The Press WEDNESDAY, JANUARY 19. 1966, Britain’s Food And N.Z.’s Farms

Press, Volume CV, Issue 30962, 19 January 1966, Page 16

The Press WEDNESDAY, JANUARY 19. 1966, Britain’s Food And N.Z.’s Farms

The article by “ Lynceus ”, of the “ Economist ”, published on this page today, describes the grievances of Danish farmers and' exporters against the United Kingdom's farm policies. The wider significance of the article will not be lost on New Zealand readers, however. New Zealand could, ultimately, lose more than Denmark through a pursuance of current farm policies in Britain: for Denmark is European and a likely candidate for membership of the European Economic Community if Britain joins, whereas New Zealand will inevitably be given inferior trading status with Britain in that event. Britain's case for pursuing an agricultural policy of protectionism is persuasively argued by ‘•Lynceus”. The “axiom” that Britain can only balance its books by exporting manufactured goods, and that the alienation of its traditional food suppliers would imperil essential export markets, is now being called into question, he says. Those export markets—which include New Zealand—are declining; therefore Britain can no longer afford to take as much of their surplus food. “ Lynceus ” does not repeat the claim frequently made by British politicians and manufacturers that the protection cf manufacturers in Britain’s export markets is the main restraint on British exports of manufactures; this is an argument which might be used by Britain to justify increasing the protection of her own farmers, if it became necessary.

A quick check of the figures quoted by “ Lyn- “ ceus ” confirms the general trend described by him: Britain's exports to its eight “ food suppliers ” have risen less in the last 10 years than her imports from these eight countries. “ Lynceus ”, however, includes Canada and the United States among the “ food sup- “ pliers ”; a detailed study of those countries’ exports might well show that their important exports of nonfood items (mainlj' minerals and manufactures) to Britain do not support his argument. And, in New Zealand’s case, several important factors have been omitted.

In recent years there has been a growing tendency for New Zealand to import more of its manufactured and semi-manufactured goods from other countries (particularly Australia), rather than from Britain. Motor-cars and motor-car components are one example. This trade diversion has not all been at Britain’s expense; for some of our imports from Australia are the products of firms wholly or partly owned in Britain. Even the substitution of New Zealand-made for British-made goods is not all loss to Britain: a British company building a factory and establishing a subsidiary in New Zealand may well send British equipment initially and raw materials thereafter to New Zealand. A change in the composition of New Zealand’s imports from the United Kingdom will result, and there will probably be a reduction—over the life of the capital equipment—in the value of New Zealand's imports from the United Kingdom. But a study of trade returns is insufficient in itself to assess the impact of British investment in New Zealand: this must be supplemented by an examination of the “ invisible ” items in the balance of payments. Dividend payments—or, more comprehensively, “ accruals of profits ” —to overseas principals must be taken into account. So must freight payments, payments for international travel, and for services such as insurance. In all these invisible items New Zealand has a consistent and growing deficit: and Britain is our main creditor. In the last four years New Zealand’s commodity trade with Britain has shown a balance in New Zealand’s favour, after a deficit in most of the previous 10 years: but, when invisible items are added to commodity items, the balance has been consistently a New Zealand deficit in all but one of the last 10 years.

New Zealand has, in the last decade, spent generously—if not over-generously—on current account, and no trading partner could suggest that New Zealand’s total spending on imports should be increased. In this situation, the only way New Zealand can help Britain’s balance of payments is to reduce spending on imports from other countries. Obviously, if New Zealand were to buy the B.A.C. 1-11 instead of European or American aircraft, Britain would benefit at the expense of New Zealand’s other trading partners. But next year—as “ Lynceus ” reminds us—Britain's trade agreements with New Zealand will expire, and if they are not renewed New Zealand may suffer to the extent where it cannot afford to replace its aircraft when they are due for replacement. The decline in Britain’s export performance in this market over the last decade might well be exceeded by the decline over the next decade unless Britain—the only large buyer of New Zealand butter ana lamb—assures New Zealand «f sufficient export earnings from these products.