Cover Story Plying the Tasman CER’s 20 Years of Heavy Weather Progress

There has been trade back and forth across the Tasman for more than 170 years.

So, unsurprisingly, few eyebrows arched when Prime Minister Helen Clark remarked, at recent 20th year celebrations of Closer Economic Relations (CER), that the New Zealand/Australia free trade agreement was an international model of how to do it right and the template other countries were following.

Yet the story of the New Zealand-Australia trading relationship has been much more up and down than the currently benign situation might suggest.

As far back as 1830, 28 ships crossed the Tasman to Sydney carrying flax, pork, potatoes, grown by Maori who displayed both impressive entrepreneurial flair and the necessary agricultural skills. After 1840, Australia’s eastern colonies helped provision the first enclaves of British settlers in New Zealand during their early struggling years. There was, in return, demand for grain, tallow and timber in Sydney.

The beginnings of New Zealand sheep farming had definite Australian stamp to them. For New Zealand sheep farmers, the mechanics of funding an industry and marketing the product did not have to be re-invented. Most important, Australian stud farms provided the merinos that stocked the early runs. During the 1860s, thriving on the east coasts of both islands, sheep numbers in New Zealand quadrupled to nearly 10 million.

Following the finds in California and Australia, the first substantial goldfield was discovered in Otago in 1861. In that year alone, 17,000 gold-hungry miners poured into the province from Australia. Not surprisingly, 60 percent of the country’s growing export trade in gold and wool went to, or was trans-shipped from, the sizeable concentrations of population building up on Australia’s eastern seaboard.

The growth in sheep numbers, and then dairy herds in the North Island, continued unabated and, with wool prices and exports peaking and definite limits to the market for rendered down mutton, over-production was looming dilemma before the timely appearance of refrigeration. From the mid-1880s meat exports climbed rapidly; refrigeration plus the centrifugal separator gave similar boost to butter and cheese.

Refrigeration offered economic salvation for New Zealand, but was only one option for Australia with its much larger domestic market and growing awareness of very considerable mineral wealth. As historian Erik Olsen wrote in Tasman Relations, (edited by Keith Sinclair) in 1988: “New Zealand … became the Empire’s farm at about the point when Australia set out to industrialise.” faltering of the Australian rural economy in the early 1890s was nudged towards stagnation by long, cruel drought that decimated sheep and cattle numbers. There was production enough to feed the fast-growing cities, but not the necessity, family-farm enthusiasm, or ready finance that quickly transformed New Zealand into leading manufacturer and exporter of meat and dairy products.

By 1900 New Zealand had settled comfortably and profitably into its role as Britain’s meat, butter and cheese larder. As these were the very agricultural commodities Australia was self-sufficient in, trade with the Australian colonies withered in the years preceding Federation in 1901. It was one of the reasons the idea of New Zealand becoming the seventh state in the new Commonwealth raised more yawns than enthusiasm on both sides of the Tasman. As the details of Federation were being finalised, New Zealand’s preoccupation was with its economic lifeline stretching 12,000 miles to the north rather than its nearest neighbour, mere 1200 miles to the west.

Direct trade across the Tasman shrank even further, the federal tariff on imports beginning to bite after the Boer War and the easing of Australia’s drought. But there was, in effect, common labour market and banking system, and some self-interested cooperation when arguing Britain’s lofty trade pronouncements.

By 1911 New Zealand was so committed to its food production role that it had more cultivated land than in the whole of Australia. By 1927 only six percent of New Zealand’s exports went across the Tasman and paltry 2.9 percent of Australia’s were shipped the other way – and this despite the first tentative attempts at preferential trade agreement in 1922.

The two countries shared similar economic problems during the depression years, with unemployment at unprecedented levels. New Zealand’s Reserve Bank, set up in 1934, was an understandable attempt to more closely control currency that had long been tied to the Australian pound. In Australia, devaluation was described as an instrument of economic adjustment; in New Zealand, the newly elected Labour government was more comfortable with the rhetoric of sharing the economic burden more equitably. Overall, Australia came through the depression years in better shape because, with its mineral wealth and the evolution of companies like BHP, which became significant steel producer, there was more opportunity for import substitution.

Grumpiness characterised the economic relationship during the inter-war period, although there was agreement on some issues, generally linked to the system of British Imperial Preferences. There was history of Australia placing restrictions and embargoes on New Zealand potatoes and apples, and there was an unwelcome increase of the tariff on butter in 1927; New Zealand prohibited Australian fruit and vegetable imports in 1932, alleging fruit-fly ‘threat’, and was exercised by an increasingly unequal trade balance and the embarrassment of importers preferring heavily devalued Australian goods which put the cosy reciprocal trading arrangements with Britain under some pressure.

New Zealand’s first Labour government promoted industrial development as an antidote to depression vulnerability, with import licensing and exchange controls to insulate the economy. Australian governments, whatever their stripe, had been more pragmatic, aiming at full employment and relatively egalitarian wage structure within regulated, low tax economy. There were then, and subsequently, marked differences in the levels of public expenditure in the two countries.

The Canberra Pact, signed by Australia and New Zealand in 1944, contained encouraging phrases about economic cooperation, but there was little of it until the early 1960s. In part, this was because primary produce exports from both countries were insulated from the realities of the post-war world by British bulk purchasing agreements for lamb, butter, cheese, wheat, sugar and wool that were hurriedly agreed in 1939 and continued undisturbed until the early 1950s. But by the beginning of the 1960s it was clear that, sooner or later, Britain would join the EEC and history and sentiment would no longer be sufficient to justify special trading relationships. New Zealand was also motivated by the maturing of the country’s pine forests and the need to shore up substantial market for the anticipated bounty of wood pulp and newsprint.

It took four and half years to craft the New Zealand-Australia Free Trade Agreement (NAFTA), with initial mutual suspicion eased by the good working relationship between the ministers, New Zealand’s Jack Marshall and Australia’s John McEwen. The first ministerial meeting was held in February 1961. As Jack Marshall recounted in his second volume of memoirs (1989): “I opened the bowling by putting forward the case for better access to the Australian market for New Zealand forest products as our main objective and then added fish, frozen vegetables, pig meats, and list of manufactured goods. The Australians responded with list of 74 items, from railway sleepers to textiles.” It was quickly apparent that officials had heavy workload in front of them; in fact, the ministers did not meet again for two years.

Some New Zealand officials, including then secretary of Industries and Commerce Bill Sutch, were active advocates of protecting New Z

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