223 File Note: Record of Meeting by Turkington

Wellington, 26 May 1981

CONFIDENTIAL

Meeting of Prime Minister with Mr I G Douglas, Executive Director, NZ Manufacturers' Federation,
2 pm Thursday 26 May 1981

Mr Douglas began by explaining that the situation among his members was now considerably quieter than when the Federation first sought a meeting with the Prime Minister to discuss the Anthony visit.1 At that time a small minority was arguing that manufacturers did not know enough about the negotiations. Since then MANFED officers had talked with officials. Mr Douglas commented that the Government had handled the CER issue in a masterly way, keeping the Australians positive without stirring up sensitive local elements.

The Prime Minister said that the exercise is coming along quite well and that Mr Anthony had been very helpful. The wine industry decision had presented a problem, partly because some senior Australian Ministers are very involved with the industry. Mr Anthony, however, was much more relaxed about the decision after it had been explained to him.

The Prime Minister outlined the areas of agreement, referring to garments, footwear and the financial sector. He also mentioned the extension of the Preferences Agreement2 for two years or to when CER comes into force. Progress had been made on export incentives without final agreement having been reached. Lance Adams-Schneider was away on a mission looking further into the question of government purchasing. On the deferred goods' category, the Prime Minister had pointed out to Mr Anthony that for some products a long term qualification of the concept of free trade was required and that absolute purity was unlikely to be achieved.

The Prime Minister said that export incentives and import licensing were still unresolved. Mr Douglas responded that these were difficult ones for the Federation which could possibly move to a terminal date for quantitative restrictions of 1995 but could not say so now.

The Prime Minister concluded that, while there are still some things to discuss, he had no feeling that we are going to give anything away. He thought that finally the Australians will come our way as the alternative would be that we do not proceed. The Australians want some conclusion to the exercise although it is dependent on Mr Anthony being able to bring his Cabinet along.

Mr Douglas shifted the discussion to the general question of protection which he felt was something the Federation had to face up to. He outlined a speech which

he is to make in Auckland which represents a backtrack on the issue of industry studies. Mr Douglas now feels that the industry studies approach has more disadvantages than advantages. The alternative is a macro approach. While it must be recognised that certain industries will require long term licensing protection, for the others a date could be set 10 or 15 years out when import licensing would cease and be replaced by tariffs. In the meantime existing protection would be maintained.

He saw the development plan concept being fraught with problems. A macro approach would minimise the conflict between industry and Government and would reduce the cost of adjustment to the Government. It would allow industry to get on with the job and his feeling was that manufacturers would take action sooner rather than later. The generosity of the time span would not result in the same pressure on the political system which was greatest when the time span is shorter.

The Prime Minister did not react directly to Mr Douglas's suggestions but commented that he did not know how the CER is going to mesh into overall policy. He felt that the CER could be brought together and was hopeful that officials could get the detail tidy within a couple of months so that he is in a position to talk to Mr Fraser. The Prime Minister saw March next year as being a likely date for agreement. Mr Douglas could see no problem with that timing. The Prime Minister did not want the issue argued through the election campaign. He mentioned Watties, McKechnies and NZ Steel as special problem areas. Mr Douglas felt McKechnies were playing for time over this issue.

[ABHS 950/Boxes1221-1226, 40/411 Part 36 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]