204 Letter from Anthony to Fraser

Canberra, 30 August 1982

I refer to the report of the Departmental monitoring group which was set up at your request1 to monitor reaction to the Report released on 4 June containing proposals for a closer economic relationship (CER) with New Zealand.

The report of the monitoring group is quite clear that there is overall support for the principle of a CER with New Zealand and that the proposals as they stand represent a considerable improvement on the current position under NAFTA where many inequities exist.

However, despite acknowledgement of the prospect of improved trading conditions there is a general feeling that the phasing out of New Zealand import licensing and export incentives as proposed, takes too long. Additionally, there is concern that the initial levels of access in some cases are not adequate. These represent the major concerns. They relate to fundamental aspects of the proposals which were negotiated extensively over considerable time taking into account the different situation from which each country had to move.

Other concerns, such as the adequacy of safeguard arrangements, procedures for intermediate goods problems and particular problems of specific industries such as forestry, whitegoods and some sections of horticulture have either been addressed or appear capable of being progressed either by industry and/or officials. In some cases these matters are already in hand.

Against this background, I propose to write to the New Zealand Prime Minister in terms of the attached letter2 conveying the nature and extent of the concerns received following release of the draft Report and seeking some strengthening of New Zealand's commitment on the fundamental issues. I will also be seeking improvements on initial access levels.

At the same time, I consider that officials should pursue the other matters referred to above with their New Zealand counterparts, and in the case of particular industry problems with industry representatives where necessary.

I would hope that as a result of this approach it will be possible to put final proposals before Cabinet by the end of September.

In adopting this approach I think it has to be clear in our minds that a final package must reflect an element of compromise by both countries given the widely different base from which we begin working towards free trade.

The main concerns which emerged from the consultation period relating to terminal dates for import licence and export incentives were aspects where it was always clear that each country had a significantly different perspective. The specific proposals on these issues represented significant movement by the New Zealand Government which has found it necessary to sell this compromise to manufacturers in that country in the face of very strong criticism.

Therefore, while a number of concerns can be met through clarification or amendment of the proposed arrangements, I believe it will be exceedingly difficult to obtain a specific improvement in the terminal dates within the proposed agreement itself. However, I will raise these issues with Mr Muldoon in the hope that, even if movement on the dates themselves is not possible, it will at least be possible to obtain some additional assurances from New Zealand. Mr Muldoon's announced review of New Zealand's export incentives may provide scope to meet, in some measure, Australian industry's concerns. On import licensing, it may be possible to obtain stronger assurances from New Zealand that, for many items, licensing will be eliminated well before 1995. On the related question of initial access levels, it may be possible to obtain increases, according to a broadly based formula rather than a case by case approach, to overcome Australian industry's concern that the levels currently proposed are inadequate or not commercially viable.

I would appreciate your comments on the monitoring group report in respect to the course of action I propose. I am forwarding copies of this letter to the Ministers for Industry and Commerce and Primary Industry.

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