ECONOMIC SOCIETY

Otago Witness, Issue 4032, 23 June 1931, Page 6

ECONOMIC SOCIETY

. ADDRESS BY MR DOWNIE STEWART TARIFF POLICY OF NEW ZEALAND A meeting of the Economic Society of Australia and New Zealand, in conjunction with the Institute of Paci fic Relations, was held at the University on Wednesday evening. There was a good attendance of members and the general public. The chair was-eccu-pied by Dr Benson.

An address on “ Tariff Policy of NewZealand and Trade in the Pacific ” was given by Mr W. Downie Stewart, M.P Mr Stewart said that New Zealand’s ex ternal trade per head was very large—indeed, larger than that of any other country in the world In 1928 it amounted to £7O 4s lid per head; in 1930 it had fallen to £5B 19s owing to the depression. The share of the external trade which went to or came from countries in or bordering on the Pacific was, in the aggregate. less than half our total trade. Great Britain was by far our largest supplier and customer in spite of the fact’that she was geographically the most distant country in the world. In 1930 she took over 80 per cent, of our exports, and supplied us with 47.3 per cent, of our imports. On the other hand, all the Pacific countries combined, including Australia, Canada. America, Japan, Dutch East Indies. Fiji, and various islands in the Pacific took less than 20 per cent., or one-fifth, of our exports. So far as our imports were concerned, these countries made a better show ing, as they sent us about 40 per cent., oi nearly half, of our total imports. The causes which prevented our Pacific trade from bulking more largely in our commerce were fairly obvious. In the case of many Pacific countries, the population was small as compared with Great Britain and consequently their power to buy or sell was proportionately restricted. But even where the population was large, as in America and Canada, high tariffs were a barrier to trade. In the case of our nearest neighbour, Australia, both these factors existed—a comparatively small population and a high tariff. “It is appropriate here,” said the speaker, “ to make a general observation on the frequent complaint by public speakers and the press that there is not more sympathy and understanding in matters of trade and commerce between New Zealand and other Pacific countries, particularly with Australia. They claim that these two countries have so much in common that closer co-operation in trade should exist as a matter of course. Speaking to the Auckland Chamber of Commerce last year. Mr J. L. Schmitt. New Zealand Trade Commissioner to Australia, gave a number of reasons why the two countries should work in closer friendship He pointed out that they were both 98 per cent. British in population; both produced similar exportable commodities; both were competing in the same market; both had many financial institutions in common, and so forth. But a little reflec tion will show that the reasons he gives for closer commercial relations often operate in exactly the opposite direction In fact, the more dissimilar two countries are in their products and manufactures, the easier it is to exchange goods and develop commerce. It is the similarity of our production in so many lines that makes trade difficult. Nor is distance in itself any obstacle to trade having regard to the shipping lines that now encircle the world. If England wants our primary products and we want her manufactured goods, trade is easy. So long as Canada wanted our biitter and cheese and we wanted her motor cars, trade ran smoothly In my view, it is for the very reason quoted by Mr Schmitt, viz., that New Zealand and Australia both produce to so large an extent similar exportable commodities, that exchange is difficult. This is true even if with regard to any particular commodity one country may have advantages over the other either permanently or in certain seasons of drought or flood. In such a case, if there were no tariff barriers, the country with the advantage would normally export to its neighbour. For example, both Australia and New Zealand are well suited to produce wheat and flour, but Australia can do so more cheaply than New Zealand. Hence she could undersell the New Zealand farmer in the absence of Customs -duties. Contrariwise, -as regards butter, hops, rope and twine, potatoes, and other items, New Zealand has the advantage and could undersell the Australian producer. But as each country in varying degrees is well suited to produce these goods, and for reasons of .national policy desires to produce them, tariff barriers spring up, and all the arguments in favour of goodwill and mutual co-operation will not prevail against them. I have spent many days and weeks arguing with the Australian Minister of Customs on such questions as thete. No mere theoretical demonstration that one country can produce the article more cheaply than the other will prevail if in fact the other country can also produce the same article, although under slightly less favourable conditions, and the interests concerned are politically strong enough to secure a protected market. Each party must take cognisance of the fact. that the two countries are not making contact for the first time—that they are not writing trade policy on a clean slate—and that rightly- or wrongly the same industry has grown up in both countries and vested interests have come into existence. So far, therefore, from similarity of products being an encouragement to easy trade, it is actually a deterrent. The second main factor that limits trade in the Pacific is the widespread existence of Customs tariffs. We have frfee and unrestricted entry into Great Britain for our exports, but the-’e is no Pacific country that grants us an open door, or to whom we grant free entry. This is not the place to discuss the fundamental policies of Freetrade and Protection. But it is important «4o remember that both in the case of New Zealand and most other Pacific countries, tariffs were originally created not in pursuance of any clearlydefined national policy of protection. They were originally imposed for revenue purposes. Indeed, when these communities were first settled, there was no other substantial source of revenue on which to rely. There was no accumulated wealth, and incomes were small and spasmodic.

