216 Keane to Curtin

Letter MELBOURNE, 6 July, 1944

I enclose herewith a brief report of my observations during my recent visit to New Zealand.

It is suggested that it be treated as a private communication for your information only.

R. V. KEANE

Enclosure (extracts)

3 July 1944

MINISTER FOR TRADE AND CUSTOMS GENERAL REPORT ON VISIT TO NEW ZEALAND

1. My stay in New Zealand was very brief and discussions with the New Zealand Government limited to four days only. I arrived in Auckland on Saturday afternoon the 24th June and left for Wellington the following day. I left Wellington again on the 30th June and caught the flying-boat from Auckland on 3rd July.

[matter omitted] [1]

6. TRADE PROSPECTS AND PROSPECTS OF MAKING NEW TRADE AGREEMENT:

The opinion was expressed by a number of individual people that the present Government would make a more favourable trade agreement with Australia than any Government which might be formed from the ranks of the present Opposition, and that if such an agreement was to be consummated, steps should be taken to set about negotiations. My appraisement of the prospects of making a trade agreement favourable to Australia is that the possibilities are remote. I am not saying that it would be impossible to do so.

However, the important factors at present total up to adverse prospects. Sentiment in favour of the Old Country is traditional with New Zealand people. Its underlying intensity has to be measured on the spot if a full appreciation of it is to be obtained. The long term dissemination of the belief that New Zealand's economy and prosperity is almost solely dependent upon acceptance by the United Kingdom of New Zealand's exports, with the implied obligation on New Zealand's part to give a clear-cut and effective preference to United Kingdom products, has established an ingrained belief in the necessity to acknowledge no other economic faith. Whilst there is an appreciation of Australia's contribution of commodities required for essential purposes which have not been available from other sources, Australia is still regarded as a two-way competitor. Firstly, she is regarded as a powerful competitor against New Zealand in the United Kingdom market. Australia is also regarded as a probable menace to New Zealand industry over a substantial range of manufactured products. The advantageous trade balance enjoyed by Australia over a number of years is narrowly regarded. In addition, the substantially lower prices operating in Australia for a large number of commodities as against those operating in New Zealand, United Kingdom, Canada, and the United States, is beginning to be appreciated. Whilst lower prices are acceptable and viewed with pleasure in the case of products which do not compete with New Zealand and United Kingdom industry, a feeling is developing that if strict import controls are not retained and operated against Australia, violence may be done both to New Zealand industries and United Kingdom trade.

7. Another factor which prevents any immediate consideration being given to the examination of trade agreement prospects by the New Zealand Government is the negotiations which have been proceeding between Mr. Fraser and Mr. Nash on the one hand and the United Kingdom Government on the other, on the question of the purchase by the latter of certain New Zealand surplus products over a four- year period. [2] I understand that the Commonwealth Government has also been invited by the United Kingdom Government to consider similar matters. The New Zealand Ministers, however, have been in active negotiation, and there is the possibility that they may be committing New Zealand to an import policy favourable to the United Kingdom which may be extremely unfavourable to Australian exports to New Zealand. Another factor which militates against the Australian case is that in a tariff sense there is very little that Australia can do to assist New Zealand exports as duties operating against New Zealand are either non-existent or nominal.

8. In considering trade agreement prospects too much reliance cannot be placed upon the pact recently made between New Zealand and Australia. [3] I did not find any great enthusiasm for the pact. indeed, it might be said that it has been coldly received.

The New Zealand people were quite unprepared for it. The impression I gathered is that in signing the pact in Australia without detailed consultation with the New Zealand Government and the United Kingdom Government, Mr. Fraser acted heroically.

9. I feel that the apprehension existing in New Zealand will never be relieved unless Australia enters into some firm commitment concerning New Zealand export commodities which are marketed in the United Kingdom. This commitment would need to provide for an assured position in the United Kingdom market against similar Australian exports in those cases where Dominion exports into the United Kingdom cannot be accepted without Dominion import limitations. Such a policy might influence New Zealand. It has the defect, however, that New Zealand's dependence upon United Kingdom markets in such products would become greater and this in turn might have the reverse effect on Australian secondary-industry exports to New Zealand. Politically the policy might be difficult to hold in Australia against our primary producers.

[matter omitted]

33. TRADE AGREEMENT PROSPECTS: In addition to general discussions with the Acting Prime Minister [4] on this subject, conversations took place with the Acting Minister for Finance (Mr. Nordmeyer) and the Controller General of Customs (Mr. Good). The attitude of both these gentlemen was one of extreme caution and hesitation. On our behalf it was emphasised:-

(a) It would be to the long-term advantage of both countries to develop trade to the maximum. Before a comprehensive review of the existing agreement [5] could be intelligently undertaken, it would be necessary for the two countries to decide in a general way New Zealand's industrial import requirements and to determine future policy in relation thereto. The degree to which New Zealand's light industry was to be based on Australian heavy industry was quoted as an example. Reference was made, to the large internal demand for equipment and raw materials which would arise in Australia as soon as the war was over and the demand which is likely to be made on Australia from other countries. It was stated on our behalf that it was desired that New Zealand should not place herself in a position of being unable to obtain from Australia large scale requirements for her post-war reconstruction and that steps should be taken to programme their requirements up to the end of 1945 at least. It was suggested also that they should examine their existing import tariff structure in relation to such requirements.

