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

Wellington, l December 1982

No 4251. CONFIDENTIAL NZEO IMMEDIATE

Prime Minister's Meeting with MANFED: Countervailing

The Prime Minister and Mr Templeton met today with Messrs Richardson, Stevens and Walker of MANFED.

At the outset Richardson thanked the Prime Minister for the firm action the Government ad taken over the last 48 hours in despatching a top level officials team to negotiate procedures for handling countervailing enquiries, following the telephone representations made by Mr Templeton with both Mr Peacock and Mr Anthony.

They stressed the very serious concerns the manufacturers continue to feel and Richardson mentioned one or two further instances of New Zealand export industries which had heard that anti-dumping or other action was in prospect. There was a widespread feeling amongst manufacturers that it was essential to establish a climate of confidence that the objectives of CER would not be undermined at an early stage by such actions.

The Prime Minister confirmed that the Government was equally concerned as was clear from the nature of the action being taken. If necessary the matter would be pursued at the highest political level. There was no doubt in his mind that in negotiating the phasing of export incentives, the Australians had accepted that they could be retained in that form until 1987. It would be quite unacceptable if another route, namely countervailing, were now to be used to attack export incentives per se. In the current cases the Australian authorities had shown scant regard for their obligation to establish that material injury was in reality occurring or threatened as a result of New Zealand 'subsidies'.

The Prime Minister said that the officials delegation would be doing their best to get the right sort of procedures. This would become all the more important if, following the disappointing outcome of the GATT talks,1 Australia's disillusionment, as instanced by its refusal to sign the final declaration, moved Australia to place less importance on strict adherence to the commitments it had in terms of the GATT and the Codes.2 It was essential, therefore, that agreement on a bilateral basis, fully consistent with the CER spirit, while also GAIT- compatible, was established.

Richardson acknowledged that scope for countervailing in genuine cases would exist under CER. They could live with isolated cases. What was important was that the very existence of export incentives was not at risk from countervailing action.

The Prime Minister said that there was nothing that could be done that New Zealand was not already doing. On the basis of Doug Anthony's attitude throughout the negotiations, the Prime Minister had confidence that he would take a very reasonable attitude. There was no possibility of New Zealand changing its basic position on the incentives issue, namely that they remained in place until 1987, but he had the hope and some confidence that even if it was necessary to take the issue to the highest political level it would prove possible to resolve it satisfactorily. Mr Stevens welcomed this. It would reassure rank and file members of the Manufacturers Federation who were inclined to interpret the Australian moves as a last-ditch attempt to force New Zealand to abandon export incentives at an earlier stage. The Prime Minister reiterated that there was no possibility of this, and he would be making it clear in the course of the debate due to take place in the House that evening.

At that point the Manufacturers' representatives, having reaffirmed their satisfaction that the Government was taking all steps possible, handed to the Prime Minister a copy of a resolution passed by the four district associations (see our immediately following telegram). They said they felt it merely covered the points that he had already been discussed and they inferred from what the Prime Minister had said that he would be prepared to give the assurance sought that New Zealand would not proceed with the signing of a CER Agreement until this matter had been resolved satisfactorily. The Prime Minister said he was not prepared to give such an assurance. First, he said, bringing the current discussions on procedures, and the timber and tiles cases to a satisfactory conclusion may not be possible within the space of a week or two. Secondly, and more importantly, NZ would be in a better position to press for a satisfactory outcome with the Heads of Agreement signed than in the absence of a CER. The Prime Minister stressed that the likelihood of protective action against imports from New Zealand would be greater in the absence of a signed agreement. The fact that the Agreement was signed did not mean that New Zealand would forfeit the right to protect its interests in the event that Australia pursued protectionist policies to our cost after the Agreement came into force.

The Prime Minister noted that the signing would now take place on 14 December. He hoped it would prove possible to resolve the issue by then.

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