Canberra, [October 1979]1

CONFIDENTIAL

Australia - New Zealand Economic Association The Foreign Policy Implications of Certain Options

INTRODUCTION

This paper examines the foreign policy implications closer economic association with New Zealand. It is not possible at this stage, however, to attempt a definitive study of the impact of such association. Although we know that other governments are taking a close interest in the possibility, there has been little reaction so far. Judgements made in this paper could therefore be subject to substantial revision. A further limitation is that, because of the existing common ground in foreign policy and the practice of close consultation between the two countries, it is difficult to identify precisely the different effects on foreign policy of the various possible forms of closer association. The paper therefore for the most part does not attempt to differentiate the effects of customs union, full free trade area, economic community or common marke.'

The paper is divided into two parts. The first part describes some general implications for the conduct of both countries' foreign policy in the event of closer association.

The second part examines the effects of closer association on our relations with important countries, on our position in multilateral organisations and in regard to defence and certain other, including international economic, issues. Some tentative comments are offered on the topical Pacific Community proposal.

PART I. GENERAL IMPLICATIONS FOR THE CONDUCT OF FOREIGN POLICY IN THE EVENT OF CLOSER ASSOCIATION

It is already assumed internationally, and in the main correctly, that there is a close identity of views on foreign policy matters between Australia and New Zealand. Third countries would indeed have difficulty enumerating differences in our foreign policies. The formation of a customs union, common market or an economic union would change this perception by degree only. In the course of time, Australia and New Zealand would be expected to speak more and more with one voice in international fora, particularly in those concerned with international economic issues. While we would not wish to give New Zealand a veto on our foreign policies, the considerations in the next section of this paper show that in many cases our policies would be affected by closer association. Both for appearances' sake and for reasons of substance, it would be incumbent upon us to try to achieve a harmonisation of views over a range of subjects. The similarity in attitudes, which is now reached in many instances without going through any formal channels of consultation, might need to be attained more systematically.

A number of implications are apparent. First, the rate of decision-making could be slowed down, even were we both to try to maintain a degree of independence in our policy. Second, the consultative process might require the creation of a new bureaucratic unit, probably located within an existing department, or the expansion of the missions in both capitals, or both. In the former case, it could be assumed that both Governments would wish to avoid establishing a secretariat with a Brussels-EEC flavour and with its propensity for growth. In the latter case, the attachment of additional specialist officers to the two High Commissions might become necessary. Looking even further ahead, common representation at some conferences and in third countries might prove to be acceptable and practical, or one delegation might speak for both. We might expect third countries to accredit, even more than they do now, one Ambassador to both countries and, as he would probably reside in Canberra, such a procedure would be resented by New Zealand.

In economic dealings with areas of the world in which New Zealand already has an established interest-Europe, the USSR, South East Asia, Japan, the United States and the Middle East-and in international economic fora, co-operation might be hard won, but it would at least rest on the foundation of a mutual interest in maximising access and minimising external protectionism. Such co-operation would inevitably have some impact on Australia- New Zealand rivalry in markets in which we both compete. In the political sphere, and in developing relations with countries in which Australia has much greater interests than New Zealand, the justification for a co-operative effort would be less obvious and, such effort, at least in the short run, not always desirable.

The complete convergence of our foreign policies would not be regarded as mandatory or desirable in either country and would be complicated by several considerations. Australia's perception of itself as a middle-ranking power would present New Zealand, which has a different view of its and our role in the world, with a dilemma. New Zealand would naturally hope to extend its political and economic reach in some geographical and policy areas by virtue of its closer association with Australia. At the same time, it would not want to be seen to be grasping Australia's coat-tails, both for reasons of national pride and because the Government and the bureaucracy would want to retain the freedom to take independent positions based on their own assessments.

The formulation of New Zealand's foreign policy in a customs union era could become very much a matter of resolving the difficulties inherent in these two contradictory forces: on the one hand the need to be seen to be acting in close accord with Australia and the recognition of the benefits joints policies would bring which a unilateral diplomatic effort might not; and on the other, the wish to preserve some independence of action and an image befitting a small power.

