156 Record of Officials' Meeting

Wellington, 19 December 1980

CONFIDENTIAL NEW ZEALAND EYES ONLY

CER: OEC1 Meeting: 19 December 1980

Dairy

  1. Mr Galvin suggested that there was very little room to move on dairy products. It was, he thought, an impossible situation for New Zealand could not appear to move backwards. Mr Norrish suggested it was important to specify what was moving backwards and what was not. He felt that, if in the end, the choice was the status quo and an arrangement in which the Board could make steady advances in the Australian market, it could be possible to present this as moving forwards. Mr Durrant responded that he had no quarrel with this in principle, but in order to make such an arrangement saleable New Zealand would need significant access opportunities at levels which he thought would be unacceptable to Australia. Mr Clark said that apart from access we would need to be able to point to mechanisms which would lead to changes in the Australian dairy system as a whole. Mr Galvin agreed that if that were possible it could prove highly useful. He asked MAF to consider whether they could write a paper which could indicate the minimum New Zealand requirement.
  2. Mr Durrant pointed out that if New Zealand took advantage of access opportunities that were increasing year by year, this would change the Australian dairy system. This was a possibility which had been open to New Zealand in the past but had not occurred, simply because the Board had judged that if it did try to exercise its rights it would have meant formal restraints. The Australian Government was about to review its own policy in any case. The difficulty for the CER exercise lay in the timing of this exercise and the timing of the CER. Mr Clark concluded that a voluntary restraint arrangement could be acceptable provided there was a clause, which related to New Zealand concerns with the direction on dairy policy as a whole. Mr Galvin said this should be canvassed in MAF's paper. In the meantime the New Zealand position would remain, but the piece of paper he was thinking of would be for Ministers, to indicate the direction of official thinking. Mr Durrant suggested that a possible outline would be:
    1. New Zealand's preferred position was the status quo. But [if] New Zealand exercised its right under the status quo within the new arrangements that would destroy the Australian dairy system as it stood;
    2. New Zealand could move towards phased access and thus phased change in the Australian system.
    He felt it was important to stress to Ministers that there was no great bonanza for New Zealand in the Australian dairy market. When the 'rough edges' were knocked off the industry New Zealand would be facing an efficient dairy industry.
  3. There was some discussion on whether there was any need for a voluntary restraint arrangement to include a mechanism to ensure some pricing discipline on the Board. Mr Durrant concluded that there was no need for any price discipline: if the access opportunities were phased in the Board would obviously price its product as high as it could.

Government Purchasing

  1. Mr Galvin suggested that Ministers also required a paper setting out what New Zealand could reasonably get in the area of Government purchasing. This issue could, he thought, be the breaking point for the negotiations since the Federal Government clearly had very little leverage with the States on this matter. He felt that New Zealand required equality with every Australian supplier. Mr Clark suggested New Zealand was simply looking for the application of the 'fair go' principle.

Category C2

  1. Dr Beath summarised the position which had been reached on Category C. As far as the concept of a pre-determined maximum deferment period was concerned, the central point was that the two Governments did not attempt to establish that pre-determined period until the content of the two Category C lists were known. He asked Permanent Heads to reaffirm that even if it was not possible to maintain the position on Category C at the end of the day the objective would be to preserve the position as long as possible. Mr Clark agreed that it was of some importance to retain the integrity of the drafting, otherwise it would be impossible to stop list three getting out of hand. Mr Galvin concluded that there was a consensus that the drafting in the Permanent Heads' record should be kept as it was. Again the position on Category C should be set down in a brief piece of paper for Ministers.

Specific Commodities

  1. Mr Bathgate then joined the meeting to indicate that he had just returned from Australia and that the discussions on whiteware had been unsuccessful. He briefed the Permanent Heads on the main element of the discussion. Mr Clark said that New Zealand could not go into CER without a reasonable agreement on dairy products and whiteware. They were the two key commodity areas for New Zealand manufacturing and [farming and]3 agriculture respectively.

Preferences Agreement

  1. Mr Clark said that although New Zealand manufacturers seemed to be rather exercised about the future of the Preferences Agreement4 in the post-CER stage, he was inclined to think that New Zealand did not have to worry much about the agreement. The fact was. that if tariffs applicable to New Zealand were being phased out in short order and progress on removing Australian tariff rates applicable to third countries was slow (as he expected), New Zealand would receive substantial margins of preference without any formal agreements. All in all he did not think it was a key issue in the CER.

'Year 2000' Proposal

  1. There was some discussion on the Australian proposal to eliminate all quantitative restrictions by the year 2000. Mr Galvin indicated that this again should be the subject of a briefing paper for Ministers.
  2. The meeting then turned to discussing administrative arrangements with respect to a joint working party planned for mid-January in Canberra.

[ABHS 950/Boxes1221-1226, 40/4/1 Part 32 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]