248 Telegram from New Zealand High Commission in Canberra to Ministry of Foreign Affairs

Canberra, 15 July 1982

No 2002. CONFIDENTIAL PRIORITY

ANZCER: Consultations

The IDC monitoring CER met this week. We talked to Anderson and Lind before the meeting and talked to Hawes again afterwards. Anderson has confirmed that there has been a strong flow of representations to Ministers on CER. Most of the enquiries and/or criticisms seem to be readily answerable but officials will have to sift through responses carefully at the end of the consultation period so as to determine issues/problems which may require further Ministerial attention and/or bilateral negotiation. You will have noted that Lind plans to spend a day in Wellington following the Agricultural Council Meeting at the end of this month and officials may be better placed by then to indicate which issues seem to require further attention.

  1. On the reaction he has encountered in visits around the States, Anderson says that there is 'widespread and consistent' dissatisfaction with the terminal dates. The official line in response has been as elaborated in our 1851-essentially that these dates are part of a negotiated compromise and that there is no further room for negotiation.
  2. At this stage officials are confident that dissatisfaction with the terminal dates will not prove significant provided that commodity issues can be resolved.
  3. You should know, however, that Sir Phillip Lynch is expected to write to Mr Anthony shortly formally seeking an extension by one month of the consultation period. The question of an extension has been discussed within the IDC and Trade are keen to resist any formal extension of the consultation period although they have acknowledged to us that they will need to be reasonably flexible about receiving late submissions. Mr Fraser has not yet answered a similar request from Mr Tonkin (Premier, South Australia) but PMandC officials have sent to him a draft reply which is clearly unsympathetic to any formal extension of the period for consultations.
  4. The areas most likely to require Ministerial attention at this stage are forest products, horticulture and whitegoods, and of these three forest products seem to present the greatest political problem. This arises from the fact that all the States-including even Western Australia-have made representations to ministers on the subject. As owners of State forests all the States have been actively concerned at the downturn in the building industry and the effect of recession on the housing market. Anderson informs us that even Mr Anthony has expressed misgivings about the political problems which the forestry sector may create for CER, and that this stands in contrast to his otherwise fairly forthright defence of the CER arrangements in response to criticism from other sectors. Mr Nixon informed State Ministers at the recent special meeting of the Agricultural Council that their first line of approach should be an industry-to-industry arrangement ('along the lines successfully negotiated by the dairy and wine industries'),1 but he too is also concerned about the political damage that the absence of an industry-to-industry arrangement could give rise to.
  5. In meetings with officials forest industry representatives have emphasised that they are not seeking increased protection from New Zealand imports or deferral from the CER formulae, (any such request would be unrealistic anyway given that most products in the sector are duty free already). On the contrary, they could live with the current level of trans-Tasman trade provided that there were no impediments/ incentives in either direction. They are therefore seeking the elimination of export incentives and import licensing from Day One, and in return for this could also agree to having tariff rates (eg current duty of 15 per cent on particle board) reduced to zero at the outset. This request for free trade in forest products from day one may be expected to surface at the industry meeting next week. (Officials here claim it is what NZ sought back in 1965.)
  6. Even though there is virtually no New Zealand trade in the product we gather that it is the particle board companies which have been the most vocal within the industry. (The provision for initial access to New Zealand of $200,000 for particle board they regard as a 'joke' as the item code has a number of other products in it anyway.) Their activities have focussed the attention of the sector on CER and have resulted in virtually industry-wide pressure for elimination of export incentives/import licensing. These pressures are, in officials view, consistent with the free trade objective of the agreement and would complement what has already been achieved in the course of the NAFTA for the greater part of the industry. According to Anderson, it is difficult to contradict the Australian industry's view that their New Zealand counterpart is a mature, sophisticated, and efficient industry which does not need the assistance provided by export incentives. On the other hand, we recall that some NZ particle board companies were very nervous about CER. However, even if it were difficult to exempt all board products from the outset, officials (Anderson and Lind) hope that the New Zealand Government can encourage the industry to consider significant increases in initial allocations.
  7. We expressed concern that the industry does not seem to have a clear view of the effect of assistance to the New Zealand industry on export prices in Australia and that the downturn in the building industry seems to have muddied the political waters. Anderson and Lind agreed: it was fair to say that the industry was not really too interested in the facts--on the other hand, however presented, the facts would not diminish the force of the political pressures that were building up on Australian ministers.
  8. On the horticultural issues Anderson said he thought it significant that at the meeting of agricultural ministers Mr Nixon was 'very supportive' of CER arrangements (this confirms the impression which the High Commissioner formed following his conversation with Mr Nixon immediately after the meeting). In both his opening presentation and subsequent discussions he emphasised that the proposed arrangements were a comprehensive and integrated package, the overall effect of which would benefit Australia. There will, however, be a range of 'small' requests which Australia may need to make in the horticultural area (details of these were foreshadowed in our 1901). More work will be required to assess the significance of these.
  9. Officials also feel that considerably more work may need to be done on the package of measures for the whitegoods industry but these will be covered separately in the light of further discussion with the industry.

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