It is thus conceivable that domestic pressures in New Zealand could compel the Government to demonstrate the strength of its own muscle more vigorously (and unhelpfully, from Australia's point of view) than it would in the context of the present bilateral relationship. The 'big brother takeover' bogey is likely to persist long after the dust of the economic negotiations with Australia has settled. If the New Zealand domestic economy picks up and the national mood becomes more buoyant, anti-Australian sentiment unleashed by closer co-operation could become more strident in its expression. A visible argument with Australia on a question which was as far as possible unrelated to economic issues (domestic or global), and which did not have a direct bearing on the union, could be orchestrated with little domestic cost, and would satisfy a demand for New Zealand to prove it was still a sovereign and independent power.

One policy area in which co-operation between New Zealand and Australia could come adrift is the South Pacific. New Zealand's sense of uniqueness in a global context resides principally in its perception of itself as a developed South Pacific country with unique expertise and experience in dealing with other Pacific Island countries and their peoples. Disagreement could be over a minor matter and hence no more than irritating. On the other hand, if a future New Zealand Government felt the need to distance itself from Australia and to bolster its Pacific identity, it could promote more radical policies on environmental and security issues and create real difficulties for Australia, and for the ANZUS alliance. (The indications are clear already that the Labour Party would not slide easily out of its commitment to work towards a nuclear-free zone if it won office at the next elections.)

The strength of the forces which argued against containment of disagreements or even in favour of a head-on collision with Australia on a foreign policy issue, would depend on how bruised the New Zealanders felt at the end of the negotiating road. Even supposing the existence of a commitment in New Zealand to the cause of promoting convergent rather than divergent foreign policies, it seems very possible that, once the form of bilateral economic association has been worked out, conducting diplomatic relations with New Zealand could become more, and certainly not less, difficult.

There are likely as well to be occasions when Australia will adopt policies different from those of New Zealand, either because there was no time to consult or because New Zealand was unable to accept a particular policy Australia wished to espouse. Australia would not want New Zealand to have a veto over its foreign policy as a result of closer association; New Zealand would have a similar point of view. The attitude of both countries towards entering into any form of closer association should be

1. closer association (in all forms) would have implications for the overall foreign policy of both parties
2. closer association would require both parties to consult over foreign policy and to seek to harmonise policies in many respects
3. closer association would not require or necessarily lead to common bilateral overall policies.

PART II. DETAILED CONSIDERATION OF THE EFFECTS OF CLOSER ASSOCIATION IN AREAS OF FOREIGN POLICY

Japan

Although trade with Japan is important to both countries, it is a more important trading partner for Australia and New Zealand has shown less sensitivity than Australia in linking greater access for its primary products with Japanese access for its products. Little distinction is made by Japan between Australia and New Zealand in terms of its general foreign policy outlook. There is evidence, however, that Japan regards New Zealand as being in serious economic difficulties and deserving therefore of special treatment (which New Zealand would naturally be reluctant to jeopardise).

There is not likely to be much effect on Australia's relations with Japan as a result of closer economic association between Australia and New Zealand. Japan will assess carefully the implications for its trading and related interests of any closer association between Australia and New Zealand. However, if this could be presented as resulting in a stronger trading potential, Japan could perc-ive closer association as being in its overall interests and could be expected to seek to take full advantage of any new opportunities it presented. Closer association between Australia and New Zealand could also prompt Japan into taking greater account of Australian and New Zealand concerns when shaping its own regional policies. Closer association with New Zealand would require us to take New Zealand preoccupations into account in shaping our policies towards Japan.

European Community

New Zealand places more importance than Australia on maintaining cordial and undisturbed relations with the EC. Perhaps because it has more to lose, New Zealand has shown itself reluctant to be as critical as Australia has been on EC trade access questions.

Australia is looking to establish with the EC a mutually advantageous partnership based on a degree of interdependence. Unlike New Zealand, Australia is able to offer the EC such a partnership particularly through encouraging investment and the use of Australian resources.

Closer ties with New Zealand could in theory strengthen our negotiating position with the EC through the development of a joint approach. It is not yet apparent, however, that both countries could easily arrive at a joint negotiating position because we both compete in the EC for similar markets. Moreover, New Zealand may expect Australia to argue its case for continued access to Europe. If so, our position could be made more difficult if the EC were to interpret closer union as relieving it of some of the burden of assisting New Zealand.

