QUOTA OPPOSED

Evening Post, Volume CXVII, Issue 62, 14 March 1934, Page 16

QUOTA OPPOSED

COMMERCIAL OPINION

SEARCH FOR ALTERNATIVES

•The following statement on the problems of the 'dairy-industry-was issued by the Associated Chambers of Commerce, following a ■ ineeting of the executive yesterdays—r ■: .. The conference at present -in progrjss between representatives i of the dairy producers, the Dairy Board, and members of Cabinet is giving attention to' the position in whicji the dairying industry finds itself today. That the situation is grave there- is no- question, and every avenue will need to be explored in the endeavour to secure some future, some security, and some stability for the industry. The commercial community of New Zealand is naturally greatly concerned with the welfare of the industry, and has given earnest study to the circumstances surrounding the situation of continued low price Revels for dairy produce in the Home market, the glut of supplies there as a result of Empire and foreign shipments, and the efforts' being made-, to protect" the farmers of Britain f t om this influx and to secure them an adequate Teturn on their supplies. The commercial ■ community of New Zealand realised that while the whole problem is essentially one for the New Zealand dairy industry itself, it is competent for. the business people to express their views on a subject so vitally affecting the whole country, and to draw attention to certain relevant factors which it feels should be carefully considered in the interests of the community generally. - . FEAR. OT A QUOTA. Firstly—to tabulate results before examining ■ the causes —-there- is no doubt that the unofficial appeals being made by the British Government for a voluntary agreement by New Zealand to a quota on- our dairy produce exports to Great Britain are causing the greatest concern here, and this.is one of the most immediate problems confronting the industry. ■ The quota is a most radical device,-and carries with it the danger of disastrous consequences to New Zealand." One of the - principal arguments advanced in favour of the acceptance of the quota restriction is one of fear. It. is said; that by acquiescing now we will probably get off with a reduction of 10 per <cent., whereas if we stand firm on the Ottawa Agreement, although we may have free entry to Great Britain until the.end of the three-year period, we may then expect a much heavier restriction to be imposed under the -freedom "of action the British Government will then possess, with possibly a tariff againstus. ...•. -. ...- ■, . ■ ' _ "Without avoiding the issue by holding fast . to- the -promises - made at Ottawa—and there- is no question that the- British Government' will meet its just obligation, just-as we feel there can be no "question-that - this country will do the saMe—it is; essential that New Zealand^should":fully realise-what a. quota' would mean. .It -would mean: (1) A restriction of production; (2) to secure this, a system of deliberate planning, which is immediately beset with tremendous problems in the securing, of equity as between different producers; (3) the ruin of many farmers; (4) the sale elsewhere,' or, if that is impossible, the financing meantime and the ultimate waste of surplus production] (5)" an arbitrary and probably, permanent restriction of that freedom of development which the dairy indus-try-has enjoyed since its initiation, and of which it has taken such wonderful advantage hitherto; (6) a permanent handicap .on.our- efforts to encourage and- promote land settlement, and a permanent check on the immigration from-the United Kingdom of that type of settler which has done so much in the past to develop the natural resources of the country; (7) the consequent restriction of New Zealand's resources from which to meet its interest obligations dn debts to overseas lenders—payments made possible only by. a sufficient excess of exports over imports. •; "■ :. ■ : ' 'BTJEBAXTOBATic GONTEOL.' ' Apart from what seems to.1 be the essential. unsoundness:. of a scheme that aims at restricting to a definite quantity the production-of a commodity that must necessarily vary according to the bountifulness of the season, any attempts at control must be by a bureaucracy, whose ability to organise and handle the situation would be very much open to doubt. The logical and inevitable, development 'would be >the official control of all avenues of industrial and commercial activity., So far as we are aware, no scheme to limit and control the products of the soil has in the, long mn proved an economic success, as witness-efforts in this direction in, regard- to rubber,, coffee, sugar, sisal," cotton, wheat, peaches, and other schemes of a similar, nature. The second main argument in favour of the quota is that a reduction in. supply will so increase the price at which it sells that the total receipts also.will, be-increased. This is often quoted -by." supporters of the principle of the'quota, but with regard to dairy produce there is'nothing. to show that ■ the English market is so inflexible as •to conveniently-prove this, principle forithe benefit of New Zealand. The number of persons in Great Britain consuming -New Zealand butter, has increased, and'there is no doubt that this; is very-largely due to .low. prices, and. the consequent displacement of margarine. It has to be.-remembered also that New Zealand is not the only supplier of .butter to the United Kingdom. The .argument that prices will rise substantially if the supply to the market is reduced is sound only if. the market has the purchasing power, and if there is no satisfactory substitute at a competitive price. From what we know, the power of absorption by the English market falls rapidly as the price of butter advances, margarine becoming an effective competitor as. soon as butter leaves the lowprice field. Another material consideration, is the huge milk marketing scheme being undertaken in Great Britain, under, which domestic milk producers are guaranteed high, prices by the Government, thus counteracting any shortening of supplies in the market by a quota imposition on New Zealand, and ensuring low prices for butter and cheese owing to the encour- i agement given by the scheme to domestic production. As regards the disposal of the surplus production under a quota, this must be a serious problem. Stocks in stores cannot go on mounting up indefinitely, and while this accumulation would compel a keener search for new markets, there is no substantial immediate outlet in sight for surpluses. ARTIFICIAL ENCOURAGEMENT. As we stated, we have dealt firstly •with effects in the dairy industry and markets. With, regard to causes, these are, of course, not only Empire-wide, . but world-wide." There are, however, certain contributing factors directly arising • from the ,New Zealand dairy industry which it is well to consider. This country is only belatedly awakening to the cumulative effect of increased supplies generally on the English market. Insistence has been made in this country in the recent past on the need to increase production, and in order to assist that end the State has not only entered into enormous commitments with regard to land development" for butterfat production, but lias maintained on the land generally, by means of legislative protection to mortgagors, compulsory reduction, of

