155 Extract from Brief for Anthony's Meeting with Muldoon

Canberra, [8]1 May 1981

Australian Attitude

  1. In a letter dated 4 May to the Minister for Trade and Resources (background paper 3)2, Mr Talboys indicated, that as part of the process of review, New Zealand Ministers hoped that it would be possible for Ministers to endorse, at the political level, those specific areas of the negotiations where officials had advised that agreement had been reached or was close at hand. Such endorsement would be contingent on a satisfactory outcome on other issues under negotiation. New Zealand Ministers recognised that it would not be possible to reach agreement on all issues at this meeting. However, it was hoped to go a good distance on bridging the areas that remain unresolved and in giving a steer on how an arrangement envisaged in the Prime Ministerial Communique3 might be achieved.
  2. Having regard to the stage now reached by officials and the nature of the unresolved issues, it could be inappropriate, at this meeting, to give political endorsement to those areas on which agreement has been possible. Such an approach could have the effect of placing certain issues in an 'agreed box', as it were, pending the results of negotiations on other subjects. While it can be acknowledged that agreement appears to have been reached on some elements, it serves little purpose to grant them any status at this stage. A final decision, when it is taken, will be made on a complete package.
  3. The inter-related nature of a number of issues under examination provides added reason for Australia adopting this attitude. Consideration of the composition of the deferred category, for example, will be influenced by the outcome of discussions on export incentives, on access and, in some cases, by the need for special solutions and to enable a smooth transition from present NAFTA arrangements. The outcome on some issues will influence assessments of the likely trade impact of new arrangements in the near term; on other issues it will have more bearing on the degree of commitment to the principles and long term objectives of CER.
  4. Against this background, Australia views the Ministerial meeting as providing an opportunity for a clear presentation of positions at the political level. From this it should be possible to assess not only the prospects for agreement being reached on the key unresolved issues but also to determine the status and direction of the package as a whole. To the extent that discussions reveal scope for narrowing differences on key issues, this can be noted. However, it will not be the objective to negotiate issues to conclusion. As far as a statement of Australia's position is concerned, it will be a reaffirmation of the points conveyed to New Zealand Permanent Heads in March4 (reference para 10 above).
  5. CER should not be viewed as a negotiation in which both sides are seeking gains and offering concessions on specific commodities. Rather, it is a case of seeking to arrive at a mutually satisfactory overall package which will enable the gradual and progressive elimination of barriers to trade under conditions of fair competition; arrangements which will be consistent with the principles and objectives agreed to by the Prime Ministers in March 1980.
  6. New Zealand Ministers may claim that they are 'offering' Australia special additional access arrangements valued at around $A48m. in the first year. It is not an offer in the normal sense. The figure emerges from the application of an agreed formula, and is modified only to the extent that a further $A15m. of special access would be obtained but for New Zealand's intention to place a number of items in the deferred category. The fact that Australia stands to gain in this manner is a reflection of the nature and coverage of New Zealand's import licensing system. New Zealand already enjoys significantly more liberal access to the Australian market.
  7. Australia should continue to press for solutions which embody a high degree of automaticity and predictability and where special arrangements and deferrals are kept to a minium. We need a clear indication that New Zealand is committed to achieving an agreement which will result in the eventual elimination of barriers to trade on all products.
  8. As matters stand, the exceptions are relatively few. For reasons of industry policy, both sides find it convenient to hold back on motor vehicles at this stage. New Zealand has accepted that, because of special circumstances surrounding the trade in whitegoods, an 'accelerated-formula' solution will be negotiated. Special arrangements are also envisaged for apparel.
  9. It is of concern, however, that New Zealand has included such a wide range of items in the deferred category and, as in the recent decision on wine, has failed to clarify the timing or nature of arrangements which would govern eventual inclusion in CER of some items of considerable importance to Australia. For this reason it is difficult for Australia to assess the immediate impact of CER and its likely evolution.
  10. There are cases, as in relation to dairy products and horticulture, where we have pointed to the need for certain arrangements or conditions to apply to trade between the two countries if it is to be further liberalised. In such cases we seek arrangements which, in our view, are consistent with CER principles and objectives while at the same time recognising the findings of the studies on agricultural support/stabilisation measures and export incentives.
  11. In outlining Australia's position as part of the proposed general review at the outset of the meeting it could be emphasised that we wish to obtain a clear statement of New Zealand's position of the following:
    • elimination of import restrictions in reasonable time, bearing in mind Australia's wish that there be a commitment to this being achieved by 1995
    • the elimination of performance-based export incentives in trans-Tasman trade by 1987 (particularly in an environment where Australia is scaling down its own scheme)
    • the elimination of performance-based export incentives in trans-Tasman trade by 1987 (particularly in an environment where Australia is scaling down its own scheme)
    • ...5 it could also be indicated that, whilst agreeable to industry-to-industry consultations taking place on dairy products, Australia would first wish to hear New Zealand's view on arrangements for progressing negotiations across the range of agricultural issues, including monopoly import arrangements and horticulture
  12. In regard to government purchasing, it would be appropriate to recall New Zealand's wish to have a mission of officials visit the States and to indicate that the Prime Minister will be writing to Premiers inviting them to consider the New Zealand position.6
  13. It may be that the flexibility of New Zealand Ministers on some important aspects is being limited by the prospect of New Zealand general elections later this year. If so, this will have a bearing on the timing of future joint Ministerial consideration of CER.
  14. Item-by-item briefing on relevant issues follows.