A closer relationship with New Zealand seems unlikely to affect the Community's attitude to our desire for closer access to the Community's political co-operation machinery.

USA

Superficially, in the major areas of foreign policy, economic, defence and security, in which the United States is of the greatest importance to both Australia and New Zealand, it might be expected that we would have similar interests to New Zealand. In practice this is not always the case. Because of our shared interest in the United States market, for example, the Australian and New Zealand positions in the MTN have been competitive to some extent. Civil aviation is another area involving the United States where our views have been at variance with New Zealand.

Publicly, the United States would probably feel obliged to endorse moves towards closer and more comprehensive co-operative arrangements between its two ANZUS allies. Privately, however, the United States may have reservations based on the following considerations:

1. the prospect that we may be seeking to create another trading bloc, designed to extract concessions from major trading partners including the Americans; this would further erode the open and free trading system to which the United States remains committed;
2. the likelihood that Australia and New Zealand, bargaining together, might be able to exert greater leverage (on, most obviously, meat) than we can do separately;
3. the suspicion that closer economic association might mean that both Australia and New Zealand will tum to each other rather than adjust their economies in response to requirements/demands from other regional countries (we would have to refute this point which could be taken by ASEAN and others also).

In the event that we entered into closer relations with New Zealand, these suspicions would remain and would require careful handling in our relations with the United States.

The United States position might, however, depend on its assessment of New Zealand's economic prospects. If the United States regards closer economic association as a prelude to a customs union, etc., and if it considers that option to be a means of bolstering the New Zealand economy, the Americans might endorse the idea. They could also think that an associated Australia and New Zealand could play a more effective and responsible role in Asia and the Pacific, including (inter alia) a role as a proxy for United States interest.

Closer association, particularly a customs union or economic community would affect Australia's relations with the United States in certain important areas such as tariffs and possibly civil aviation.

The increasing attention being given in the United States, by Presidential candidates and Congress alike, to the notion of a North American common market (with Canada and Mexico) should be noted in this context. The scheme suggests that the United States may be prepared to qualify its opposition to regional trade (and energy) blocs, but only where its vital national interests are directly engaged.

Canada

Australia, New Zealand and Canada have similar political and social heritages and therefore tend to have similar views on international issues, although the regions of priority interest are obviously different for each. Closer economic co-operation between Australia and New Zealand is unlikely to change significantly the core of understanding among the three countries. In fact it is likely that the Canadians would encourage closer association if it were clear that there would be benefits for both Australia and New Zealand.

Closer economic association may have some implications for Australian and New Zealand trade with Canada (e.g. meat) but such matters as allocation of quotas could presumably be worked out between Australia and New Zealand without the overall relationship of both countries with Canada being affected.

East Europe

Closer economic association with New Zealand raises the possibility of co-ordinating some aspects of our policies and practices in dealing with the USSR and East Europeans. Generally, we and the New Zealanders encounter similar differences and difficulties in our economic dealings with the centrally-planned economies of Eastern Europe, and it would seem sensible if we did more to exchange notes and to co-operate within reason in some of our activities in this regard. Closer co-operation in our trade promotion and assessment activities is perhaps one area for consideration. Another may be in the area of the control and surveillance of the USSR and East European presences in our countries (which increasingly will become a problem as our respective economic relations with them grow). On their part, the USSR and the East Europeans would probably welcome more co-ordination between Canberra and Wellington. They already find it convenient, for planning purposes, ministerial and delegation visits, to draw a loose association between us.

ASEAN

Australia's relations with ASEAN and with the individual ASEAN countries are far more substantive than those of New Zealand (e.g. levels of trade, aid, diplomatic representation etc). in addition Australia is a more extensive market for ASEAN products than New Zealand. Accordingly the potential for friction in relations with ASEAN are much less for New Zealand. The limitations of the New Zealand market are implicitly acknowledged by ASEAN which does not press as hard for greater market access there.

