61 Minute from Ashwin to Henderson

Canberra, 12 February 1980

CONFIDENTIAL AUSTEO

Closer Economic Association between Australia and New Zealand

A meeting of Australian Permanent Heads is to be held in the Department of Trade and Resources on Thursday, 14 February, to discuss tactics for the meeting between Australian and New Zealand Permanent Heads scheduled for 25/26 February in Canberra.

[matter omitted]1

  1. In particular, the New Zealanders are reluctant quickly to dismantle their import licensing system and to vary their tariff structure and export incentive system (although we believe that the latter may be modified as a result of threats from the United States to take action against New Zealand in GATT and under its countervailing duties legislation and as a result of concern by the New Zealand Treasury over its cost). The representatives of the Australian economic departments believe that it is the New Zealand intention to make arrangements that will serve only their industries by agreeing to 'first step' arrangements favourable to New Zealand industries without any time scale being set for further steps. While there are probably some New Zealanders who take this view, the obvious difficulty they had in getting their act together before the Wellington meeting suggests that there is no united New Zealand attitude. The New Zealand Treasury is thought to have a more liberal view. Nevertheless, there does seem to be well-entrenched reluctance on the part of New Zealand politicians to move ahead in uncharted waters (see Mr Border's valedictory speech attached). These views are supported in the attached paper2 prepared by Mr Santer of EP Branch.
  2. A meeting was held in Canberra on 11 February amongst Australian officials to consider the next steps to take. The economic departments were very pessimistic about the likelihood of any further progress because of what they see as New Zealand obduracy. While not overlooking this fact, we argued that our own Permanent Heads should not enter into the discussions in the belief that no progress at all was possible. If no progress is possible, it should be left to the New Zealanders to say so. We supported the suggestion that the positive aspects of the joint report should be emphasised and that, where differences are known to exist, the Australian Permanent Heads should clearly state what our position was and endeavour to pin down the New Zealanders to a precise statement of their position.
  3. STR has now produced the attached 'issues' paper3 for consideration of Australian Permanent Heads at this week's meeting. In our view it somewhat overstates the 'negativeness' of the New Zealand Officials' views. Although the New Zealanders obviously had difficulties in adopting a unified position, they did agree to the Joint Report which does recommend the 'hybrid' approach as worth further investigation. The STR paper also, and in our view unnecessarily, goes a bit too far in assessing underlying New Zealand motives, although we did get STR to agree to delete some references to this.
  4. The paper does (on page [7]) come up with some good recommendations as to what our attitude should be at the February meeting, specifically, that we should reaffirm that any future arrangement must be consistent with our Government's objective for a more competitive and outward-looking Australian industry, that any move towards closer economic association must be a gradual process with an agreed long term goal (i.e. not a single immediate step or maintenance of the status quo for New Zealand's benefit) and that we should ascertain the extent to which New Zealand is committed to these objectives and whether they would be prepared to modify some key policies (e.g. import licensing, export incentives) to achieve them and to establish what is negotiable in this area. The paper does, we think, raise a red herring in the form of possible Constitutional objections from the Australian States when, in fact, the objections are more likely to come from Australian industries wherever situated. In any case, there are procedures which we can invoke for consulting the State[s] when Treaties are under consideration.
  5. The STR paper also deals with some other matters which have been discussed as possible areas in which progress could be made, includin g revision of the ANZAC Pact, transport, co-operation in Third Country Markets, and energy. We are proceeding with the draft of a revised ANZAC Pact (which has been held up by the absence of Mr Pritchett overseas) but New Zealand is not enthusiastic. No further useful announcements seem possible on energy or joint marketing. On transport, the two Transport Ministers have just announced that a six month study of trans-Tasman shipping is to be undertaken and suggestions have been made that the Prime Ministers may wish to give this study some encouragement; it is difficult to see how they could do so.
  6. A record of conversation giving some New Zealand views on these matters in attached.
  7. It is recommended that at the meeting of Australian Permanent Heads this week, you recommend that our attitude to the meeting with the New Zealanders on 25/26 February should be:
    1. The Joint Report of the Working Groups represents a positive step forward and should be recommended to Ministers (the New Zealand side may well prove unable to agree to this)
    2. We should work together towards realisation of the 'hybrid' noted in the Report as being the most promising area for investigation, but one which should not compromise long term possibilities of a Customs Union approach
    3. The arrangement should be consistent with our objective of a more competitive and outward looking structure for Australian industry
    4. A definite time-scale should be set with a long-term goal
    5. We should ascertain precisely what modifications, if any, New Zealand is prepared to entertain to its tariff, export incentive and import licensing policies.

[NAA: A1838, 37011119118, xv]