187 Report by Joint Working Party to Permanent Heads

8 April1982

ANZ CER Joint Working Party Report to Permanent Heads

Progress Report

The following progress report sets out:

  1. Issues identified for Permanent Heads by the Joint Working Party (JWP) as requiring resolution;
  2. Points agreed by the JWP.

BACKGROUND

Australian and New Zealand Permanent Heads met in Wellington in December 1980 to consider the detailed studies and consultations undertaken by Working Parties. A further meeting of Permanent Heads was held in Wellington in March 1981. Arising from these meetings a report1 was prepared for Prime Ministers which detailed the objectives, principles and concepts on which possible new trading arrangements might be bas.ed, along with a draft Heads of Agreement for an arrangement to govern the economic and trading relationship.

The Joint Report of Permanent Heads revealed that a broad area of agreement had been reached among officials on the possible techniques and modalities for liberalising trade. Despite the broad area of consensus, Permanent Heads also isolated a number of key issues on which agreement had not proved possible. Since that Report there has been a Joint Ministerial review of the CER exercise,2 a meeting of Prime Ministers and several meetings of the Joint Working Party. As a result of those meetings there has been a narrowing of differences. Outstanding differences, and new issues which have emerged, will need to be considered by Permanent Heads.

1. ISSUES REQUIRING RESOLUTION

1.1 Import Licensing-Terminal Date: At issue is whether a terminal date should be set at the outset for the elimination of all import restrictions within a reasonable time. Australia's position is that there should be a firm timetable for the elimination of quantitative import restrictions more in keeping with that for the elimination of tariffs. There should be a review of import restrictions in 1990 with the objective of drawing up a timetable and arrangements for the removal of such restrictions by 1995.

New Zealand is prepared to have a review after five years and subsequent reviews to consider whether revision of the growth formula is necessary to fulfil the objective of liberalisation within reasonable time. But New Zealand is opposed to any formal pre-fixing of an end date.

Since the Ministerial meeting in May 1981 officials have sought resolution of this issue. However Australian industry, through CAl, has subsequently confirmed its strong commitment to a terminal date and the importance it attaches to the early elimination of licensing.

New Zealand indicated that, while import licensing policy inter alia is under Government review, there is strong opposition in the New Zealand business community to any commitment at present to the setting of a terminal date.

New Zealand also emphasised the inter-relationship between this issue and the development of appropriate safeguard arrangements.

The JWP noted the following additional options which could form the basis for further consideration by Permanent Heads:

  1. one of the objectives of the general review to be to determine the scope for early elimination of import restrictions;
  2. to set a date at the time of the general review;
  3. to set a terminal date in advance of the implementation of CER, and to review its appropriateness five years before that date.

1.2 Export Incentives: At issue is a termination date for performance-based export incentives in trans-Tasman trade.

Australia's position is that performance-based export incentives including export suspensory loans should be eliminated in trans-Tasman trade by 1987, and that such incentives should be eliminated immediately in specific areas such as horticulture. In addition eliminated schemes should not be replaced by other assistance measures having similar trade distorting effects. Consideration should be given to the scope for harmonisation of non performance-based export incentive schemes.

New Zealand agreed:

  • that maintenance of incentives long-term under CER is inconsistent with the concept of a single domestic market
  • that a review should be undertaken in 1982 to examine the effects of incentives schemes and to consider remedial action where appropriate.

New Zealand has not been prepared to accept that the objective of this review should be the elimination of performance-based incentives by 1987.

1.3 Horticulture: Australia is seeking a package of measures which accommodates the special problems of the horticulture industry in trans­ Tasman trade. This should include immediate removal of performance-based incentives on horticultural products and, as a minimum, on the following products of particular sensitivity

  • frozen peas and beans
  • processed potato products
  • fresh and processed mushrooms
  • frozen and canned com
  • berry fruits

Australia would agree to the 10 per cent access formula being applied to the guidelines for frozen peas and beans.

Australia also wishes to ensure that anti-dumping procedures are adequate to deal quickly and effectively with dumping situations in horticultural products.

The New Zealand position is that horticulture should be subject to the CER principles governing access and exports incentives. In particular this means that as the frozen pea and bean guidelines are not a formal quantitative restriction they cannot be considered a base on which to apply the 10 per cent access formula.