Central to ASEAN countries' reaction would be the impact on their trade prospects. Should Australian - New Zealand economic co-operation make it more difficult for ASEAN products to enter Australia- New Zealand (e.g. by way of higher or more selective common tariffs), we could expect a negative reaction which could adversely affect not only Australia's trade relations with the ASEAN countries but also our overall political relations. ASEAN countries could perceive such a move as a partial withdrawal by us from the region, a shoring up of a Western enclave and a symbolic retreat into the past by the region's two developed countries. (It would not in any case be in either Australia's or New Zealand's economic interest to retreat into greater protectionism against ASEAN. To do so would be economically inefficient and would slow ASEAN economic development which ASEAN, Australia and New Zealand all agree is essential for political stability in the region.)

It can therefore be expected that the ASEAN countries will closely examine the nature of any increased economic co-operation with New Zealand and its likely implications for them.

In recent talks between New Zealand and ASEAN officials, the latter expressed a keen interest in the effects on ASEAN of any economic association between Australia and New Zealand; they were assured by New Zealand that any notion of high protective barriers should be rejected.

There are grounds for believing that, if economic satisfaction for ASEAN were guaranteed, ASEAN countries such as Indonesia would welcome closer association for regional security reasons. In presenting to ASEAN the case for Australia- New Zealand closer economic co-operation, we should not overlook the political benefits for ASEAN.

We should be sensitive to ASEAN concerns and will need, with New Zealand, to keep them informed at appropriate stages of developments so as to minimise the risk of misunderstandings. We should not let any new relationship with New Zealand lessen our interest in ASEAN.

South Pacific

The South Pacific is an area of special importance for both countries. However, New Zealand continues to regard itself as having a greater knowledge of, and influence in, the region and sees Australia's efforts there as inexperienced. Differences of opinion on regional matters are not unusual. Australia's pattern of representation is growing and our aid program-even excluding PNG, now exceeds that of New Zealand. We should pay special attention to New Zealand sensitivities on South Pacific matters.

Any measures which led to increased and sustained prosperity in Australia and New Zealand, which did not worsen the relative position of Pacific Island countries, should be to the latter's advantage, since it could increase Australia-New Zealand's capacity to provide a wide range of assistance for the Island countries. It could, of course, reduce the capacity of the Island countries to play off Australia and New Zealand against each other, as they sometimes seek to do.

Closer trans-Tasman economic co-operation could cause some pressures for equal treatment from Papua New Guinea and other South Pacific Island countries. Australia and New Zealand are currently negotiating a common trade agreement to give [South Pacific] Forum island states comprehensive, progressive duty-free access to their markets. This will include both processed and semi-processed manufactured goods. The Islanders (or their spokesmen) will want to be satisfied that Australian -New Zealand co-operation does not deprive them of actual or potential markets. There could be problems for Australia in particular in respect of certain agricultural products for which New Zealand now provides a significant market for the smaller Central Pacific States (e.g. pineapples, tomatoes, bananas, taro, sugar, citrus, passion fruit, avocado). There could be pressures for us to ease our quarantine and other barriers for such products.

There is some evidence that the Island countries are suspicious of what they consider to be collusion between Australia and New Zealand as regards the South Pacific generally. Such suspicions could increase with progress towards closer Australian - New Zealand economic association. We doubt, however, if the Islands will suffer or will believe that they have suffered as a consequence.

The degree to which New Zealand is prepared to co-operate with Australia on political issues could also be affected by closer economic association. New Zealanders may feel that with closer economic association they would need to demonstrate more clearly their political independence from Australia; they might consider the Pacific area as a most advantageous region for such demonstrations. More 'radical' New Zealand attitudes towards French Pacific territories, for example, might exacerbate our present difficulties.

China and the Koreas

We would expect China to react favourably to a closer economic relationship between Australia and New Zealand, with its concomitant of a closer political relationship. China could be expected to interpret a closer ANZ partnership as strengthening anti-Soviet alignments and therefore supporting its own interests in the region. A strengthened ANZ relationship would, we expect, prompt the Chinese to take somewhat greater account of our joint views in shaping its own regional policies. Closer association would not, however, necessitate any changes in our own China policy to accommodate New Zealand.

