41 Cablegram from Australian High Commission in Wellington to Australian Government

Wellington, 29 October 1979

0.WL3993 CONFIDENTIAL

A/NZ Permanent Heads Meeting

Scott, Head of the New Zealand officials group which prepared the paper on closer economic association with Australia, told us today that the final draft handed to us has been prepared in some haste and that Cabinet Economic Committee acceptance of the document and its central theme of an outward looking economic association flowed from the 'outward looking' principles contained in the last budget. The officials group had deliberately avoided getting 'bogged down' over the specific merits or otherwise of free trade with Australia, and had turned to a broader theme as the more acceptable common denominator.

  1. Scott conceded that while an outward looking economic association (on which he noted both papers were more or less in agreement) might imply a customs union, the New Zealand political climate did not allow Ministers to move as far as this. They were still looking at a free trade area in which N.Z. would be free to utilise lower tariffs on capital goods and raw materials to create a market for itself in third countries. Nevertheless Scott agreed that the officials' paper implied movement away from the present NAFTA format.
  2. Scott did not deny that there were some inconsistencies in the long term aims of the New Zealand officials' paper and what Ministers were willing to entertain. Working back from an outward looking economic association could logically imply a customs union-itself a logical and perhaps inevitable progression from a free trade area. However Scott noted that Ministers, including Mr Muldoon, were concerned with more concrete shorter term scenarios.
  3. In this context the Prime Minister was anxious to have a reasonably specific proposal before him prior to his meeting with Mr Fraser. He was not interested in having a loose set of options. It was therefore hoped that the Permanent Heads might be able to make some positive progress and at least provide a broad scenario and time-frame for close economic association which could then be further worked over by a meeting of lower level officials.
  4. Asked about the absence of Mr Adams-Schneider from the Cabinet Economic Committee meeting at which the New Zealand paper was discussed, Scott said Adams-Schneider has been sick. He strongly implied, however, that if there were to have been protectionist objections then they would have come from MrMuldoon.
  5. We should also note that Scott has accepted a difference in definition of trade creation and trade diversions between the two papers. He seemed to accept our definition as more appropriate.

[NAA: A1838, 370/1119/18, ix]