South Pacific Forum: Discussions with Mr Street
- Although Mr Street was unable to accept your invitation to visit New Zealand prior to the Forum,1 it seems likely from the Forum programme that there will be time available, should either of you wish to discuss matters of current interest in the Australia/New Zealand bilateral relationship.
If that opportunity presents itself you may wish to draw upon the following material:
Closer Economic Relations
Officials have recommended to Mr Muldoon that, if time permits, he should review the state of play in CER with Mr Fraser. In particular we are concerned by reports that there may be a growing willingness on Mr Fraser's part, in response to pressure from State governments and parts of Australian industry, to extend the consultation process in Australia by a month (ie into early September) and perhaps for a further full round of negotiations after that, with the inference that some of the fundamental aspects of the package, notably terminal dates for import licensing and export incentives could be re-opened. As the Prime Minister has said already, the attitude of the New Zealand Government is that the Exposure Draft represents an agreed and balanced package to which New Zealand could contemplate only limited amendments arising from the consultation period. Furthermore we perceive certain dangers in stringing out the negotiating process. The proposed start-up date of 1 January 1983 could be jeopardised. This in turn could lead to increased pressure upon the Government and industry groups (many of which have come to accept CER as inevitable) to widen the exemptions, delays and deferrals from automatic CER coverage.
The Australian attitude may be conditioned in part by the fact that the consultation period is the first major information exercise the Australian government has done on CER, whereas in New Zealand consultation has been going on, in practice for the last two years. CER has been more of an unknown to Australian industry than to New Zealand's. Furthermore, the effects of the international recession are now biting in Australia: some Australian industries which might have been relatively relaxed about increased New Zealand exports under CER a year ago, are now looking much harder at whether the trade-off, in terms of improved access for them to the New Zealand market is fair and equal. In doing so they are understating one of the earliest and most central implicit agreements of CER-that New Zealand needs somewhat longer to adjust to CER conditions than Australia because parts of New Zealand industry have enjoyed a wider range of protective measures under NAFTA, and are therefore more vulnerable.
The Australian Cabinet is expected to focus again on CER in the second half of August, at which time extension of the consultation period, or a request for further negotiations are likely to be among the issues considered. Mr Anthony has often hinted that he has faced no easy task in Cabinet on the CER and, as he said, 'needs all the friends (he) can get'. Although these are not matters which New Zealand can negotiate if the Australian Government decides they are political necessities, you may wish nonetheless to make the following points to Mr Street in any discussion of CER you have with him:
- There is widespread public and industry acceptance in New Zealand of the importance of CER for the future development of trans-Tasman trade, and the relationship generally.
- New Zealand industry has come to regard CER as inevitable, but remains nervous and cautious about it because, despite its gradualism, it will impose real adjustment pressures on many sectors. In particular the Manufacturers Federation has not yet formally agreed to the termination date for import licensing.
- Delays at this stage in finalising the negotiating process by either government could encourage back-sliding, and could cause investment decisions which ought to be made now to be deferred by some industries in case the 'rules of the game' can be changed at the last minute. Such changes could only detract from the economic impacts both governments expect CER to bring through strengthening competitive factors in the marketplace.
- The various problems which have surfaced during the consultation period are, in New Zealand's view, manageable within the existing framework of the agreement and do not require reopening the 'package'. A decision by the Prime Ministers to set a date for initialling heads of Agreement (by the end of September, for example) would concentrate attention on finding solutions.
- Closer Economic Relations
[ABHS 950/Box 1228, 40/4/2 Part 5 Archives New Zealand/Te Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]