Australia and New Zealand

GEOGRAPHICALLY, Australia and New Zealand are Britain’s most remote Commonwealth partners; in sentiment and tradition, they are the closest of all. Though critics of the crown may grow in number within the sound of Bow bells, their voices have raised few echoes in Gundagai or Taranaki. In character, outlook, and disposition, Australians and New Zealanders differ greatly from each other and from their British cousins. Both typically find Englishmen difficult to get along with. Yet in Australia and New Zealand the British Isles are still called “home.” British migrants get preference over all others, and trade with the mother country has come to be regarded as a patriotic duty and a right.

“Australia sends her best to Britain,” is the slogan under which Australian goods are sold on the United Kingdom market. This note of pride in filial responsibilities cheerfully accepted is reflected practically in a wide range of primary industries which have grown up over the years in Australia and New Zealand, on the premise that the British market, with its umbrella of Commonwealth preferences and protective tariffs, will be there forever.

When the European Common Market was established in 1957 and Britain first began to exhibit an interest in joining, neither Australia nor New Zealand was unduly alarmed. Whitehall’s assurances that it would join only if agriculture and agricultural trade were excluded satisfied both Canberra and Wellington that they had nothing to fear. Their markets for meat, fresh, dried, and canned fruits, and dairy produce would not be affected, it seemed, and wool was to enjoy free entry under the common external tariff.

Little remains of this complacency today. Duncan Sandys, British Secretary of State for Commonwealth Relations, had the task of telling the Australian and New Zealand governments that Britain had re-examined its attitude toward the Market and that, inevitably, agricultural trade would be involved if Britain sought full membership.

The sense of shock was equally great on both sides of the Tasman Sea. But, whereas the New Zealanders took comfort from Sandys’ assurances that Britain would do everything possible to protect their interests, the more critical Australians demanded a seat at the conference table when the European Economic Community discusses issues bearing on their own interests.

The threat to the Commonwealth

The Australians accused Britain of a breach of faith. And, while agreeing that a united Europe could do much to preserve the peace, they also warned vigorously that it might be achieved only at the cost of a break in Commonwealth relations.

“I see, and my colleagues see, great merit politically in a European association,” said Prime Minister Robert G. Menzies, an articulate and brilliant barrister with many close friends in Whitehall. “We hardly need to be persuaded that it has great importance. But we simply record our view that this will lead to a loosening of Commonwealth relations. Mr. Sandys felt, and no doubt with great conviction, that none of this would affect the Commonwealth relationship. Well, we think it will.”

For Britain the decision was Draconian. In view of its own economic difficulties, it was also urgent. On July 31, 1961, two weeks after Sandys had reported on his often heated and sometimes bitter discussions in Canberra, Prime Minister Macmillan announced that Britain had decided to apply for full membership in the Community “ii satisfactory arrangements can be made to meet the special needs of the United Kingdom, the Commonwealth, and the European Free Trade Association.”

In the ensuing months, however, it became apparent that Britain was in no position to dictate terms to the Community. “Our position is clear,’ said Michel Debre, then the French Premier. “The European Common Market must be applied to agriculture. If not, there will be neither Common Market nor Europe.” President de Gaulle was equally explicit. “Britain must come to the Common Market, but without conditions,” he said.

As Australia assessed the prospects, any safeguards negotiated for Australian and New Zealand trade would be favors conceded rather than concessions won. “What Britain may choose to regard as adequate safeguards are not likely to look nearly so adequate to us,” said John McEwen, Australia’s deputy prime minister and minister for trade, as he left Australia on an eleventh-hour mission to explain to Washington, London, Paris, and Bonn why Australia and New Zealand were so seriously concerned.

The dependence on exports

Entire industries and communities have grown up in Australia and New Zealand around the cultivation and export of primary produce to Britain. On the apple-growing island of Tasmania, for instance, only apples rejected for export find their way into local shops. The rest are graded, packed, and shipped in refrigerated holds to the London market 12,000 miles away.

The great Australian outback, stretching from the Kimberleys in western Australia through the Northern Territory to North Queensland, depends primarily on sale of beef cattle, sugar, and minerals to the British market. The crop harvested in the wheat fields of the southern plains is sold mostly in London. The irrigated valleys of the Murray and Murrumbidgee were developed and thrived on the assumption that British housewives would always want their dried and canned fruits and fat lambs.

Of Australia’s annual export trade of approximately 82 billion, Britain takes a quarter. New Zealand has even more at stake. More than half of its export trade of 8846 million is with Britain, which takes 91 percent of its butter and 94 percent of its cheese, mutton, and lamb, its principal exports.

All Australian and New Zealand products have unrestricted right of entry into Britain. Most of them enter duty free, while competitors outside the Commonwealth usually pay duty. Since the Common Market proposes to remove all barriers and restrictions on trade between member countries and to establish a single common tariff for the whole group on imports from the outside world, Australia and New Zealand face the prospect not only of losing their preferred rights of entry into Britain but of encountering new tariff barriers.

Crippling competition

The Australian government, in particular, is unimpressed with Macmillan’s contention that the greater prosperity flowing from the new European trading bloc will create an improved market for Australian and New Zealand products. Since the end of World War II Europe has been selling more and more manufactured goods and buying fewer and fewer foodstuffs and raw materials.