The ROK tends to take account of its political relations with other countries in terms of their attitude towards the DPRK, and may fear that a closer association between New Zealand and Australia could influence New Zealand to adopt a position nearer Australia's on Korea. A closer association between Australia and New Zealand would limit opportunities for the ROK to play one against the other economically, and to a lesser extent politically.

China and the ROK would be displeased if the closer association led to an increase in the level of protection for certain manufactures, through a revision of external tariffs and/or quotas.

It is unlikely that Taiwan or Hong Kong would feel that their relations with Australia and New Zealand would be affected by a partnership between the two.

Indo China

In general terms, both Governments have pursued similar policies towards Indo China. The principal difference is New Zealand's softer line on Vietnam and on Kampuchea. New Zealand has also shown itself less concerned about the Indo Chinese refugee problem and has adopted a lower profile than Australia in criticising Vietnam's responsibility for the outflow. These differences are not in themselves of great significance. Closer economic association between Australia and New Zealand is unlikely to have any important effect on foreign policy towards Indo China.

Middle East

On Middle East matters New Zealand has been prepared to take a marginally more pro-Arab stance (mainly in United Nations voting) than Australia. This does not seem to have had demonstrable effect so far, but it could have eventual trade repercussions in the event of closer economic association, particularly as we are in some respects trade competitors in the region.

Latin America

New Zealand's relations with Latin America are, like Australia's, limited. Politically there is no reason to suppose that closer association with New Zealand would have any appreciable effect on Australia's relations with Latin American countries which in any case tend to associate New Zealand with Australia.

New Zealand and Australian trade interests in Latin America do not overlap to any great degree, although in the case of dairy products (e.g. dried milk, butter products) there is potential for some competition for sales to such countries as Peru and Venezuela.

Africa

Neither country has important interests in Black Africa itself. The significance of the region for both lies mainly in the wider foreign policy implications of respective attitudes to Rhodesia and apartheid in South Africa. Australia's position on Southern African questions has been more popular in the third world. New Zealand has had difficulties in its relations with black African countries over sporting ties with South Africa. Closer economic association is unlikely to affect either side's relations with Africa, but we would need to ensure that we did not inherit the odium of some of New Zealand's African policies.

Defence

In defence, the ANZUS Treaty forms the fundamental basis for co-operation in such matters as defence procurement and joint exercises. There are of course differences which occur between Australia and New Zealand from time to time over intelligence interpretations, doctrine and harmonisation but policies remain essentially very close. In spite, however, of a strong mutuality of strategic and defence interest, New Zealand faces a lesser spectrum of contingencies than that which Australia faces-and faces them generally in the confidence that its military response would be likely to occur in association with Australia rather than independently. New Zealand force structure planning and levels of defence expenditure are shaped accordingly.

Closer economic association would not (except in the event of total economic integration) have very immediate or very great effects in the defence area. If a closer economic relationship were to improve New Zealand's economic health and rate of economic growth, the restraints on New Zealand's defence expenditures in recent years (New Zealand's defence outlays have fallen by about 18 per cent in the last five years) might be eased. This may in tum lead to a gradual improvement in New Zealand's force capabilities, and would be advantageous to Australia in that it would enhance New Zealand's capacity to contribute effectively to the realisation of shared Australia - New Zealand defence policy objectives.

A further consideration is that if New Zealand industries were able to gain, through a reduction in tariffs on items imported by Australia from New Zealand, a more competitive position in tendering for Australian defence equipment, cost savings might result to Australia in the purchase of some of these items.

The effect on Australia's defence policy of total integration of the Australian and New Zealand economies would be increased interdependence between Australia and New Zealand and therefore New Zealand would be more strategically significant to Australia. This would be a development which would have to be taken into account by Australian defence planners.

Immigration and Refugees

There are some differences in the immigration and refugee policies of the two countries. They stem in part from New Zealand's special relationship with the Polynesian Islands-including special work permit schemes for citizens of Tonga, Cook Islands, Niue and Western Samoa-but also from New Zealand's low-level migration policy and its visa abolition agreements. Australia tends to give more attention to entry from South East Asia than does New Zealand. Australia gives greater emphasis to Indo Chinese refugee resettlement.

