160 File Note by Hunn

Canberra, 16 February 1981

89/4/1. CONFIDENTIAL

Closer Economic Relations: State Governments' Views

Prior to a recent visit to Sydney I contacted the Premier's office in order to establish whether they would be prepared to talk in broad terms about CER. We had understood from our Canberra contacts that NSW Government officials had prepared two or three papers on the subject ('by far the most detailed material the Federal Government had received from the States'). I spoke to a Mr Draper (a former Federal public servant-Department of Trade) who is concerned with NSW's trade relations with other countries.

Mr Draper made it politely but firmly clear that he did not consider it appropriate for the High Commission to be talking to State officials at this stage when the States were in the midst of discussing the issues with Canberra. He took the view that until an 'Australian' position had been defined it would be improper for him to enter into detailed talks with us. (He was prepared to have a broad sweeping exchange but thought this would only waste the time of both parties-I agreed).

Nevertheless I put it to him that there were, and would continue to be, differences between States on certain issues-Government purchasing being the most important from our point of view-and that at some point it would be essential for New Zealand to talk to State Governments. He conceded the validity of this but did not retreat from his position-that the present was not the opportune moment for such an exchange.

He admitted frankly that to some extent the States were playing games with the Federal Government. There were areas in which the States would be adversely affected by CER but naturally in pressing their case the States tended to exaggerate their importance. For the State Governments it was a case of all care but no responsibility.

He indicated that this was not so, however, in the area of government purchasing where State differences were more entrenched and less capable of political solution from Canberra. He understood the subject was on the agenda for the next Federal/State Industrial Ministers' meeting. NSW had embarked on its own internal enquiry and all that could be said at the moment was that confusion reigned despite the general guidelines promulgated by the Premier: if you took six government agencies you would find six different purchasing policies. He hoped this situation would be clarified in NSW over the next couple of months but he did not sound too optimistic.

He observed that Victoria and South Australia had joined to eliminate State preferences-although the special circumstances there made this easier-and he implied that New Zealand would have least difficulty eventually to obtain what it wanted in government purchasing with those States and with NSW. But he emphasised it was not enough simply to remove any formal preference to internal contractors or sources of supply. It would still be necessary to overcome the practical barriers put up by government officials against out-of-State suppliers. On their experience NSW would regard it as a hopeless quest to try and eliminate favoured son treatment in Queensland. Draper also commented that any advantages gained by New Zealand in terms of State Government purchasing would have to be reciprocal.

On a more general level Draper thought NSW was the least concerned of all the States on CER. There were some industry sectors which needed to be handled carefully eg dairy products (their dairy farmers were worried about a New Zealand 'surplus'). Import licences and export incentives would have to be eliminated from Trans-Tasman trade if CER were to work, but generally NSW was relaxed about it. The very good personal relations between Mr Wran and Mr Muldoon had created this climate.

[ABHS 950/Boxes1221-1226, 40/411 Part 34 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]