256 Extract from Brief for New Zealand Permanent Heads

Wellington, [19] October 1982

Objectives for New Zealand Permanent Heads, 19-20 October 1982

We are now in the 'crunch' stage of the CER negotiations. Considerable progress has been made in the last round of working party discussions on such issues as intermediate goods, government purchasing, and transitional safeguards. Agreed amendments to the DHOA on these matters have been referred to Permanent Heads for their approval. In addition, with the exception of the import/export tariff issue, a package of modifications for whitegoods has been agreed.

These are all significant steps towards securing the overall agreement. However, unless Permanent Heads succeed in putting together this week accommodations on the key issues of export incentives and import licensing which can be recommended to ministers, insufficient time will be available to provide for implementation of the agreement from the beginning of next year. There must be some likelihood, bearing in mind the constant possibility of an Australian general election (and a change of government) as to whether delay now would put CER startup in 1983 in jeopardy.

The Australians have come up with some new proposals on these two key issues as a result of the consultation process. They reflect intense concern in Australia that the proposed arrangements 'favour' New Zealand by imposing undue restrictions on Australian access to the New Zealand market, and by 'excessively' long adjustment periods in respect of the terminal dates and 'equalization' of export incentives. As a result the exchange of correspondence between the Prime Minister and Mr Anthony,1 the Australians accept that the terminal dates for import licensing and export incentives provided for in the DHOA are not negotiable, however, they are just as adamant that to the extent that these dates cannot be changed, New Zealand must move to improve the terms of Australia's access, and to phase out export incentives as fast as possible, consistent with the terminal date of 1987. Mr Fraser repeatedly made the point to Mr Muldoon in Brisbane2 that Australia saw two ways of proceeding to wrap up CER. He clearly means the blunt instrument (bringing forward dates) or the surgeons knife (a series of final adjustments across the board).

These Australian requests are ambitious at this stage of the negotiations, but they may nevertheless represent a 'bottom line' for Australia. An important objective of the Permanent Heads' meeting this week, therefore, is to test the extent of the Australians' flexibility as far as these requests are concerned. Indications from middle-level officials at last week's meetings are that Mr Anthony's requests fall some way short of what other departments considered Australia's opening bid should have been. If so, Australian Permanent Heads may not feel able to recommend to their ministers a settlement on terms any less than Mr Anthony's latest offer, unless we are able to persuade them that the New Zealand response to their requests will meet their objectives in a different way (ie will deliver them substantially the same degree of benefit).

On access elements in the New Zealand response could include:

  • Meeting all individual Australian complaints above3 lack of commercial viability in initial access levels. This would involve
  • Recalculation of the minimum access level on the basis of first 'year' of access whose duration is effectively eighteen months;
  • The application of the growth factor to the eighteen months period in the second full year;
  • The bringing forward of the review to a date which would enable improved terms/access to be authorised earlier than at present;
  • A commitment written4 review's terms of reference which would provide for an accelerated pace of liberalisation to coincide with our tariff phaseout (IL 1987) so that there is no 'earthquake' of adjustment in 1994-5.

On export incentives, given Mr Anthony's expression of preference to negotiate directly with the Prime Minister, it may not be possible to explore with Australian Permanent Heads a range of options to quite the same degree as for import licensing. However, given the threat of countervailing action against imports from New Zealand, and the damage this could do to our overall position on export incentives in the CER, it will be important to rehearse New Zealand concerns in this area and to explore the scope for discretionary action by Australian ministers to waive countervailing actions in a situation where there is a commitment by New Zealand to terminate performance based export incentives. Starting in 1985 (this, of course, would leave unaddressed one Australian concern that whereas there will be no Australian incentives available in trans-Tasman trade from 1 July 1983, New Zealand exporters would have all or some benefits available until 1987).

It will also be important to obtain a reading from Australian Permanent Heads on whether it is considered that another ministerial meeting may be necessary before the negotiations are concluded. If so, it may be worth canvassing dates for a meeting. CER can probably go ahead on 1.1.83 even if a Treaty has not been signed beforehand, but would be signed soon after (ie February/March?). This presupposes the substantive conclusion of treaty negotiations by Christmas. To achieve this the final step of negotiations (initialling of DHOA by Ministers) would have to be complete before the end of November at the latest. That suggests any final Ministerial negotiating session probably has to take place as early as5 November as possible.

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