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