213 Cablegram from Australian C.E.R. Delegation, Wellington, to Australian Government

Wellington, 13 October 1982

0.WL13984 CONFIDENTIAL

CER: Joint Working Party discussions

For Suva: please bring to attention of Sir Geoffrey Yeend.

Following outline of progress in JWP is being provided in response to reftel given possibility of early discussion between Prime Minister and Mr Muldoon. A more comprehensive account will be provided at the end of discussions on Thursday.

Further to our O.WL13942,1 NZ Cabinet Economic Committee (CEC) on 12 October considered Australian proposals for improvements/modifications in CER package. As conveyed to us by NZ officials, CEC reactions on major issues are set out below. Note that delegation has not raised issues of terminal dates for export incentives and import licensing covered in correspondence between Mr Anthony and Mr Muldoon or commencement date for CER.

Access Levels: (underlined)

In accordance with Mr Anthony's directive (O.CH662292 refers) we proposed that minimum initial access levels of dlrs NZ 200,000 or 5 percent of domestic market whichever is lower be doubled (underline one) to dlrs NZ 400,000 and 10 percent. We proposed that growth on base access levels remain at 10 percent p.a. in real terms with the exception of items for which initial access levels ranged between dlrs NZ 400,000 and dlrs 1 million. Here we proposed a 20 percent p.a. increase in access until such time as access opportunities reached dlrs 1 million, thereafter 10 percent growth would apply.

We were advised that NZ Ministers are disposed to see some movement in initial access levels. However, they are concerned at the size of the increase which Australia has proposed and at possible adverse industry reactions in NZ. Urgent soundings of selected private sector representatives are being undertaken. NZ officials are currently assessing the full implications of the proposed increases in access and hope to give a more detailed response by the end of next week.

Export Incentives: (underlined)

As directed by Mr Anthony we have conveyed but not canvassed the phasing out of export incentives leaving this for resolution between Mr Muldoon and Mr Anthony. Notwithstanding Australia's disputed claim that phasing is part of the existing package, NZ Ministers have agreed to the phasing out of performance-based incentives. However they do not wish to prejudge the outcome of the review of export incentives announced in the 1982 budget and wish to maintain maximum flexibility in this regard. Accordingly they wish to reserve their position on the issue of front-end phasing (bigger initial steps) pending the review.

NZ is prepared to give an unequivocal assurance that Australia's very serious concerns about the continuation of export incentives in trans-Tasman trade will be a major consideration in the review of future policy on incentives. The JWP has yet to discuss the precise form which such an assurance might take.

Countervailing Duties: (underlined)

NZ Ministers are very concerned at the possibility of countervailing action against imports from NZ which receive export incentives. They believe that once a terminal date and phasing arrangements for export incentives have been agreed between as part of CER, the export incentives issue has been resolved and that Australian industry should not have access to an additional 'solution'. On instruction from Ministers, NZ officials have requested that the JWP find some means whereby, under CER, the risk of countervailing action pre-empting the agreed means of dealing with the export incentives issue can be avoided.

We have pointed out that Australian industry has a legal right of recourse to countervailing procedures. Anti-dumping/countervailing is the only means of remedying the unfair trading situation created by export incentives until the incentives are removed.

Other Issues: (underlined)

Discussions are continuing on a number of issues including government purchasing, methods for allocating import licences, intermediate goods, safeguards and specific products. There has been some progress and we expect that a number will be resolved to Australia's satisfaction.

Further Steps: (underlined)

It is envisaged that major remaining unresolved issues will be considered by Australia and NZ Permanent Heads in Canberra next week.

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