209 Message1 from Anthony to Muldoon

Canberra, 5 October 1982

CONFIDENTIAL

As a result of our discussions in Wellington in April, our two Governments agreed to the release on 4 June of a report outlining proposals for a closer economic relationship between our two countries. At that time it was envisaged that a period of approximately two months would be available for discussion and consultation with interested parties before final decisions could be taken.

In the light of the extensive consultations and briefings which have taken place in Australia, my Cabinet colleagues and I have given careful consideration to the general reactions and main concerns expressed by State Governments, national industry organisations and other bodies in response to the proposals which we released in June. As a result, I am writing to you outlining our thoughts on the results of the consultation process and the steps we see as necessary to progress the proposals to a stage where the Government could take final decisions on this subject.

First, I should emphasise that there has been general support for the concept of CER within the business community and from State Governments. However, at the same time, there has been strong criticism of a number of particular aspects of the proposals.

The most widespread and substantial concerns, which concerns are shared by the Australian Government, relate to the terminal dates for import licensing and export incentives and the initial access levels generated by the proposed formula.

Other widely raised issues include the adequacy of safeguard arrangements, procedures for resolving intermediate goods problems and proposed methods for allocating exclusive licences, where the New Zealand intention is to assign 50 percent of licences to manufacturers. A number of specific commodity issues were also raised.

My Ministerial colleagues and I are very concerned that the principal issues raised by State Governments and key industry organisations in Australia should not become stumbling blocks in the Australian Government's final assessment of the package. Australian Ministers are fully conscious of the fact that the terminal date for import licensing and export incentives were the outcome of extensive consultation and negotiations between us. However they have been particularly concerned by claims that the objectives of fair competition and equality of trading opportunity are set too far into the future.

The date for termination of performance-based export incentives is regarded as a crucial factor by Australian firms despite the understanding that export incentives will commence phase-out from 1985. They see it as a perpetuating unfair competition for almost five years from the proposed date of implementation.

I have noted the comments which you and your Ministerial colleagues have made in relation to the review of New Zealand's export incentives. In the light of those comments and the deep concern expressed by Australian industry on this aspect of the proposed CER, I must ask that you seriously reconsider the possibility of undertaking within CER to eliminate performance-based export incentives across the Tasman in 1985.

Early action on export incentives could also avoid a spate of anti-dumping/countervailing actions which could have adverse implications for the general climate of trans-Tasman trade and encourage the development of similar attitudes on the part of third countries.

The issues of the terminal date for import restrictions and initial access levels have provoked similarly strong representations. These have contrasted the greater freedom of access into Australia which will result from the removal of tariffs by 1988 with the situation in New Zealand where only modes increases in access will have been effected by that date under the formula for liberalisation of import restrictions. This is not seen as consistent with the principle of fair competition. I must therefore ask that you seriously consider also the possibility of bringing forward the terminal date and increasing initial access levels.

This situation would also be ameliorated by strengthening the commitment, already in the proposed Heads of Agreement, for the earlier removal liberalisation of import restrictions on a case-by-case basis as circumstances permit.

Initial access levels and a number of matters including safeguard arrangements, intermediate goods procedures, licence allocation, certain aspects of export incentives and specific product issues could be perused by officials in their current discussions in Wellington. I feel that the principles already set out in the proposed Heads of Agreement provide scope for further elaboration which should take account of most of these substantial concerns.

You will be aware that two main industry areas, forest products and whitegoods, remain unresolved. I would hope that through a combination of industry-to-industry consultations and/or official contact these important groups can be satisfactorily incorporated into the arrangements. There are some other industries which have expressed concern at the inequality of the arrangements which would apply to them, for example copper and aluminium and certain sections of horticulture, but I believe these too can be satisfactorily pursued at the officials level for the moment.

I look forward to your comments on the matters I have raised, with the aim of being able to put final proposals before the Australian Cabinet by the end of October.

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