(b) A sympathetic attitude on the part of Australia would be assured in respect of any proposals made by New Zealand in as much as it was freely recognised by the Australian Government that New Zealand had to maintain a balanced economy and to this end Australia and New Zealand should jointly consider the marketing of like primary export commodities in a co-operative and not competitive manner.

(c) Against the enormous productive capacity built up in other countries during the war, Australia and New Zealand should endeavour to maintain the important secondary industries developed and established during recent years on the grounds of area security.

(d) An every-day practical significance should be given to the pact recently made between the two countries, especially in relation to trade matters.

34. The New Zealand Acting Minister for Finance appeared to be rather scared at the suggestion that trade agreement negotiations might be considered. He stated that the Government were still awaiting the report of the Prime Minister and Mr. Nash on the United Kingdom proposal covering the four-year purchase of excess New Zealand production in certain commodities. He felt that the United Kingdom would, on its part, be entitled to ask for firm commitments from New Zealand on import policy, and until these two matters had been considered it would be difficult to give practical consideration to other questions. He stated that he would take up with the Government the question of sending a Ministerial delegation to Australia to discuss trade agreement matters. In my view, however, the statement appeared to lack conviction.

35. The belief of the New Zealand people and Government in their extreme dependence on the United Kingdom market is touching to a degree. This single-minded belief, in my opinion, excludes the possibility of a free, unfettered and worthwhile approach being made to establish trade relationships between our two countries based on the respective economies and inevitable industrial developments particularly in Australia. This belief leads to insularity in outlook which is difficult to appreciate unless a visit is made to the country.

36. Undoubtedly the United Kingdom takes every possible advantage of this situation and their representatives work very quietly and effectively. They are consulted by the New Zealand Ministers and officials on the most detailed matters and in some cases on questions of remote or faint interest to the United Kingdom.

Therefore, in a negotiation any Australian proposal which was likely to affect any United Kingdom industry interested in the New Zealand trade would, from a practical viewpoint, have to be concurred in by the United Kingdom Government before New Zealand would be prepared to accept. To do otherwise would be to violate both a strong belief and a long tradition. Nevertheless, I consider our industrial development and the prices at which many commodities will be available in Australia would make it embarrassing to the United Kingdom to insist upon retention of trade with New Zealand by means of action taken under New Zealand import and monetary control, if Australian pressure on the United Kingdom were to be judiciously applied. I feel that it might be worthwhile to endeavour to hold discussions in the near future but it would be necessary to have a good man in London to press difficult questions with the United Kingdom Government. Both Ministers and officials are personally very friendly towards Australia and wish us well, but they appear to freeze when trade agreement matters are mentioned.

37. As soon as the results of the London discussions with Mr.

Fraser and Mr. Nash have been considered by the New Zealand Government, I consider we should endeavour to sound them out on the question as to whether they are prepared to send a Ministerial delegation to Australia. Undoubtedly better trade agreement terms would be obtained from the present Labour Government than from a Government formed by the Opposition.

[matter omitted]

43. PUBLICITY: There appears to be little appreciation in New Zealand of the Australian war effort, even at Ministerial or official levels, let alone at public levels. This may have resulted from either failure on the part of Australian Governmental agencies to direct suitable publicity to the Dominion or lack of distribution facilities there, or perhaps a combination of both. Press reports of Australian affairs, with the exception of adverse criticism of the Curtin Government, or such inconsequential matters as crime and other 'newsy' items, are almost completely lacking. Hostility to Labor administration on the part of the New Zealand press generally may be responsible for this. The Australian High Commissioner (Mr. T. D'Alton) regularly receives from the Department of Information newsletters and other matter but his only worthwhile avenue of distribution is by using the Labour weekly newspaper.

44. If it is acknowledged that wider publicity should be given to the affairs of both countries on a reciprocal basis as a pre- requisite to the establishment of closer political and economic relations, immediate steps should be taken (a) to intensify the flow of suitable publicity through official agencies;

(b) to ensure that such publicity is 'slanted' to meet the needs of New Zealand papers, which are generally of a lower standard than Australian newspapers and to which a great part of Australian publicity is unacceptable in its present form;

(c) to seek the co-operation of Australian newspaper executives to ensure a freer exchange of news of national value and giving editors a full background story to our attempts to establish trade and other links.

[matter omitted]

R. V. KEANE

1 Matter omitted from this Document consists largely of comments on the availability of consumer goods, the operation of Lend-Lease and reciprocal aid, and the supply position in New Zealand.

2 See Document 155, note 3.

3 Document 26.

4 D. G. Sullivan.

5 Signed 5 September 1933, its effect was to apply British preferential tariff rates on most Australian goods imported into New Zealand and vice versa. It was modified in November 1937 to permit a higher tariff against some Australian manufactured goods in New Zealand.

[AA:M1415, S-T, JULY-DECEMBER, 1944]