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Wednesday, 12 February 1986
Page: 205

Senator CHILDS(5.40) —I wish to take this opportunity to discuss some of the conclusions from the third report of the Senate Standing Committee on Industry and Trade into the closer economic relations trade agreement between Australia and New Zealand. This report completes an exhaustive examination of all major traded primary products across the Tasman. The first thing to note is that CER should not be seen as providing only greater access to one another's markets for agricultural goods. The Committee believes strongly that CER will generate more gains for both primary sectors if both countries use the agreement as a basis for the development of third country markets. CER should be used in such a way as to maximise our comparative advantages in primary industry commodities by seeking new markets or niches in markets within the Pacific Basin region and as a supplier during the off-season to North America and Western Europe.

Having said that the Committee still believes that there are a number of areas where both Australia and New Zealand could develop significant levels of trade in selected primary products. The first thing to note is that both Australia and New Zealand are major exporters of a number of primary products. This makes us direct competitors in the world market as well as potential or real competitors across the Tasman. The balance of trade in agricultural goods is very much in New Zealand's favour and will continue in that way for the medium to long term.

During the course of the inquiry a great deal of attention was given to the issue of fluctuating exchange rates and the impact that these have on both bilateral and multilateral trade. The Committee noted that the adoption of freely floating exchange rate policies by both countries since the commencement of CER had not resulted in exchange rate stability. However, this is not the result of CER. Since July 1984 the Australian dollar has risen from $NZ1.30 to reach an all-time high of over $NZ1.70 and then plummeted throughout 1985 to reach a low of around $NZ1.12 to $NZ1.15 by mid-November 1985. Australian primary industry groups have questioned the lack of recourse under the agreement to take account of government intervention in foreign exchange markets. In particular, they question just how the objectives were to be achieved and the safeguard provisions were to apply to the rural sector. The Committee believes that CER will not achieve its objectives if trans-Tasman trade is to be based solely on the vagaries of relative values of our currencies. Both sides need to sit down and reach agreement about the ways to minimise disruption of trade arising from wide and sudden fluctuations in our exchange rates. In addition, the Committee has recommended that the impact of fluctuating exchange rates on trade be referred to the Economic Planning Advisory Council for examination. CER has exposed some weaknesses or lack of expertise in Australia's ability to market many of its agricultural products. In particular, New Zealand has shown Australia that successful marketing of agricultural products these days does not simply depend on producing goods at a competitive price but rather targeting markets with goods that are especially grown or processed to fill a particular niche in a market.

Turning to another aspect of the report, the Committee noted that differences in policies pursued by Australia and New Zealand can give rise to situations where people have claimed that trade is not being conducted on the basis of fair competition. For example, the continuation of any form of export assistance on either side of the Tasman will always confer an unfair advantage on the exporter to the detriment of the local producer. Fortunately, since the commencement of CER, there have been moves by New Zealand to remove many of its support schemes and concessions that have conferred a high level of assistance on specific primary products. In particular, the most contentious scheme from the point of view of Australian producers, the supplementary minimum price scheme has been terminated.

Turning to some of the general conclusions of the Committee's third report, the Committee drew attention to the following: The need to remove all forms of export assistance across the Tasman; the inadequacy of the safeguard provisions in their present form for agricultural products, particularly in the horticultural sector; the need to develop third country market development programs jointly; and the need to follow up the regional impact of increased import competition from New Zealand, particularly in the area of processed fruit and vegetables.

With regard to particular commodities, the Committee made the following specific findings: The pea-growing industry has suffered some disruption since the commencement of CER; the removal of the embargo on the importation of fresh potatoes for processing did cause a great deal of concern within the Australian potato industry; lack of earlier access to golden jubilee variety of sweet corn did result in a steady build-up of frozen sweet corn imports but these came from the United States, not New Zealand; the export of Australian tomatoes to New Zealand is still limited to only one variety and is still subject to fairly tight controls even though Fruit Distributors Ltd ceased to hold exclusive franchise as from 1 July 1985; the sudden removal of the 20 per cent sales tax on imported New Zealand fruit juice concentrates added to the adjustment pressures faced by the local industry, particularly in Tasmania; the existence of such schemes which take advantage of differences in external tariffs, or by-law or duty drawback provisions are not in the spirit of CER; any attempts by New Zealand to export sheepmeat to Australia in 1986 will be strongly opposed by Australian sheepmeat producers; Australia's ability to market both its sheepmeat and beef to third markets will be of far greater consequence compared to the future prospects of increased trans-Tasman trade in such products; New Zealand has been far more aggressive with respect to its export of meat to third country markets and has been prepared to enter into barter deals; and unrestricted free trade in dairy products across the Tasman would not bring about a situation of fair competition due to existing major differences in the industry assistance programs of both countries.

Finally, the major recommendations in the Committee's Third Report include the following: First, all major rural industry sectors take the opportunity to review the past 12 to 18 months and develop more appropriate industry strategies to deal with any future increased competition from or with New Zealand; secondly, the government directs the Economic Planning Advisory Council to study the impact of exchange rate fluctuations on Australia's ability to develop and maintain specific export market activities; thirdly, a joint examination into the possible abuses arising from differences in external tariffs, access to by-law or duty drawback be undertaken with a view to eliminating such practices; fourthly, both governments establish a panel to explore and identify areas of potential joint interest and co-operation with respect to third market country development; fifthly, the need to formalise procedures to avoid the likelihood of counterproductive trade wars across the Tasman, particularly in goods that are facing unfair competition from third countries; and sixthly, all export assistance programs between Australia and New Zealand be eliminated.

In conclusion, the success of CER, particularly from the point of view of both countries' primary industries, lies not so much in the ability to increase trade in these products across the Tasman, but the willingness of both countries to co-operate in a number of areas of mutual interest to pursue third country market development. I commend the report to the Senate.