255 Note from Murdoch to Norrish

Wellington, 18 October 1982

CER

Attached is a draft overview paper1 for the Permanent Heads meeting.2 It is a convenient enough summary of where the Joint Working Party stopped last week. It does not expose all of the options available to the Permanent Heads meeting to negotiate a new compromise document satisfactory to both sides, and nor does it delineate the shape of any possible packages, although in some areas the possible trade-offs are clear enough.

  1. Some of the apprehension all of us felt recently about the Australian will to reach finality on CER in time for a 111183 start-up was removed by the performance of Newton Lind and the Australian JWP officials in the meeting just concluded. They were positive and constructive, apparently anxious to clean up as many of the outstanding peripheral issues as possible. Several times Lind reminded the NZ side that on such issues what he needed was forms of words which would make the given issue cosmetically more acceptable, and 'saleable' for Mr Anthony.
  2. However these are atmospherics, and nothing more than that. Their importance for wrapping up CER can be over-stated. After all these Australian officials have been with CER for 2-3 years: they have an institutionalised interest in 'bringing it off'. Far more critical must be the approach of the (less involved) senior Australian officials and political figures, especially Mr Fraser.
  3. At its crudest, the Australian public consultation phase on CER must be judged a fiasco if the requirements for changes to the DHOA now before NZ are any guide. The cumulative effect of the new requirements put to us by Lind and the JWP (fleshing out Mr Anthony's letter to Mr Muldoon3 ) is that of a new negotiation, in that virtually none of the main points agreed leading to the release of the DHOA have been left untouched by the Australians. Australian industry appears to have 'woken up' to CERjust in time to put together a very substantial roar of opposition to it. It is not clear yet whether a bit of acceleration here, a change of market share percentage there-will meet the clear political need for Mr Anthony to demonstrate that he has significantly improved the package. If it was tempting to think that some bringing forward of either the 1987 or 1995 terminal dates could have secured the CER much earlier, that is not the case now: not just because it remains the point at which Mr Muldoon has drawn the line, but also because one would have to have real doubt that such changes would be sufficient by themselves any longer to meet Australian objections.
  4. From the New Zealand perspective there could well be real limits to the amount of amendment to DHOA that the Government can entertain. Within our own JWP delegation some of the old interdepartmental problems resurfaced in the past week as Treasury fought to preserve as much of the export incentive sector as possible, and DTI nervously did their sums with MANFED on what the new Australian bids for initial access would do to CER's 'gradual' impact on New Zealand industry. Permanent Heads may feel less constrained to defend such conflicting interests than junior officials. One hopes so because the immediate consequence of such internal tensions (apparent even in the JWP) is that New Zealand's package response to the new Australian demands must be negotiated first within our own team to establish a set of NZ agreed common factors which could then tum out to be fairly low in comparison with Australian demands. In other words the means of bridging the gap between what we think we can manage and what the Australians think they can live with may not be explored as fully as it should be at this stage in proceedings.
  5. The nagging question is 'what then, if this meeting of senior officials doesn't provide a package which both governments can accept?' Another Ministerial meeting? That is highly likely in that Mr Anthony already wants to deal directly with Mr Muldoon on the issue of the revise[d]4 phasing required for export incentives. In Brisbane5 Mr Fraser turned aside Mr Muldoon's enquiry about holding to CER startup next year with the observation that implementing (as distinct, implicitly from negotiating) CER had not been considered by the Australian Cabinet.
  6. Any Ministerial meeting would, presumably, have to take place against a publicity background of some proportions. The obvious temptation would be for industry in both countries to seek to bolster their government's final positions by putting some public pressure on them. Lind has already cautioned the NZ JWP that any leaks from the NZ MANFED about the negotiating position taken by Australian officials would evoke the strongest counter-reaction from Australian private sector sources.
  7. Perhaps the key to all this is the amount of momentum the CER negotiations have achieved. If it is now a question of 'just one more roll' on the downhill slope for this large stone, Australia can probably be brought along: the bureaucratic commitment and the (dwindling) political interest is probably still there. However if the stone has stopped, or is about to stop, the mere thought of the amount of political muscle required to push it the last few yards may be enough to put one side or the other off. The Permanent Heads meeting should expose this more clearly than any earlier meetings.

Footnote

  1. This may all seem rather gloomy. It is a 'plan for the worst' and 'hope for the best' outlook. A more sanguine approach would note that the fundamental objective of CER (free trade by 1995 or earlier where possible on a product basis) has not been criticised. All New Zealand has been asked to do is 'grease the track' more, especially the early stages. Greater emphasis could perhaps be put on the fact that the need for gradualism on New Zealand's side, and the ability of Australia to cope with that need (by accepting imbalance in the rate of liberalisation) have been changed as economic conditions in Australia have begun to match those in New Zealand in the past year.
  2. In discussing how to include the amendments in the CER Heads of Agreement, the Australians have suggested that these should all be published as an annex to the exposure draft.

[ABHS 950/Box 1228, 40/4/2 Part 5 Archives New Zealandffe Whare Tohu Tuhituhinga 0 Aotearoa, Head Office, Wellington]