210 Extract from Record of Meeting between Fraser and Muldoon

8 October 1982

CONFIDENTIAL

Meeting between the Prime Minister, Mr Fraser and the Prime Minister of New Zealand, Mr Muldoon, Brisbane, Friday, 8 October 1982

Also Present:Sir Laurie Francis New Zealand High Commissioner
Mr T. Groser, Foreign Affairs Adviser to Mr Muldoon
Sir Geoffrey Yeend1

CER

Mr Fraser asked Mr Muldoon what he had on his agenda. Mr Muldoon responded immediately 'CER'. Mr Fraser said that in two States at least this was likely to be made a political issue and would then be picked up by the Leader of the Opposition. The problems were in respect of terminal dates and levels of access.

Mr Muldoon said that there was no way that terminal dates could be shifted as far as New Zealand was concerned. On levels of access it may be possible to negotiate some change. New Zealand manufacturers were keeping very close to this issue and were keen to get it together. They were holding their troops together but would lose them if terminal dates became the issue. Some specific industries- forestry and the steel industry in Australia-had obviously realised the need to look closely at CER.

Mr Fraser said the State Governments were honing in on the issue as were industry groups. Terminal dates were the main problem. There was no way that the present document can be accepted without major political argument in Australia. To Mr Muldoon's comment that it therefore became a matter of specifics, Mr Fraser said not entirely. It would depend on whether import licensing could be phased out quickly; or the steps be made bigger in the earlier years, so that the last years do not matter so much.

Mr Muldoon said there may be some flexibility in this respect. The details were not in his head but there were some commitments in New Zealand to review incentives anyway. Some aspects of taxation law were being amended at the present time. As soon as that was finished the New Zealand Government would want to move into the questions of incentives for manufacturers and farmers. He said it may be an area where New Zealand could make some commitment vis-a-vis Australia, but it was six months off. There was already a commitment to the US to do something about export incentives by 1985.

Mr Muldoon commented that Australia of course had a bounty system. Mr Fraser responded that there were none on exports that he could think of but agreed with Mr Muldoon's comment that bounties would have some influence on New Zealand exports into Australia. Mr Muldoon said that if there were changes New Zealand would want to look at this question of bounties in Australia. But he was not making any firm comment. He did not see difficulty in introducing some flexibility on implementation. He did however see no flexibility on terminal dates.

Mr Fraser said that if that was New Zealand's position on terminal dates there would need to be bigger initial steps in reducing import licences to sell CER in Australia. That is what had influenced Mr Anthony's letter.2 He did not want to see the matter become a political problem in Australia.

Mr Muldoon saw no political problem in New Zealand on the matter. But to Mr Fraser's comment that there would be one in Australia, commented that he supposed the States would not be helpful. Mr Fraser said State attitudes necessitated movement on dates or steps particularly in the manufacturing area. There were two paths that could be pursued to mollify Australian industry and this was one of them.

Mr Muldoon said he would have to see what could be done. In New Zealand, to those opposed to CER, the New Zealand Government had said 'bad luck it is going to happen'. An example was Wattie's Industries. There were others-for example a fishing rod manufacturer—who would go out of production—although acknowledging Mr Fraser's comment that it was often a matter of improving efficiency Mr Muldoon thought that 1995 would allow manufacturers to cover their investments. Anything less he thought was impossible. State preferences in Australia were still a problem-acknowledging Mr Fraser's comment that the Commonwealth Government opposed them.

To Sir Laurie Francis' comment that Mr Paul Keating was a supporter of CER, Mr Fraser said that that could not be relied on. The Labor Party would determine its own attitude and members would be obliged to conform. Mr Muldoon commented that Australia had given large depreciation allowances to manufacturing industry which had the same effect as export incentives. Mr Fraser commented that we were trying to match European efforts in their industries-but we were still behind. Mr Muldoon said that export incentives were 20% on diminishing value in New Zealand with some specific cases being made, but there was of course sales tax on plant. In any comparisons in this area there had to be a high degree of precision.

Mr Muldoon went on to comment that the other aspect was whether the scheme could commence on 1 January. Technically it would be possible for New Zealand to do so. But if 1 January was missed there would then be some difficulty.

New Zealand could not legislate until later in the year-possibly July or August-maybe a little earlier. He said he was calling the New Zealand Parliament together at the end of May but it would mean well into 1983 for a commencement. Mr Fraser responded that the Australian Cabinet had not discussed the start date and would not be doing so until there was progress on other areas. To Mr Muldoon's question whether legislation was required in Australia, Sir Geoffrey Yeend responded that it would be required. Mr Muldoon said officials were waiting on guidelines to continue with their meetings. There would then be talks with Mr Anthony on the fine detail. Mr Fraser agreed that this area could be pressed on vigorously.

[NAA: A1838, 370/1119/18, xxxiii]