194 Minute from Mcnamara to Fraser

Canberra, 31 May 1982

Major correspondence on Closer Economic Relations with New Zealand (CER)

Mr Wran and Mr Cain have written concerning CER and you have also received a copy of Mr Nixon's letter(1) to Mr Anthony on this matter (copies attached).

Mr Nixon has expressed concern that while all Australian tariffs will be phased out within five years from 1 January 1983 New Zealand will maintain its import licensing until 1995. He also argues that New Zealand should commence its phasing out on export incentives on 31 March 1985 and complete the process no later than 31 March 1987.

Comment

Mr Nixon's concerns on export incentives were against the background of a New Zealand offer of 31 March 1988. As New Zealand has now agreed to phase out incentives by 30 June 1987 he may no longer have a problem there.

We can appreciate Mr Nixon's concerns on import licensing and our Cabinet briefing note indicates the possibility of similar concerns coming forward from the States and industry. Just what constitutes a fair trade-off is a matter of judgement (rather than arithmetic) and timing is only part of the issue. In 'selling' the CER it will be possible to point out that the Australian market is already very 'open' to import from New Zealand-much of the trade is duty free and our tariffs against New Zealand are, in general, quite low. New Zealand, on the other hand, has higher tariffs and has import restrictions Thus Australia has little to 'offer' to New Zealand in terms of improved market access. On the other hand, the New Zealand offer constitutes a gradual, if initially modest, opening up of their market for Australian exports, from a position where our ability to compete has been very restricted.

The telexes from Premiers Wran and Cain argue that a programme of structural adjustment assistance should be part of the CER package. State officials made similar comments at a recent briefing and were informed that the proposed agreement was not intended to include an Adjustment Assistance Programme but that Premiers would be free to raise the question with you if they wished.

Comment

On the assumption that Mr Anthony's recommendations are accepted by Cabinet, there will be a need to provide the States formally with a copy of the draft agreement with New Zealand. We recommend that, at that time, you could acknowledge the concerns raised by the Premiers and indicate that their views will be taken into careful account before the Government takes final decisions on closer economic relations with New Zealand.

[NAA: A1209, 1981/508, viii]