Progress towards closer economic association would not necessarily affect Australian or New Zealand immigration policies. It could, however, affect the resolution of some of the existing problems on trans-Tasman travel policy. It might also give rise in the South Pacific to expectations of closer association in other fields and could thus generate pressures from the Island States for wider admission of their nationals to Australia. Some of these countries have already sought special entry concessions to Australia for their nationals and this trend could be expected to increase. There could be pressure for admission criteria similar to New Zealand's. Conversely, closer association might appear to countries of South East Asia as a regrouping and possible reaffirmation of white European identity. It might become necessary to give greater emphasis to the non-discriminatory basis of our immigration policy.

In the context of closer association there would be a need for both Governments to study the need for harmonisation of immigration policies.

It is unlikely that increased co-operation with New Zealand would greatly affect either country's policy towards refugees. It is possible that any increase in economic strength would lead to some increase in pressures from UNHCR and the international community for a greater resettlement effort. This would pose greater difficulties for New Zealand than for Australia and any additional burden-or the onus for resisting it-would most likely fall on Australia.

Energy

In a customs union arrangement, or some closer form of economic integration, New Zealand could perhaps seek to have Australia undertake more direct or indirect oil supply obligations towards New Zealand in the event of any major future supply crisis. This seems unlikely, however. Both countries are members of the IEA and therefore have access to the IEA Emergency Oil Sharing Systems. Beyond this, a fuel supply crisis would generate considerable domestic concerns and as a consequence the Australian Government would probably not wish to be seen to be diverting scarce supplies from Australia at such a time.

Increased economic co-operation could lead to calls for co-ordination of energy policies. Co-ordination of coal utilisation and energy research and development policies could have potentially favourable implications. So too, of course, would co-ordination of policies regarding natural gas exports and the attraction of energy-intensive processing industries. We doubt, however, whether satisfactory co-ordination of these policies could be achieved, especially as there is an international surplus of natural gas and a limited number of potential energy-intensive processing projects available. Australia and New Zealand are likely to be competitors in these areas and although a customs union would not necessitate any changes in either country's policies, any attempt to establish an economic community or a common market would create interest in developing similar energy policies.

Development Assistance

If there were to be a larger degree of economic co-operation between Australia and New Zealand, it might be argued that a corollary of such association would be greater co-operation on development assistance matters. For a number of reasons, however, it is felt that this may not be the case in the short term.

Significant contact already exists between Australia and New Zealand in relation to official development assistance matters. Consultations on overseas development assistance issues, endorsed in the Nareen declaration,² have been held annually since 1977. The declaration also makes provision for short-term exchanges of aid officials between the two countries.

In addition, both ADAB and the External Aid Division (EAD) of the New Zealand Ministry of Foreign Affairs have agreed to designate an officer to keep an eye on co-operation between Australia and New Zealand. Both countries agree that informal contact should be encouraged. On the multilateral aid side, New Zealand is a member of the Australian constituency at the World Bank.

However, apart from a possible increase in staff exchanges, the current level of co-operation is probably an optimal one for the time being. An economic union would have to be made and truly established as a fact of life before a greater degree of co-operation would be possible in the South Pacific at least without raising the suspicions of countries in the region.

If ultimately Australia and New Zealand were to move to an EEC-type arrangement, it is doubtful that initially there should be a concentrated effort to run a joint aid program, in addition to separate programs, as is currently done by the EEC. Such an exercise would require significant funds to have any real effect. However, most funds currently going to multilateral bodies could not be diverted to subsidise the activities of such an EEC-type commission. Furthermore, nearly 80 per cent of both donors' programs is disbursed on a bilateral basis. Each seeks to include an identifiable association with most of the aid provided. In addition, with both Australia's and New Zealand's aid declining in real terms there would be a reluctance to place scarce resources into a common pool. The probability of additional funds being made available by either government for an EEC-type aid program is remote in the short term.

In the long term, however, as Pacific nations develop relations with whatever form of closer economic co-operation between Australia and New Zealand evolves, we will need to look closely at our respective aid programs. It may well be that new forms of aid will be required to match the status of the economic association (e.g. Lome-type arrangements³).