DAIRY PRODUCTS

Issue

Unfettered access for NZ dairy products would undermine Australia's domestic marketing arrangements and severely disrupt the Australian dairy industry. (Under the existing forms of stabilisation/support in the two countries, the NZ Dairy Board (NZDB) would have a significant competitive advantage over the Australian industry.)

NZ Position

NZ is opposed to any formal restraint on dairy products which does not exist at present. It argues that the NZDB should be free to determine the extent of exports to Australia and that dairy products should be treated the same as other products in any CER arrangement.

NZ is seeking application of the liberalisation formula (viz 10% per annum expansion) to the NAFTA cheddar cheese quota and in respect of other dairy products reaffirmation of the present situation of no formal barriers to NZ imports.

Australian Position

Australia is seeking a recognition from NZ that:

  • the impact of stabilisation/support arrangements in the two countries on trade needs to be offset in some way, and
  • the best way to proceed would be to build on existing industry-to-industry arrangement on cheese by expanding it to cover all dairy products with
    • a government-to-government 'tie breaker' (resolution) in the event that agreement cannot be reached at industry-to-industry level.

Possible Aproach

NZ Ministers need to give in principle acceptance to our position so that work on precise nature of arrangement can go ahead.

Elaboration of Australian Position

Dairy products to be included in CER arrangements but the framework for industry-to-industry consultative arrangements on cheese (Terms of Reference given in Annexure A) to be extended to cover all dairy products. The interĀ­ industry arrangements to be supported by understanding between Governments as to appropriate course of action as 'fallback' if industries cannot agree. (Proposals are detailed in Annexure B.)

At the Working Group meeting on 28 April 1981, Australian officials were handed a paper by the NZ delegation (Annexure C) which has no official standing but which could outline a possible direction for briefing of NZ Ministers

if such an approach is raised by NZ Ministers it would represent a significant shift in NZ position but difficulties remain in that:

  • the pattern of NZ supply to the Australian market would be determined by the NZDB - this would not be acceptable to Australian industry
  • the mechanism being proposed to resolve an impasse at the industry level with regard to conduct of trade is too open
  • there is no explicit recognition by NZ that the machinery needed to ensure trade in dairy products develops on an orderly basis would be formally embraced by the CER.

As the NZ paper stands, we consider that it is not suitable for inclusion in a CER arrangement.

Annexure A

TERMS OF REFERENCE-CONSULTATIVE COMMITTEE

The Consultative Committee established by the New Zealand Dairy Board and the Australian Dairy Corporation shall, from time to time:

  1. Examine trends in the world production of dairy products with particular reference to cheese.
  2. Examine the world trade in dairy products including pricing levels with particular reference to cheese.
  3. Examine developments in the production and consumption of dairy products in Australia and New Zealand.
  4. Assess the present levels of consumption of cheese in Australia and factors likely to influence those levels.
  5. Discuss New Zealand's marketing intentions for cheese in Australia and their appropriateness in the light of (d).

Annexure B

ELABORATION OF AUSTRALIAN PROPOSALS FOR THE INCLUSION OF DAIRY PRODUCTS IN CER

Trade in dairy products between Australia and New Zealand would be 'managed' so as to ensure that trade takes place on an orderly basis.

Management of the trade would be accomplished by broadening the scope of the present inter-industry consultative arrangement on cheese to cover all dairy products.

inter-industry consultative committee would meet at least once a year with the view to reaching agreement on levels of trade in dairy products between the two countries for a future period.

In the event of the inter-industry consultative committee failing to agree on an appropriate level of trade for any class of dairy product, the Ministers responsible for trade matters in the respective Governments would be required to make a determination on the matter.

The arrangement for dairy products would be formally embodied in any CER agreement

under the umbrella of an exchange of letters between the two Ministers responsible for trade matters.

In the exchange of letters NZ would be required to:

  • recognise the competitive advantage enjoyed by the NZ Dairy Board in the domestic markets of the two countries
  • recognise that unfettered access to the Australian market for NZ dairy products would be severely disruptive to the Australian industry
  • provide assurances that NZ Dairy Board would not intentionally disrupt the Australian market.

For its part Australia would recognise:

  • NZ has a permanent place in the Australian cheese market and is entitled to share in market growth
  • NZ will be given preference for 'topping-up' any shortfalls in Australian supplies of other dairy products.

Annexure C

EXTRACT FROM UNOFFICIAL NZ PAPER (RECEIVED ON 28 APRIL 1981)

Dairy Products

The two governments recognise the importance of dairy products in the closer economic relationship and wish to see trade in dairy products develop on an orderly basis to the benefit of producers and consumers in both Australia and New Zealand. It is accepted that dairy products should be included in the arrangement. However, given the special circumstances on the industry additional measures of consultation should be provided.

It is envisaged that co-operation between the appropriate industry organisations in Australia and New Zealand would ensure the orderly development of dairy markets consistent with normal CER arrangements. In the light of its consultations with the appropriate Australian interests and taking full account of the assessments of production, markets and prices provided in those consultations, the New Zealand Dairy Board would determine its pattern of supply of product to the Australian market in any year.

Should any circumstances develop where it is considered by either side that the growth in trade is not occurring in an orderly way, the two governments would consult to consider whether any guidance should be given to the relevant industry organisations on the conduct of the trade.

[NAA: A1313/116, 84/2288, i]