218 Brief for Anthony's Meeting with Muldoon

Canberra, 28 October 1982

CONFIDENTIAL

Australia- New Zealand Closer Economic Relations (CER) Ministerial Meeting

Wellington, 28 October 1982

Brief

A. Overview

Your meeting with Mr Muldoon marks a major crossroad in the progress of proposals for a CER

  • will determine whether he is able to give sufficient ground on the key issues of export incentives and import restrictions to meet your specific negotiating objectives [and]1 enable finalisation of an overall package which could be expected to receive Cabinet endorsement.

Your discussions will focus heavily on export incentives and import restrictions however, subject to progress made by officials, it may also be necessary for you to discuss countervailing, allocation of licences, forest products and canned fruit.

Failure to resolve the two key issues will almost certainly mean abandoning the target implementation date of 1 January 1983 and could necessitate a complete reassessment of the future of the initiative which was formally launched by the two Prime Ministers in March 1980.

Movement on the key issues will not be easy for Mr Muldoon particularly given the different approach to consultations adopted by New Zealand both prior to and in the light of public release of the 'exposure draft' on 4 June.

New Zealand consulted closely with industry on the impact of the liberalisation formulae throughout the negotiations leading to the exposure draft

  • firm terminal dates for performance based export incentives (1987) and import restrictions (1995) were ultimately established in the face of very strong industry objection in New Zealand
  • consultations since June have placed emphasis on educating groups throughout New Zealand on the full details of the proposed new arrangements [and] promoting public acceptance of the main elements.

In Australia although key industry bodies and States were kept generally informed and their views invited, emphasis was placed on the Prime Minister's initial commitment that no substantive decisions would be taken until the details of any proposed new arrangements were made public and all interested parties had the opportunity to comment. Accordingly release of the exposure draft provided State Governments, members of national industry bodies, etc., with their first opportunity to comment on the overall package.

Australia's objective in this latest round of negotiations is to obtain a number of improvements/modifications in the draft CER package

  • in accordance with the approach agreed by Cabinet following consideration of a monitoring group report which revealed widespread in-principle support for the objectives of CER [and] acknowledgement that the proposed arrangements will result in an improvement, over time, in the inequities of the situation under NAFTA
    but
    strong criticism of a number of elements, including those relating to the fundamental issues of import restrictions and export incentives, in addition to the initial levels on which increased market access is to be based.

[matter omitted]2

[matter omitted]3

In light of Mr Muldoon's response, you instructed Working Party officials to

  • put a request for a doubling of the minimum access level to $NZ 400,000 cif or 10% of the domestic market, whichever is lower with provision for a 20% real annual increase for item codes where base access was between $NZ 400,000 and $NZ 1 million.
  • reiterate that Australia has seen phasing as an essential element of New Zealand's offer to eliminate performance-based export incentives by 1987 and that you would wish to resolve with Mr Muldoon the question of a significant front-end phasing of incentives which Australian Ministers see as a minimum
  • seek a firm commitment from New Zealand Ministers that Australia's very serious concerns about the continuation of New Zealand's export incentives in trans-Tasman trade will be a major consideration in the New Zealand Government's review of future policy in this area.

The issues identified by Cabinet have been the subject of intensive discussions with New Zealand officials during October

  • Joint Working Party met in Wellington 6-15 October
  • Permanent Heads met in Canberra 19-20 October.

Considerable progress has been made in establishing a basis for agreement on a number of modifications/improvements in the draft package, consistent with the approach endorsed by Cabinet. These include

  • certain aspects of the import licensing and export incentives issues
  • revision of the proposed special arrangement for whitegoods
  • transitional safeguards
  • intermediate goods
  • government purchasing
  • certain of the specific product issues. Details of these and other aspects which have been agreed or which are expected to be finalised by officials are summarised in Section C.

However, the key issues of terminal dates, initial access levels/growth formula, and phasing of export incentives have been reserved for Ministers

  • New Zealand can agree to phasing of export incentives but wishes to reserve any commitment on timing and degree pending the current review
  • New Zealand has not responded in detail on our revised base access/growth proposals for import licensing although some scope for movement has been acknowledged
  • we are working with New Zealand officials to overcome their reluctance to allow for countervailing action which they regard as inappropriate under CER in view of their agreement to removal of export incentives, however it seems likely that this will also need to be addressed by Ministers
  • briefing on the key unresolved issues is contained in Section B.

[NAA: A1313/116, 84/2288, i]