Civil Aviation

Australia and New Zealand have considerable common civil aviation interests in relation to the trans-Tasman route, but in relation to other countries there are significant differences based essentially on both countries having their own national carriers with competing commercial interests.

Leaving aside commercial competition, both countries have basically the same overall international civil aviation aims, i.e., to enable the public and freight to move by air as easily, efficiently and cheaply as possible. However, it cannot be assumed that moves to closer economic association would lessen the wish of each country to retain the separate identity of its own national carrier. Thus unless the moves to closer economic association were to lead to a decision to amalgamate both countries' national carriers (which at this stage seems unlikely), it is possible that both countries would continue their differing (and often competitive) activities in relation to international civil aviation.

Antarctica

There is some difference of emphasis on Antarctic resource issues. New Zealand had tended to be wary of any approach that, in its estimation, might create tensions detrimental to the Antarctic Treaty. It has therefore tended to be less assertive than Australia about protection of claimants' sovereignty positions in discussions of Antarctic resource regimes. Closer association might be expected to broaden the already considerable degree of co-operation and co-ordination of our Antarctic policies with New Zealand. It could for example open up prospects for closer co-operation in regard to respective Antarctic expedition activities in the Ross Dependency and that part of the AAT which adjoins it (which part is not presently the subject of any Australian expedition activity). Opportunities might also open up for shared utilisation of shipping resources and more extensive co-ordination of the air transportation arrangement we each presently have with the Americans (including the possibility of re-appraising the extent to which we each need rely on United States for transport facilities). Closer Australia - New Zealand economic co-operation might also have implications for any potential Antarctic mineral and oil exploration in our respective claimed areas. In this respect indications that the Ross Sea area could be prospective for oil are significant.

Law of the Sea

In Law of the Sea matters there are different emphases between Australia and New Zealand on the rights of coastal states to control passage through territorial seas, revenue sharing in respect of the continental shelf beyond 200 miles, the financing of the 'Enterprise' ⁴ and the control of the production of the seabed minerals.

UNCLOS is likely to have concluded before the effects of closer economic association are felt, and the different emphases which currently exist are likely to have been subsumed in the convention that emerges from the Conference. There will be scope for harmonisation of policies on the control and development of our respective continental shelves and exclusive resources zones, for example oil exploration and exploitation activity, surveillance and relations with distant water fishing nations. There will also be scope for a co-ordinated approach to the maritime policies of the countries of the South West Pacific. There will be similar scope with respect to co-ordination of policies towards the International Sea-Bed Authority to be established under a Law of the Sea Convention. None of the options canvassed would require the adoption of identical policies on Law of the Sea matters.

Fisheries

Australia and New Zealand are to some extent competitors in attracting foreign fishing access and in their potential as stepping-off points for southern ocean fisheries. Both countries however have recognised that other nations with distant water fishing interests will seek to play off one against the other, and for this reason we have kept each other informed on how we are handling foreign fisheries requests.

The fisheries policies of both countries, although not formally affected by closer association, would certainly require some co-ordination in the event of the establishment of a common market or economic community.

NIEO Issues

Both countries perceive that their interests sometimes suffer as a result of being lumped in with the developed world in the familiar North/South dichotomy, although the degree of disadvantage varies between the two countries, and according to the issue. At the most recent UNCTAD V meeting in Manila, New Zealand kept closer to the general Group B ⁵ position than did Australia, but on the other occasions, the reverse has been the case and New Zealand has been more ready than Australia to consider joining G77.⁶

This follows from an increasing New Zealand inclination to carve out for itself within Group B a distinctive position as one of the 'least developed of the developed countries', seeking special arrangements because of this position (e.g. on assessed contributions to the Common Fund). Although Australia cannot claim such a position (because of GNP per capita income, growth rates, etc.) it too has become increasingly concerned to identify opportunities where it can pursue its own particular interests on NIEO issues. Because of the Group system of negotiations on North/South issues, however, there seems little alternative now to continue membership by both countries of the 'developed country' negotiating group in international fora.