But it was natural that under the shelter of a revenue’ tariff industries of various sorts found it possible to come into existence. As they became more numerous and powerful they became of sufficient importance to raise the question of protection as a definite political issue, and in this haphazard way our tariff has grown to its present dimensions. The third factor which influences our Pacific trade is the existence or absence of shipping facilities and shipping regulations, but these can Ue most easily outlined in referring to specific countries in the Pacific with which we trade. On the whole, it would be an exaggeration to speak of our trade in the Pacific as being founded on any definite national policy in the sense of a carefully-thought-out plan consciously and consistently followed from year to year. In this respect our national outlook on external affairs is vague and casual in comparison with our attitude towards .domestic problems. There is a fairly defined national opinion on questions of land tenure, education, Asiatic immigration, and similar questions. But the changing phases of our external trade, the opening up of new markets, and the growth of foreign or dominion tariffs arouse little discussion except among particular groups of producers or tiadcrs whose fortunes are directly affected. As an Australian writer said recently: “ The vice of democracy is the internal bias. The whole mechanism is designed to secure the treatment of the problems concerned with the relations of citizens with one another, but not with the outside world.” Mr Stewart went on to mention a few of the features of our trade with some of the more important Pacific countries. Early in 1922, as Minister of Customs, he visited Australia to negotiate a tariff agreement, and the main points of the decisions come to were:— (1) Australia took New Zealand off the foreign tariff; (2) free entry into Australia was granted for New Zealand timber, fresh fish, frozen and canned /fish, and oysters, hay and chaff, tallow, vegetables, certain agricultural implements and dairying machines, sheep dip, etc. (3) On many other items the duties were substantially reduced such an bacon and bams, butter and cheese, sugar of .milk, and so on. (4) The duties on same articles such as soap, textile piece goods, millinery and other items in which the New Zealand manufacturer found Australian competition more severe than British, were kept higher than against Britain by 5 to 10 per cent. So also in regard to boots, the duty was kept at 35 per cent, against Australia, as compared with 25 per cent, against Britain. (5) The chief concessions granted to Australia -were the free entry of her timbers to- New Zealand (as these are hardwood and not produced in New Zealand), and a substantial reduction in duties on Australian wines and other items not competing with New Zealand manufactures. (6) All goods for which no special rates were fixed w r ere to fall under the British preferential rates of either country. Since the agreement each country had found it necessary to alter the duties on a few items, as it was entitled to do by giving six months’ notice. The chief alteration by Australia was an increase in the butter duty to a prohibitive figure under the Paterson scheme. Figures were quoted to show the imports into New Zealand of goods of Australian origin and the exports from New Zealand to Australia of New Zealand produce. Dealing with trade between New Zealand and Canada. Mr Stewart pointed out that in 1930 New Zealand appointed a trade commissioner to Canada, but in view of the tariff conflict now in progress between the two countries it was difficult to predict what benefits would flow from the appointment. The Canadian Government was now contemplating the sending to New Zealand of a representative to arrange a fresh treaty. It remained to be seen whether the attack and counterattack that had taken place would pave the way to a satisfactory agreement. Unless this came about, trade .between the two countries must be seriously affected Approximately half our imports from Canada in recent years had been in motor vehicles, and our export of butter constituted the bulk of our trade with Canada. For 1929 it was worth £2,707,669, out of a total export to Canada of £3.353,975. New Zealand trade with the United States was also dealt with, as well as trade with the South Sea Islands and with Japan and the East. Dealing with the tariff of the United States, Mr Stewart said that, in addition to the tariff, the shipping regulations of that country seriously handicapped New Zealand shipping. Not only so, but the United States Government heavily subsidised American ships trading to New Zealand and Australia. For example, the Matson Company, which ran a threeweekly service from San Francisco to Sydney, got a subsidy per mile which amounted to about £140,000 a year. On the other hand, the Union Company, running a four-weekly service between Wellington and San Francisco, got- from the Zealand Government £25,000 a year. For their Auckland-Vancouver service .'a'ey received:—(l) From New Zealand Government, £20,000 a year; (2) from Canadian Government, £20,000 a year(3l irom Fiji, £5OOO a year; (4) from £2600 a year. Total, £47,600. .there are also other subsidies paid by tae United States Government on vesse s running between Los Angeles and Auckland, said the speaker. “ Not only so, but the United States seems determined to do all it can to promote its new shipping interests in the Pacific, and is advancing 75 per cent, of the cost of two new vessels for the San Fran-cisco-Sydney service at 3J per cent, for 20 years. These vessels will receive an increased subsidy a s against the present service—on account of their extra speed the total subsidy per annum will amount about £190,000. In other directions also New Zealand legislation handicaps New Zealand-owned ships in competing with numerous American, Swedish, and Norwegian ships. The wages of crews of New Zealand ships are more than double those of the Swedish and Norwegian vessels and about 25 per cent more than those on United States vessels. So with regard to loading under New Zealand regulations deck loads are limited to the height of the ship’s rail, but there are practically no restrictions as to deck cargo on competing ships. Sometimes these vessels arrive with deck timber 12 feet high or about 1,000,000 superficial' feet. All these handicaps on New Zealand shipping seriousl” reduce our invisible exports. The value of shipping services to and from the Dominion vitally

