183 Extract from Record of Discussion between Fraser and Templeton

Canberra, 12 March 1982

CONFIDENTIAL

Record of the Prime Minister's Discussion with the Hon. H. C. Templeton, Minister of Trade and Industry and Minister of Customs in the New Zealand Government 11 March 1982

After an initial exchange of pleasantries, the Prime Minister said that Australia was looking to progress negotiations for a closer economic relationship (CER), but that he had doubts about a January deadline. It needed to be understood that there should be equal opportunities for both sides-export or interest rate subsidies must be equalised.

Mr Templeton said that NZ's view was that the relationship should be opened up gradually. Their decision to move on import licensing was an historic one and adjustments should take place slowly. NZ manufacturers were of the view that under the proposed access formula Australian manufacturers would do very well in the NZ market. He admitted that NAFTA arrangements worked in NZ's favour but claimed that some 'breathing space' would be needed if their manufacturers were to be exposed to Australian competition.

The Prime Minister said that from Australia's viewpoint there must be a fixed and agreed timetable-one that cannot be unilaterally altered.

Mr Templeton said NZ manufacturers found this difficult to accept and even had problems with a terminal date of 1995 for the cessation of import licensing-NZ manufacturers saw this as their final chance of protection.

The Prime Minister stated that such a terminal date was unacceptable to Australia-import licensing would need to be terminated when the tariff phasing was completed, i.e. five years after the commencement of any CER. This was not a negotiating point. In Mr Templeton's view, this approach caused difficulties; with the phased reduction of tariffs, import licensing would no longer be a problem. The Prime Minister replied that if it were not a problem there should be no difficulties in abolishing it.

Mr Templeton then turned to the question of wine to illustrate his point that Australia's share of the NZ market would increase appreciably under CER. Following agreement between the Australian and NZ wine industry, Australia's market share had moved from 6th to 2nd and was likely to be 1st very shortly. He argued that this type of situation would pose some adjustment problems for NZ, and therefore a reasonable time should be allowed before complete free trade occurred.

Mr Clark of the NZ Department of Trade and Industry stated that the benefits which would accrue to Australia in the phasing out period were not generally appreciated in Australia-the quality of access would be very much better than at present: NZ would merely receive benefits from the abolition of Australian tariff barriers. Australia, on the other hand, would benefit from the abolition of NZ tariffs and from greater 'quality' of access, i.e. we would be placed in a preferred position, vis-a-vis the rest of the world.

Mr Templeton said that the strength of the NZ economy was dependent on agricultural exports and these would need continued support. The Prime Minister replied that export incentives needed to be treated equally. Mr Templeton said that NZ had always accepted that by 1985 it would need to do 'something' about export incentives, because of its accession to the GATT code.

The Prime Minister said that export incentives and interest and agricultural subsidies must be equalised across the Tasman.

In Mr Templeton's view, this was not possible.

The Prime Minister reiterated that it must be possible to reach a judgement so that neither side received an overall advantage of government support-the 'fair go' principle. Mr Templeton said that this was feasible provided time could be given so that NZ manufacturers were 'massaged' into accepting the arrangements. Australia, as the larger economy, should accept that the smaller economy would need support. He also said that New Zealand was reviewing its policies on export incentives this year, Mr Anthony had informed him that horticultural incentives posed particular difficulties and they are to examine this aspect carefully.

On dairying, Mr Templeton said that the NZ Dairy Federation had been given clear guidance that they should achieve a sensible agreement with the Australian Dairy Board, a fair go for both agricultural industries which were both efficient producers in the world market. The desirable outcome would involve an agreement that they do not compete in each other's domestic market but join forces for a joint assault on the world market.

The Prime Minister indicated his support for this proposal which may provide a solution to a very real problem.

[matter omitted]

[NAA: A1209, 19811508, v]