131 Telegram from New Zealand High Commission in Canberra to Ministry of Foreign Affairs

Canberra, 13 November 1980

No 3526. CONFIDENTIAL PRIORITY

ANZCER: Agriculture

Now that the Prime Minister's consent to lifting the embargo on discussion of the BAE dairy paper1 has been obtained, officials here have been giving some thought to the way in which agriculture should be addressed. Anderson has asked DPI to work up some options as the basis for consulting industry and for engaging in a substantive discussion on agriculture at the next JWP. He is conscious time is running on, and that on the NZ side, the importance accorded agriculture in striking an appropriate balance of advantage will make it essential for Permanent Heads to be in a position to report substantial progress.

  1. In the Australian IDC discussions Anderson has started from the premise that agriculture-including dairy products-should be treated in the same way as industrial products and manufactures. He maintains there is nothing peculiar about agriculture that requires different phasing formulae for tariff treatment or for QRs, but articulating the principle in this way should strengthen resistance to any notion on the Australian side that 'sensitive' areas of agriculture warrant exclusion from the deal.
  2. Anderson said it would help if we could be in a position to spell out in greater detail our concerns on agriculture at the next Joint Working Party meeting. On tropical agriculture it will be necessary to take on board the way in which NZ's commitments to South Pacific countries are likely to affect our freedom of movement. He seems to be thinking along the lines of having Australia designated as a preferred 'secondary' source of supply for tropical agricultural products. This would enable NZ to preserve access for South Pacific countries but at the same time make some commitment to seek supplies from Australia should the need arise. (It is not clear what mechanism Anderson has in mind for this but perhaps some form of undertaking from FDL to source on Australia when the need arises, possibly reinforced with a substantial margin of preference over third country suppliers, could satisfy Anderson's criteria.) In addition, it would help to have a better picture of NZ's other concerns in agriculture.
  3. On dairy, Anderson said that the next step should be identifying those parts of the BAE study which specifically deal with the impact of support/stabilisation measures on trade. (This accords with Blarney's view as reported in our 3382.) We asked Anderson what conclusion he would expect to flow from this approach. He said it was his impression the study showed that while the degree of support for each country's dairy industry was about the same, because of the difference in form that assistance took, the impact on trade was potentially quite extensive. If the current structure of assistance each country's industry enjoyed was kept in place, free trade would in fact reduce by about 75 percent the value of assistance to the Australian industry. What was required, therefore, was an understanding which improved NZ's exporting opportunities (as distinct from 'access') in the Australian market, but which would also include some form of 'orderly marketing' provision inhibiting the capacity of support/stabilisation measures to undermine price levels in Australia.
  4. We noted that the High Commission was at something of a disadvantage in that we had not yet seen the BAE study; nor were we in a position to comment on the substance of Anderson's thinking at this stage. However, it seemed to us that in responding to any specific Australian proposals, there were a couple of considerations which we felt sure would weigh heavily with us: the first was that any Australian proposal which did not reflect the duty-free unrestricted status of dairy products in the NAFTA would not be consistent with the rules we were applying for translation of products from the NAFTA to the CER. The second point was that proposals flowing from whatever conclusion was reached on the impact of support/stabilisation measures in trade should not be based on an assumption that the current value of assistance will remain constant.
  5. Anderson indicated that as far as the duty free NAFTA status of butter and cheese was concerned, there would have to be some acknowledgement that an important element in the negotiations when the NAFTA was signed had been an agreement between the Dairy Boards which effectively inhibited the NZ Board from using the access for butter; and a quota had been applied to access for cheddar cheese. What he hoped Australia would be able to offer would be considerably better than the opportunities available to the NZ dairy industry under the NAFTA, in that if we accept them they would enable 'assured, predictable, and growing participation'-a studied paraphrase of the DB's own language-in the Australian market.
  6. Anderson agreed to our reporting this conversation, but asked it be made clear these are his views only at this stage, and he still has some way to go in securing the agreement of the Australian IDC. For our own part, we consider we should have no illusions that the concept of assured access for NZ dairy products in the Australian market (as distinct from cooperation in third markets via, eg ADI) will not encounter strong opposition from dairy interests here. We think it can be assumed, however, that Anderson's thinking as outlined above accurately reflects the role both Anthony and Scully see for the dairy industry in the CER at this stage.

[ABHS 950/Boxes1221-1226, 40/4/1 Part 31 Archives New Zealandffe Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]