235 Ministry of Foreign Affairs Internal Note

Wellington, 12 January 1982

ANZCER: Duration of the Agreement

  1. In s.2.34 of the JPHR,1 it is recommended that the duration of the new agreement should be open-ended. (See also the corresponding s.l3.03 in DHOA.) This is not comparable to the provisions of the NAFTA which has a fixed, but renewable, term of ten years. NAFTA was last renewed in 1976.
  2. New Zealand manufacturers have indicated a preference for a terminating CER agreement along NAFTA lines. The Australian Government has made it clear it would be opposed to a terminating agreement. If the CER required renewing at, say the end of ten years, virtually all the protection afforded Australian industry against imports from New Zealand would have been phased out whilst it is quite possible that there would still be protection in New Zealand through import licensing. No doubt the Australians foresee a situation in which it would seem to be in New Zealand manufacturers' interest to freeze the status quo at that point and oppose an extension of the CER trade liberation processes.
  3. Aside from not introducing a contentious negotiating point at this stage in the CER, it seems desirable to maintain the commitment to an open-ended agreement. It is only in the medium to longer term that the beneficial dynamic economic impact of the CER will begin to be felt in New Zealand. Further, an open-ended agreement is fully in conformity with two important CER principles-automaticity and predictability. If industries believed there was a reasonable chance that the CER would not be renewed, there might be a tendency to avoid making the adjustments required to more competitive conditions. A terminating agreement might also introduce some uncertainty in the minds of investors looking to assured long-term access to Australia/New Zealand area market.
  4. Manufacturers' representations on this point appear to have been consistent but not a strong element in their case to the Government. Their concerns could be met at least in part by emphasising:
    1. The flexible nature of CER including appropriate safeguard mechanisms to deal with specific cases;
    2. The opportunity to rectify any underlying problems in the general review of CER;
    3. That it will be necessary, as in most trade and economic agreements, to include a clause providing for the worst case when either party may withdraw from their treaty obligations after a period of notice.

[ABHS 950/Box 1228, 40/4/2 Part 1 Archives New Zealandffe Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]