The implications of some form of closer economic relationship between Australia and New Zealand on the two countries' approach to NIEO are not substantial. Our impression from talks with New Zealand officials is that they would welcome closer collaboration between our two countries in developing our attitudes on NIEO issues in any event.

Closer economic association would further strengthen the overall leverage that could be exerted to project Australian and New Zealand interests in North/South negotiations over the NIEO, and in approaching particular issues (such as reduction in agricultural protectionism) in developed country forums like the OECD. The greater the degree of economic union the less the likelihood of tension over competing and conflicting market interests, although our positions in NIEO negotiations do not always coincide.

It follows from the above that we see no major difficulty with an intensification of co-operation with New Zealand on NIEO issues. Indeed we can see some positive advantages in such intensification by:

• promoting consistency of position on NIEO issues in international bodies in which we traditionally alternate membership with New Zealand
  (e.g. ECOSOC, UNDP) thus noticeably reinforcing particular interests in these forums;
• strengthening our ties with Pacific developing nations on those NIEO issues of particular concern to them, e.g. in relation to special provisions for island developing countries;
• encouraging the development of arrangements where we can benefit from leverage exerted in common with New Zealand and other middle-level countries, including others in the 'South', who depend heavily on the export of primary commodities such as minerals, energy, foodstuffs-in relation to trading arrangements, investment and access to technology.

Closer co-operation on NIEO issues would necessarily develop over time and need to take account of New Zealand's perception of advantages for its own position. Possible steps which could be considered to give further substance to such co-operation might include continuation of regular consultation with New Zealand (at both Ministerial and officials' level) on NIEO matters with the objective of identifying issues on which a joint definition of approach would be desirable and opportunities existed for initiatives in support of this approach.

Pacific Community

The Pacific Community proposals are tentative and exploratory at this stage and neither Australia nor New Zealand has developed a detailed policy position. However, it can be said that closer economic association with New Zealand would increase the need for a harmonisation of our respective policies towards the Pacific Community proposals. The development of closer economic association with New Zealand and substantive development of the Pacific community could overlap and, in time, heighten the need for our joint consideration of the implications of the one for the other. It would seem most unlikely that potential members would view increased Australia - New Zealand co-operation as incompatible with the aims of any wider regional community. Indeed, Australia and New Zealand could be expected, through their own experience of economic co-operation, to play a more significant role in the Pacific community than might otherwise have been the case.

Multilateral Organisations

One element which would require detailed consideration would be the effect on Australia's position in rotation for membership of United Nations bodies. However, the close relationship among the Nordic countries does not seem to have affected their ability to serve individual terms on multilateral bodies.

One advantage of a closer association might be the usefulness to us of formal 'load-sharing' arrangements-i.e. single delegations representing both countries at certain conferences. (Equally, load-sharing could be a development which, for political reasons, we-and sometimes New Zealand-would want to avoid in some cases).

A number of Commonwealth countries are involved in economic or political associations and in no case has this markedly affected their capacity to be effective contributors to the Commonwealth. Examples are the United Kingdom's EC membership, and the Caribbean members of CARICOM.

As to Australia's membership of international organisations, and perceptions of Australia in political forums of which it is not a member (e.g. the NAM), we see relatively few implications arising from a closer economic association with New Zealand. Indeed, many countries already assume that Australia and New Zealand consult closely on political matters. From the multilateral political point of view, our most important concern is how the Third World perceives Australian policies on key issues, such as southern Africa, the Middle East and so on. We would want to ensure that closer association did not lead to us being associated with some of New Zealand's unpopular policies.

[NAA: A1838, 37011/19/18, vii]

• 1 The document is undated. An earlier draft was sent to thirteen Departments on 25 September 1979 for comments. On 3 October the 'latest draft' was sent to all Foreign Affairs Assistant Secretaries for further comments. That document is identical to the one published here.
• 2 Document 1.
• 3 The Lome Convention was an agreement, first signed in 1975, between the European Union and African, Caribbean and Pacific (ACP) countries to provide development assistance to the ACP states.
• 4 Not identified.
• 5 i.e. the developed countries.
• 6 The Group of 77 at the United Nations (G77) assists developing countries to negotiate on economic issues in the United Nations.