I have received from the New Zealand High Commissioner a copy of his letter to you dated 20 May 19821 proposing that, subject to Australian acceptance of the safeguard provisions negotiated by the officials, New Zealand could agree to set
30 June 1995 as the terminating date for quantitative restrictions and could phase out export incentives after 31 March 1985 terminating by 31 March 1988.
I believe that these proposals are unsatisfactory and should not be accepted.
In my discussions with industries likely to be affected by a CER with New Zealand the most universal complaints are that Australian will have phased out all of its tariffs within five years from 1 January 1983 (sooner for some products) and will then offer a totally unrestricted and duty free market for New Zealand exports.
Meanwhile, however, the market in New Zealand would remain restricted and almost all of New Zealand exports to Australia will continue to benefit from very large and unwarranted export incentives. As you are aware, these export incentives take the form of tax-free cash grants equivalent in most cases to 10.5% or more of export value-regardless of any growth performance. In other words if a New Zealand exporter sells $100,000 of a product to Australia he receives $10,500 by way of a tax-free cash grant. This to me is excessive and unwarranted especially to an unrestricted market such as Australia.
Against this, Australian exports to New Zealand continue to be faced with very stringent import licensing which very effectively prevents any trade growth or at best limits it to very low access levels. For many products, particularly agricultural products, the access provided by the CER formula represents miniscule openings into the New Zealand market which will not increase to reasonable levels for many years.
I feel that if we are to effectively 'sell' the CER to industries concerned in Australia the final balance sheet must be seen in large measure to redress these basic inequities. The latest New Zealand proposals do not seem to adequately do this.
As regards import licensing, I believe that 1995-thirteen years hence-is by far a too distant date to be considered the basis for providing a 'fair go' trading opportunity across the Tasman.
A date thirteen years distant for elimination of licensing cannot -to my mind- be considered to provide for a 'fair go' trading situation.
On export incentives, I am firmly of the view that slippage of the date for total abolition of New Zealand export incentives beyond 31 March 1987 would create a most unfair imbalance on Australian industries, particularly rural industries. In my view New Zealand should begin its general phase out of export incentives (on trans-Tasman trade) on 31 March 1985, the date on which the current scheme expires, and complete the phase out no later than 31 March 1987. Even this termination date, which in all probability will be four years after Australia abolishes performance-based export incentives, will, justifiably, be considered inequitable by Australian producers.
I would urge that these comments be taken into account in you further negotiations with New Zealand prior to Cabinet consideration of the package on 1 June.3
[NAA: A1209, 1981/508, viii]