198 Memorandum from Hughes to Fernandez

Canberra, 5 August 1982

M.CH142433 RESTRICTED

Australia- New Zealand Closer Economic Relationship (CER)

Thank you for M.BS5367 and M.B5373 on the approaches made by you and by the New Zealand Ambassador to inform the EC Commission of the proposals for new trading arrangement between Australia and New Zealand. Consultations with the public in both countries on the proposals will soon be complete and we shall advise you of progress

  1. For your own information, the Department of Trade and Resources has not wanted Australia to join in any active way in New Zealand's approaches to the EC, which are seen as essentially a New Zealand responsibility. Departmentally, we can see some cause for concern in the longer term about the EC's response to the CER trade agreement:
    • While New Zealand is right to be concerned about such matters as access to the EC for its butter in the wake of CER, it might be wrong to assume that the facts of the situation-the lack of any new market in Australia for New Zealand in dairy products under CER-will prevent the Europeans from using CER as a pretext for reducing New Zealand's access to the European market.
    • The Europeans could still argue that the CER will strengthen New Zealand and Australia sufficiently to enable both countries to support the 'rationalisation' of New Zealand's dairy industry that would be necessitated by a continuing eroding of New Zealand's market position in Europe.
    • The CER trading agreement, and any subsequent economic or other arrangements intended to contribute to more integrated economic relations, might add to the mistaken impression in Europe and elsewhere that Australia is accepting a special responsibility for helping New Zealand with its basic economic difficulties. (We would suggest that New Zealand's continuing economic viability will depend fundamentally on wide-ranging international trade, including for example, the maintenance and development of its markets in Europe.)
  2. You may like to have these considerations in mind in discussions with both the Commission and the New Zealanders on CER-related topics. Your own comments, especially in the light of any Commission responses, would be helpful to us.

[NAA: A1838, 370/1/19/18, xxxi]