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Wednesday, 21 August 1985
Page: 113

Senator ARCHER(5.31) —I wish to take this opportunity to discuss briefly some of the conclusions in the Senate Standing Committee on Industry and Trade second report into the closer economic relations trade agreement between Australia and New Zealand. At the outset, let me say that the New Zealanders have developed a far more effective negotiating style. As a result, the New Zealanders have been rewarded for their efforts under the CER trade agreement. On the other hand, in the lead-up to and since the commencement of the agreement, Australians have taken a rather indifferent approach to CER. Unfortunately, for many industries and regions, this has meant that CER has only become an issue after certain New Zealand products have begun to have an impact on the Australian market. This has led to a rather negative and at times adverse reaction by Australians to CER. This only highlights the fact that had Australia spent a little more time and effort and generated more community interest and discussion during the lead-up to CER, it is quite possible a number of problems and concerns that are being raised may have been avoided or at least minimised. We cannot turn back the clock, but what Australia now has to do is to win back some of the lost ground and ensure that the agreement does precisely what it was meant to do.

The four main objectives under the CER trade agreement are: To strengthen the broader relationship between Australia and New Zealand; to develop closer economic relations between member States through a mutually beneficial expansion of free trade between New Zealand and Australia; to eliminate barriers to trade between Australia and New Zealand in a gradual and progressive manner under an agreed timetable and with a minimum of disruption; and to develop trade between Australia and New Zealand under conditions of fair competition. The nature and intent of the agreement are quite clear. However, in practice, the Committee believes that some of these objectives are not being met.

The apparent eagerness by both parties to replace the ailing New Zealand-Australia Free Trade Agreement with a more comprehensive trade agreement resulted in the implementation of CER with a large number of modified arrangements as well as a number of deferrals. This decision has caused, and will continue to cause, a misallocation of resources and this has placed added burdens on those sectors which are already operating in a completely free trade environment.

CER lacks a plan or strategy for the future development of industries and regions in both countries. In particular, no mechanisms are in place to evaluate whether or not the objectives are being achieved. It appears that both governments have opted to wait to see how trade develops and, at the same time, both are hoping that there will be very few transitional problems at either an industry or regional level. The Committee, however, sees the need to have in place clearer guidelines which incorporate general industry and regional outcomes. If both parties are predicting significant benefits from CER, it would seem logical to ask where these benefits will occur.

Australia and New Zealand have begun a process of freeing up trade across the Tasman at a time when the rest of the world is still putting in place more obstacles to trade. Even though both Australia and New Zealand are members of the General Agreement on Tariffs and Trade, the Committee finds it most disturbing that the long term success of CER could be severely jeopardised by the inability of GATT to enforce its rules on some of the more powerful member nations.

The Committee is not convinced that CER as it presently exists is providing a climate of certainty from the point of business investment on both sides of the Tasman. On the contrary, the Committee believes that one of the most fundamental uncertainties surrounding the future success and direction of CER is just how far and how quickly New Zealand will proceed with the dismantling of its global import licensing system and whether or not this system will be replaced with a new system of tariffs.

The Committee would therefore have expected consideration of the following: An assessment of whether or not CER would provide the right sorts of market signals to ensure the expansion of both countries' efficient and low cost industries; a full documentation of the types and levels of assistance that will still be in place in both countries after the staged removal of tariffs, quantitative restrictions and export incentives; and the commissioning of a number of impact studies for the various industry sectors in order to gain a clear, but not necessarily precise, picture of the likely areas of expansion and contraction.

Turning specifically to some of the shortcomings under CER, the Committee believes firstly that the safeguard provisions as they presently exist offer very little recourse to any party who may be suffering geniune hardship and injury arising from CER. Secondly, anti-dumping and countervailing inquiries continue to be lengthy, the determination of normal value and injury still causes concern and the additional consultative processes that have been built into CER appear to exacerbate matters further. Thirdly, other safeguard provisions, namely articles 17 and 22, are very vague and ineffective and therefore appear to offer very little comfort to anyone who wishes to pursue a genuine grievance. Fourthly, other articles under CER covering such aspects as intermediate goods, rules of origin, et cetera are reactive rather than trying to eliminate the source of the problem.

Since the commencement of CER, exchange rates have fluctuated, both suddenly and widely. From 1980 to the beginning of this year, New Zealand's real exchange rate has fallen relative to Australia's, thus enhancing its competitive position. In the past few months the pendulum has swung the other way. The July 1984 20 per cent devaluation of the New Zealand dollar caused a great deal of concern in Australia because this action made many goods in Australia virtually uncompetitive overnight. The adoption of floating exchange rate policies by both governments has certainly removed the possibility of any further major one-off currency realignments. However, it is difficult to say whether or not the continual daily adjustments to each currency will be less disruptive to trade compared with earlier exchange rate policies of both countries. In particular, because our exchange rates are largely determined by factors exogenous to CER, trans-Tasman trade is likely to be disrupted from time to time.

Finally, whilst it may seem that the Committee is being highly critical of many aspects of the CER agreement, it nevertheless believes that if both countries want to fulfil the CER objectives, it would appear that more active consideration must be given to the issues raised in the Committee's second report and, hopefully, that these matters will be resolved as soon as possible and not be put to one side until the 1988 review.

I commend the report to the Senate. I would like to take the opportunity to express my gratitude to the many people who have made a deep contribution to the preparation of the report and the job that is ahead of us, particularly Mr Peter Keele, the Secretary of the Committee, and the Committee staff. The preparation of the report has been a great effort. We have had complete co-operation from people from both sides of the Tasman who are highly desirous of getting the CER agreement working as it was intended to work.

Debate (on motion by Senator McIntosh) adjourned.