 are now effectively being taken care of by the studies on intermediate goods, export incentives and import licensing.

Interaction between NAFTA and CER

  1. It will be difficult (and it is in some ways an artificial undertaking anyway) to keep the NAFTA and CER strands separate. As the Prime Minister noted at the National Party Conference, it is a legitimate question to ask whether the current Australian mood of bloody mindedness over NAFTA has (adverse) implications for the CER exercise. But nothing that Mr Anthony said during the Ministerial sessions could be taken, I think, to indicate a waning Australian interest in the CER. On the contrary, Anthony indicated he had been particularly pleased with the way the concept spelt out in the Prime Ministers' communique and annex had been received by editorial writers and members of the Australian business community generally. He felt that a- 'certain momentum' had been established which would help sustain governments on the indicated course against the inevitable objections that could be expected from vested interests. Anthony noted however that he doubted there were many votes in the issue in Australia. Trade liberalisation with NZ was something the Australian Government would pursue for its own sake. But he seemed to be implying that it was not an issue the Government could campaign on, and indeed there was a danger, if the issue was not handled very carefully, of it becoming an electoral liability. Hence the current Australian sensitivity about saying anything publicly about an agreed timetable, or to say anything very specific about the pace at which the work is being pursued.
  2. These considerations, along with some sensitivities on our own side, explain the blandness of the communique's references to the CER. The NAFTA meeting had limited objectives to pursue in the CER context: to review progress in the studies and narrow down scope for the political decisions to be taken after the Australian election. I think the meeting achieved this purpose.

[ABHS 950/Boxes1221-1226, 40/411 Part 29 Archives New Zealandffe Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]