affects the balance of trade even though their value is not included in the statistics of exports and imports. The advantages our shipping competitors enjoy increase the value of the services for wnich iNew Zealand has to pay, and conversely lessens the value of our exports, includingshipping services. It is clear, therefore, that differences in shipping regulation® constitute a serious handicap to the trade <>l New Zealand, and the effects of such, differences may be likened to the effects of differences m tariffs, and consequently affec-t the distribution of trade and the channels through which it patkes. Any fruitful discussion by the Institute >f Pacific Relations on the growth of Pacific trade must, therefore, clearly take into account the effects of shipping regulation® as well as the effects of the tariff policies of individual countries in the Pacific. “ The general tendency during this century has been for New Zealand trade in the Pacific to open out in a widening circle. The growth of trade with America and Canada has been the main feature of the change that has taken place. This has been chiefly due to the amazing development of the use of motors ana motor fuel, and also to the growth of Canadian manufactures for export. But a serious check on the expansion of commerce has been the rapid increase in tariff barriers in all Pacific countries (including New Zealand), more particularly since the war. It is idle to speculate as to what would have happened had the movement been towards Freetrade instead of in the opposite direction, for even in New Zealand many, if not most classes of primary producers, rely on the tariff as strongly as do the manufacturers. It is true that the New Zealand tariff is modest compared to the Australian and American tariffs. But, as in Europe, so in the Pacific, the main characteristic of the struggle between nations is the attempt by Governments to influence the course of trade by Customs duties. This is the central and most significant factor in modern commerce. But another factor of importance is the growing practice on the part of America of subsidising her own shipping lines to fight for Pacific trade. When to this is added the great handicap to which New Zealand shipping interests are subjected in shipping regulations and restrictions, the prospects of any expansion of New Zealand-owned shipping in the carrying trade of the Pacific are very shadowy. This is regrettable when we remember how much pioneer work New Zealand did in Pacific shipping. It is all the more regrettable if,, as Captain Dollar, of San Francisco, said last year, ‘ The day is fast approaching when the world, maritime commerce will be on the Pacific and not on the Atlantic.’ To be sure, we cannot hope to subsidise and help shipping on the same princely scale as America is setting out to do. But (apart from subsidies) the restrictive conditions under which New Zealand shipping operates is tending rapidly to throw the carriage of our trade into foreign hands. One day we find that no longer can our phosphates from the Pacific islands be carried in New Zealand ships as heretofore. Another day we find a Japanese line opening up trade not only between New Zealand and the East, but even between New Zealand and Australia. Moreover, although we have under our charge the Ross Sea dependency, which is, comparatively speaking, at our own door, w see annually a rich harvest worth millions of pounds reaped thence by whalers who’come from Scandinavia on the other side of the world. If New Zealand could have enlarged and developed her carrying trade in the-Pacific on terms that enabled her to compete successfully with foreign nations, she would have drawn to herself a great and splendid revenue, as England did in the Atlantic and the seas of the old world. But to an onlooker it appears as if she is slowly being driven out of the deep sea trade and being forced back on to the narrow confines of her own coast." On the motion of Mr E. H. Murney (vice-president of the Economic Society), a vote of thanks was accorded Mr Stewart for his address.