149 Minute from Fitzgerald to Fraser

Canberra, 18 March 1981

CONFIDENTIAL

Australia - New Zealand Closer Economic Relations Permanent Heads Meeting

Australia and New Zealand senior officials met in Wellington last week. Australian officials presented in plain terms the Australian Government's position on the outstanding issues, as set out in the recent Cabinet decision and in the more detailed instructions given the delegation by Mr Anthony. Australian officials particularly stressed the firmness of the Government's position on these issues.

  1. For their part, NZ officials re-stated and elaborated their Government's position, stemming from Cabinet consideration several weeks ago and for the most part already known to the Australian side.
  2. There was some concern evident on the New Zealand side at various points during the discussions, but importantly, there was no breakdown. On the contrary, willingness to explore ways to reconcile the differences was always apparent.
  3. On key outstanding issues the trend of the discussions was as follows:
    • Firm time-table for ending import licensing: New Zealand is unwilling to fix in advance a date for final elimination but NZ officials will re-assess what residual areas of effective licensing are likely to remain, under the proposed liberalisation formula, at 1990 (the date envisaged for a review to implement the final elimination of licensing). Further consultations will take place after that re-assessment.
    • Tendering of exclusive Australian licences: There appears to be scope and willingness on the New Zealand side to meet the Australian position as set out in the Cabinet decision. New Zealand officials did point out, however, that while an objective basis for issue (without use of tenders) existed in many cases, there would be a number of cases where licences had never been issued before (except in token amounts) and where some method such as tendering would be the only feasible way to make at least the initial licence allocation. Further consultations between officials will take place on procedures appropriate for specific cases.
    • Elimination of peiformance-related export incentives: The relevant New Zealand Permanent Heads (and they only) were informed, in strict confidence, that Australia's Export Expansion Grants Scheme was being re-considered and could well be wholly or substantially eliminated in the near term. This will necessitate a thorough re-assessment of the New Zealand position on export incentives and, the Australian side was informed, could add significant weight to pressures building up in New Zealand to re-consider the existing schemes, possibly leading to their (partial) replacement by assistance or tax concessions not related to export performance.
    • Dairy products: New Zealand is willing to see industry to industry consultations on exports to Australia but not an explicit and formal Government-to-Government voluntary restraint arrangement which could be perceived as a retreat from New Zealand's present formal rights under NAFTA. Importantly, however, it was noted that the New Zealand Minister does have the power to direct the New Zealand Dairy Board in relation to exports and could, for example, give the Board guidance (or in the last resort, direction) as to what was consistent with the principles of an overall Agreement for a Closer Economic Relationship. New Zealand, however, would not like to make resort to such Government direction explicit in an Agreement. As both sides agree (in general, if not necessarily in detail) that there is long-term potential for growing New Zealand exports to Australia without displacing any Australian production, there is some confidence on the part of officials that a form of words (to be included in an Agreement) can be found which is satisfactory to both sides.
    • Other rural products (of interest to Australia): New Zealand officials were not very forthcoming but indicated that where New Zealand arrangements had appreciable trade-inhibiting effects New Zealand would be willing to look at neutralising such effects-e.g. for wheat, through not setting domestic prices above the Australian price. On wine, a reasonably long phasing-in may be sought.
    • White goods: This is a manufacturing industry for which the New Zealand Government has high hopes under a closer economic relationship. The difference between the positions of the two sides was not seen to be too wide, and a solution seems possible. Further consultations will occur to explore ways of meeting the Australian position.
    • Government purchasing: New Zealand does not at this stage wish to settle for an arrangement applying at the national level only, even on a trial basis. It would prefer to seek to obtain first its preferred result of achieving (on a reciprocal basis) in-State supplier status in State Government purchasing as well as domestic supplier status in Commonwealth Government purchasing. The Australian side explained that relevant powers lay with the States but indicated that the Commonwealth was willing to write to the States in support of New Zealand's wish to discuss the matter with the State Governments (this course was approved by Cabinet; letters to Premiers are in preparation).
  4. It was agreed that talks at the Ministerial level would be needed to resolve these matters, although further work needs to be done by officials over the next few weeks on the precise nature and implications of the differences between the positions of the two sides, as a basis for the Ministerial talks.
  5. Given that Mr Muldoon would certainly wish to be involved in such talks, they cannot take place until early May, given his other commitments. It is envisaged that Mr Anthony will go to New Zealand at that time. One implication is that it is now difficult-given the stage of the New Zealand election cycle-to envisage that an Agreement for a Closer Economic Relationship could be finalised this year.
  6. It is noted that since the officials' talks, Mr Muldoon is reported in the press as having confirmed that there was no breakdown in the negotiations for a Closer Economic Relationship and that Ministerial talks would be the next step.1

[NAA: A1209, 19811508, i]