217 Ministerial Submission to Street by Laurie

Canberra, 26 October 1982

CONFIDENTIAL

New Zealand - CER negotiations

PURPOSE: To advise you of the stage reached in the CER negotiations with New Zealand.

  1. Ministers decided on 28 September (during your visit to New York for the UN General Assembly) that Mr Anthony should press New Zealand for improvements in the proposed new trade agreement, giving highest priority to securing earlier termination dates for import licences and export incentives. Other areas for further negotiation included government purchasing, intermediate goods, transitional safeguards and a number of specific product issues. Ministers agreed that Mr Anthony should report on the new negotiations in October, and decided they would not consider the question of an implementation date until the outcome was known.
  2. Mr Anthony wrote to Mr Muldoon on 4 October1 setting out Ministers' views following their consideration of the public reaction to the proposals as circulated in June, and asking New Zealand to reconsider the aspects causing concern in Australia. Mr Muldoon replied on 7 October2 explaining the difficulties for New Zealand involved in any renegotiation of the termination dates, but suggesting that it should be possible to explore other aspects of import licensing and export incentives with a view to ensuring that Australian concerns about the objectives of fair competition and equality of trading opportunity were met.
  3. Accordingly Australian officials from Trade and Resources, Industry and Commerce, Primary Industry, Prime Minister and Cabinet and this Department had discussions at working party level with their counterparts in Wellington from [5] to [15] October, and on 19 and 20 October further negotiations were held at Head of Department level in Canberra.
  4. Progress has been limited. While acknowledging New Zealand's difficulties, the Australian side-Industry and Commerce in particular--emphasised the continuing presentational difficulty in Australia of the termination dates and pressed New Zealand for significant improvements in access to the New Zealand market for Australian manufacturers in the early stages of operation as an alternative means of responding to this problem. New Zealand was not prepared at this stage to accept a suggestion by Mr Anthony for doubling the initial access proposals in the present package, while Industry and Commerce let it be known that even this offer might not prove acceptable on the Australian side. Similarly on export incentives Australian officials have underlined the importance of significant phasing out beginning 1985 (e.g. 50% of the incentives currently applying to trans-Tasman trade), while New Zealand would still prefer slower phasing and is in any case reluctant to make any definite commitment before the review of the overall export incentive scheme intended in the 1983 budget.
  5. The discussions have seen further progress on outstanding detailed issues including countervailing and anti-dumping measures and trade in whitegoods, carpets and forestry, horticultural and plumbing products.
  6. Negotiations have now advanced as far as possible at official level. Mr Anthony is to have discussions in Wellington with Mr Muldoon on 28-29 October. He will then report to Ministers. The possibility still exists of implementation on 1 January, assuming Ministers on both sides agree to a new package of proposals by mid-November and the two Prime Ministers initial the Heads of Agreement in early December. However Mr Muldoon in an address to the influential New Zealand Manufacturers' Association has already spoken of slippage to October 1983 or even January 1984. In any case, the acceptability in Australia even of a renegotiated package is not certain. The Department of Industry and Commerce, for example, remains unconvinced that there would be any disadvantage for Australia in abandoning the proposed new trade agreement and allowing NAFTA to lapse at the end of 1983, at which time the current preferential tariffs for New Zealand would terminate. The Department of the Prime Minister and Cabinet is concerned at the domestic political implications of a proposed agreement which State Governments, notably in NSW and Victoria and to some extent Queensland, have explicitly criticised.
  7. We would nevertheless be concerned about the wider implications for relations with New Zealand if the CER process were to collapse. Without a new agreement the trading relationship would become complex and disputatious. Many New Zealanders (including the Government) would seek to blame Australia for their economic difficulties and for the failure of the CER effort. A New Zealand feeling that Australia had pressed for too much could in turn and in time have negative consequences for co-operation in other important areas such as ANZUS and the South Pacific.
  8. The CER negotiations are not likely to continue beyond the negotiation of a new agreement to succeed NAFTA: New Zealand ideas for other areas of closer economic co-operation such as investment and banking seem to lack real content, and we do not favour the idea of a broader agreement covering such issues as migration and civil aviation (which we believe are better pursued in their own right).
  9. Our tentative assessment, shared by Trade and Resources, is that New Zealand will overcome the objections of its manufacturing sector and agree to the substance of Mr Anthony's initial access proposals. If this occurs and if Ministers approve the revised package, we think that the CER negotiations could come to a reasonably amicable and mutually advantageous close. We will provide you with further briefing material before Cabinet considers the question again.
  10. For information.3

[NAA: A1838, 307/1119/18, xxxiii]