New Zealand has indicated a willingness to examine specific cases where it can be demonstrated that performance-based export incentives have resulted in an unfair trade advantage. It has recently advised that the products of concern to Australia, namely frozen peas and beans, fresh mushrooms and frozen com, have been made ineligible for loans under the Rural Export Suspensory Loan Scheme. The other items, namely processed mushrooms and canned com are already ineligible under the RESL Scheme. Berry fruits however remain eligible for loans on plant, equipment and buildings but only at the harvest and post-harvest stages of existing production.

New Zealand considers that the agreed anti-dumping procedures including the facility to impose cash securities and the other safeguard provisions of the agreement would meet Australian concerns.

1.4 Government Purchasing: New Zealand is seeking reciprocal exchange of preferences for national and state government purchasing. To achieve this goal New Zealand is negotiating with State Governments. A paper setting out the respective positions is attached (Annex 1).

1.5 Deferred Category: The product coverage in the deferred category is still under examination by both countries in accordance with the principles already agreed. Documentation defining the plan and schedule for the movement of products from the deferred category is attached (Annex 2).

Whitegoods: Negotiations are continuing on a special arrangement for whitegoods taking into account the special circumstances prevailing in that sector. A paper is attached (Annex 3).

Steel: The conditions for treatment of steel under CER are the subject of continuing negotiation. A paper setting out the current position is attached (Annex 4).

1.6 Safeguards: the issue of safeguards in the context of adjustment to CER has not been resolved. An initial proposal by New Zealand and a response paper by Australia is attached for consideration by Permanent Heads (Annex 5).

1.7 Access: Both sides have exchanged access calculations. Papers are attached setting out the position on some issues which remain unresolved, namely synthetic carpet and furniture (Annex 6).

1.8 Tendering of Import Licenses: The possibility of allocating increased access opportunities by tender remains unresolved. A paper setting out the position is attached (Annex 7).

1.9 Intermediate Goods: Procedures for handling intermediate goods problems have been broadly agreed (Annex 8). However, the question of whether or not to establish.a benchmark for determining what constitutes a substantial intermediate goods problem has been left for consideration by Permanent Heads. It might be noted that in November 1980 a NZMF/CAI Working Party reached an agreed position on this question. When this question is resolved, it is proposed that the note on intermediate goods be included with the other texts referred to in paragraph 2.7.

1.10 Fish: Australia is seeking early removal of performance-based export incentives on fresh and frozen fish. Australia is also seeking confirmation that New Zealand joint venture fishing operations have equal opportunity to sell fish in the New Zealand market in competition with local fishermen, subject to the normal commercial considerations of price and quality. The rules of origin aspects of these issues are still under examination.

New Zealand's position is that the question of export incentives on fish under CER should be covered in the context of any overall commitment by New Zealand on export incentives. New Zealand confirms that there is no impediment to joint venture companies marketing joint venture-caught fish in New Zealand except that it must not be dumped on the domestic market, i.e. at a price below the ruling port price as determined by sales of the same species caught by New Zealand vessels. Concerning Rules of Origin, it is New Zealand's view that fish caught in New Zealand's EEZ by domestic or joint venture fishing vessels is produce of New Zealand. The determination in respect of joint venture-caught fish is made under section 7(2) of the Fisheries Amendment Act 1963 by a condition imposed by the Minister that 'catch will be New Zealand property unless prior approval is given to a variation by the Ministry of Agriculture and Fisheries'.

1.11 New Zealand's Supplementary Minimum Price Scheme (SMP): The BAE is nearing completion of a study which examines the possible impact of the SMP Scheme on trans-Tasman trade. An issue which is emerging is the potential for encouragement of overproduction of coarser wool types and the consequences for the operation of the Australian minimum reserve price scheme. A report on the BAE examination will be made to Permanent Heads.

1.12 Interface with NAFTA: The JWP has examined NAFTA and associated arrangements to assess those aspects which will need to be covered in some form in a CER and those which will become redundant. It is considered that the future of some arrangements should be the subject of further consideration by Permanent Heads (Annex 9).

2. POINTS AGREED BY THE JOINT WORKING PARTY

The JWP has reached agreement on the following issues:

2.1 Monopoly Import Items: Based on understandings reached at the Ministerial talks in May 1981,3 satisfactory solutions have been reached relating to New Zealand's monopoly purchasing arrangements for pineapples, bananas, citrus fruit and fresh grapes, wheat and wheat flour. These understandings are reflected in proposed amendments to the Joint Report of Permanent Heads (Annex 12).

2.2 Sugar: The existing measures governing the import of sugar (raw and refined), golden syrup and treacle into each country need not be disturbed.

2.3 Agricultural Support/Stabilisation Measures: In addition to the special arrangements agreed in respect of existing measures, provision should be made to ensure that new schemes and amendments to existing schemes are consistent with the agreement.

