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

Canberra, 4 March 1981

No 701. CONFIDENTIAL NEW ZEALAND EYES ONLY IMMEDIATE

ANZCER: Wine

We thought it may help to draw out more specifically some of the background to an1 implications of the way wine seems to have now emerged on the Australian side as an issue in the ANZCER 'package'. To the extent that decisions arising from the recent IDC industry study of the wine industry are still pending, you may wish to bear in mind the implications for ANZCER.

  1. As we understand it, Australian ministers seem anxious to be able to point to some 'gains' in the agricultural sector. The positions agreed to on wheat and tropical fruit (where on the face of it comparative advantage is on the Australians' side) simply endorse the status quo and are not such as to enable the Australians to point to the prospect of trade growth. Wine therefore represents one area where, given the formulae for liberalising tariffs and access, gains could be pointed to provided it is possible to come to some arrangement with them.
  2. The Australian wine industry has not been as noisy as the dairyfarmers or the horticulturalists, but we understand that they have been making representations. Geoff Giles, who represents Riverland electorate of South Australia and who is Chairman of the Government Caucus Committee on Rural Affairs has been the target for a number of representations from the industry. What has concerned the grape growers, of course, is not the prospect of competition in the Australian market, but opportunity in the New Zealand market. Corporate links between Australia and New Zealand companies have enabled growers to familiarise themselves fairly readily with differences in structure, costs, and levels of protection between the two industries.
  3. The Australians would probably prefer to negotiate an understanding with us which would mean, at the very least, that wine's status in the deferred category is limited to a defined period of time (eg two years), or at most that wine is subject to normal licensing and tariff provisions. Whether significant gains for the wine industry do result for the Australian industry from the CER is probably less important for them than being able to present the prospect of significant gains (cf, mutatis mutandis, the New Zealand position on the dairy industry). It follows, however, that they would not be able to do this if at the time the ANZCER was implemented, there was a coincidental intensification of protection of the New Zealand wine industry from competition with Australia.
  4. Not having discussed this product in detail with the Australians and not being familiar with the trend of Government's thinking on the IDC report, it is difficult for us at this stage to articulate options. It is more than likely, however, that unless some attempt is made to bridge any gap the Australians may discern between our decisions and CER objectives, they may consider that the 'balance' of the CER package tips against their interests and accordingly seek redress in other areas. In such circumstances, comparison between what we are seeking for the dairy industry and what we are prepared to accept for the wine industry is, if odious, inevitable.
  5. It seems to us that we will need to assess the scope for coming to an arrangement on wine against the prospect that an inability to do so will mean that the Australians could use wine's continuing deferred status as leverage on other products in the ANZCER package. Readiness on our part to explore the scope next week for an arrangement would go some way to meeting their concerns, however, as well as weaken their leverage.

[ABHS 950/Boxes1221-1226, 40/4/1 Part 34 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]