interest and interference with the rate of exchange, many producers who arc really insolvent, and who, without those measures of assistance, would have had to withdraw from butterfat production. It is therefore to be seen that the present position of over-supply has been secured partly by the artificial encouragement of production, and the propping up of values. Our purpose in mentioning this aspect of the case is not to foment sectional differences, but to enable a dispassionate analysis to be made of the whole situation. As to steps^which New Zeatand might take to alleviate the present position with regard to the dairying industry, it is necessary that we get the maximum production of the best quality at the lowest cost. Natural processes must therefore be given an opportunity to operate. Instead of propping up inflated values we should liquidate them, as well as liquidate bad ventures, thereby encouraging no longer the uneconomic production of butterfat. This is a factor that is not distant ay imposed from without, but is within our own control. Is it beyond the limits of our courage? . VIEWS SUMMARISED. Concentration on quality in butter and particularly cheese is .of outstanding importance, and the improvement can bo effected if the industry so wills. Along with the improvement in cheese quality, there are possibilities in the local market for increased cheese sales. Baw milk sales could almost certainly be increased by suitable propaganda. - We would summarise our views as follows: —(1) We view with very grave concern the imposition of a quota on New Zealand dairy produce, and suggest that every possible alternative means of agreement with the British Government should be explored; (2) New Zealand should strive by every possible means to improve the quality of its dairy produce, more especially of its cheese; (3) we should face the facts of -the present situation and cease forthwith the various devices which have been brought into operation with a view to maintaining and expanding uneconomic production of butterfat; (4) we should explore every possibility of finding markets other than the United Kingdom for our dairy produce, if necessary by the extension of trade agreements with other countries; (5) the industry shonld examine closely the possibilities of" production alternative to the production .of butterfat, arid every encouragement should be given to those persons who cannot produce butterfat at today's prices to develop alternative lines of production.