2.4 Dairy Products: Industry-to-industry consultations have resulted in agreement on conditions under which dairy products will be traded within CER. Basically, the agreement is an extension of the current forms of co­ operation between the Australian and New Zealand dairy industries. An important feature of the agreement is that it proposes that the NAFTA quota on cheddar cheese be abolished and trade in cheddar would be absorbed within the overall level of cheese traded under the understanding. New Zealand will share in future growth in the Australian domestic market for cheese.

The JWP considers that the agreement reached represents an acceptable solution and should be endorsed by the two Governments. (A text of the agreement is contained in Annex 10.)

2.5Co-operation in Third Markets: Provision should be made for the encouragement of co-operation in third country markets.

2.6 Wine: Industry-to-industry discussions have resulted in agreement on conditions for the inclusion of wine within the CER. The CER formulae for liberalisation of tariff quotas would apply to the quota element as from 111/83. There would be limits on the use of this quota in respect of wine under $2 per litre. The liberalisation of the tariff element would be deferred until 1/1186. The tariff would be phased to free in 5 steps instead of the 6 provided for under the general CER formula.

The Joint Working Party agreed that the industries had reached an acceptable solution. A copy of the industry report is attached (Annex 11).

2.7 Amendments to Joint Report of Permanent Heads: Since the last meeting of Permanent Heads in March 1981, officials have agreed a number of changes to the Joint Report4 designed to improve the meaning of the document. Many of these do not alter the Report in any substantive way while other changes involve the addition of new words or deletion of existing words. These are submitted to Permanent Heads for endorsement (Annex 12).

2.8 Explanatory Notes: As an aid to the future operation of the agreement the JWP is devising some explanatory notes. It is proposed that these would not form part of the Joint Report of Permanent Heads but should have the status of an agreed Joint Working Party document. Permanent Heads may wish to note the agreed texts relating to:

  1. Deflator: Agreement has been reached on the deflators which will be used to calculate access adjustments in real terms (Annex 13).
  2. Anti-dumping Arrangements: Agreement has been reached on procedures for handling anti-dumping actions under CER (Annex 14).
  3. Access Growth: Agreement has been reached on the means by which increases or decreases in global licences will be taken into account in determining such exclusive licences as may be necessary to ensure that access opportunities are increased by 10% per annum in real terms. Agreement has also been reached on the treatment of liberally licensed goods and second-hand goods (Annex 15).
  4. Transition from NAFTA: The JWP has discussed arrangements necessary to ensure a smooth transition from NAFTA to CER (Annex 16).
  5. Harmonisation of By-law and other Concessionary Import Provisions: Agreement has been reached that the harmonisation of or adjustment to by-law and other concessionary provisions may be desirable in particular cases to ensure that the objectives of CER, are met (Annex 17).
  6. Phasing Formula for Composite Duties: Agreement has been reached on the means by which the ad valorem equivalent of composite rates of duty will be determined in order that tariffs may be phased out consistent with the agreed formula (Annex 18).
  7. Rules of Origin: Agreement has been reached on the rules of origin to be applied to trade under a CER (Annex 19).
  8. Sugar: An explanatory note has been prepared specifying the sugars and sugar products covered by import controls which may be maintained by each country (Annex 20).

2.9 Other Trade Distorting Factors: The JWP has agreed that harmonisation of such requirements as standards, technical specifications, testing procedures, domestic labelling and measures relating to restrictive trade practices should be encouraged and that provision should be made for action to be taken where problems occur (Annex 12).

2.10 Grace Period: The JWP agreed that, for the agreement to enter into force by 1 January 1983, the Heads of Agreement would need to be initialled by 1 July 1982. It was considered that the extensive consultations which will have been undertaken with interested parties and the notice of intended implementation date more than adequately covers the need for the year's grace period that the DHOA had originally envisaged before tariff phasing commences.

2.11 Exposure Draft: The JWP has agreed to circulate separately to Permanent Heads a draft prepared by Australia which could provide the basis for further work on a report covering public release of the CER package before final decisions are taken by the two Governments. The draft, presented as a report by officials, draws heavily on Part 1 of the Joint Report of Permanent Heads and envisages attaching the draft Heads of Agreement and appropriate annexes, e.g. Investment in the Financial Sector, joint industry understanding on dairy products. The JWP agreed to submit the draft to Permanent Heads for consideration and finalisation in the light of further discussion on outstanding issues.

[NAA: A1838, 37011119/18, xxvii]