Its wheat imports have fallen by 1,600,000 tons a year since 1939. It imports 700,000 tons less meat and 200,000 tons less sugar. This has happened during a period when both population and prosperity were increasing, and it does not mean that Europeans are eating less. On the contrary, they are consuming more and more, but because of the incentives of high prices paid to home producers in Britain, Germany, France, and Italy, local production has expanded dramatically.

Not only has the European market for imported food shrunk, but only a fraction of the world supply of major food commodities is now sold at the “world" market prices, which Australian and New Zealand farmers generally receive. Australian butter sells wholesale in London at the world price of 5695 a ton, compared with the wholesale U.S. price of about 81360 and even higher prices in France. Similarly, the world price of sugar, which Australia gets for its British sales, applies to only about 12 percent of total world production, while the bulk produced and consumed is marketed at much higher prices.

This relationship between world prices and the prices at which most of the world’s production is sold already penalizes producers of the main food exports of Australia and New Zealand. Australia’s exports, on the basis of 1953 commodity prices, would have produced an export income last year of $3 billion instead of slightly more than $2 billion. New Zealand’s export prices have fallen by about 10 percent since 1955, while in the same period import prices have risen by about 5 percent.

In both countries adverse trade balances have resulted, and only a continuing and, in the case of Australia, a strong inflow of foreign capital has enabled the two countries to bridge the gap between their earnings and their spending.

As Wellington and Canberra see the situation, Britain’s entry into the Common Market promises to aggravate an already grave situation. The Community will establish over a period of years agreed selling prices for wheat, butter, and other primary products which will be sufficiently high to encourage production under European conditions. As a full member of the Community, Britain will be obliged to grant duty-free entry to its partners. And this, in turn, will mean that for all commodity exports, except wool, ores, and concentrates, both Australia and New Zealand will face crippling competition from subsidized and protected producers on the continent of Europe.

Bleak prospects

Both countries expect to be badly hurt. Australia envisages the potential loss of some $400 million in export earnings and the collapse of industries and communities which have been geared to and depend entirely on the British trade. New Zealand’s prospects are even gloomier if Britain cannot live up to its assurances. It lacks the diversity of Australian exports, and more than $300 million of its own are in the most vulnerable commodities — meat, butter, and cheese.

Although there is some recognition in Australia of New Zealand’s special difficulties, adversity has not really brought the two Commonwealth members closer together. New Zealanders tend to regard Australians as rather uncouth and slippery customers who are not above using sharp protective practices to keep New Zealand’s products out of Australian markets.

The two countries have therefore tended to meet the Common Market challenge in their own separate and different ways. New Zealand continues to set much store on the assurances it has received from Britain. Australia, having blasted Britain for its action in walking out of the GATT cereals conference in Geneva early this year and for pursuing a cheapfood policy at the expense of its Commonwealth partners, places much greater emphasis on its direct approach to the Six and on its own urgent prospecting in new markets.

Australia sides with France

Australia’s efforts have not been unsuccessful. McEwen received a warm and encouraging welcome when he told French ministers in Paris that he opposed any suggestion that Britain try to maintain its cheapfood buying policy with the Commonwealth once it joined the Market. He strongly supported French proposals that producer countries should get adequate prices under world marketing arrangements.

What Australia wants is a special, but temporary arrangement to provide access to the British or Common Market for Australia’s traditional foodstuffs as a prelude to a general world marketing scheme designed to satisfy the export needs of Australia and other bulk commodity producers. To the French, the proposition is appealing. To the British, it is rank ingratitude.

The notion of Australia’s siding with France in a move that, if successful, must embarrass Britain’s traditional cheap-food policy would have been almost ludicrous only a year or two ago. Australia may not have liked Britain’s cheap prices, but dealing with Britain was more a tradition than a trade, and it recognized realistically that other markets were hard to find.

United States policies of protection prevented easy access into that rich market. Dumping of American agricultural surpluses was often humanitarian, but it rarely evoked much enthusiasm among Australian grain growers. And in most of the underdeveloped world, where imports of capital goods required for development programs took priority. agricultural products such as New Zealand’s lamb, butter, and cheese and Australia’s fresh, dried, and canned fruits were classified as luxuries.

Oriental trade

In the past two or three years, however. Australia has greatly expanded its trade with Japan, and also with Communist China. While the United States continues its notrade policy with Peiping, the prospects of substantial and continuing sales of Australian wheat over a period of many years are highly favorable. It is with Japan, however, that Australia’s trading prospects are brightest.

Australia’s own tariff system is rich in bargaining power. More than 30 percent of Australia’s imports of manufactured goods today come from Britain. If the preferential system goes because of Britain’s entry into the Common Market, Australia can retaliate immediately by abolishing all margins in Britain’s favor on goods not produced in Australia.

Japan now has some of the means and much of the desire to replace Britain in the Australian market. It buys $274 million worth of Australian goods each year and sells in return only $115 million worth. Australia has huge reserves of both ferrous and nonferrous ores which Japan would willingly buy. With the rising Japanese standard of living. the trend away from the basicdiet of rice and toward increased consumption of meat, sugar, and fruit is also continuing and suggests an expanding market for Australian foodstuffs.

The opportunity to divert much of Australian trade to Japan certainly exists. But the traditional trading relationships which have existed for so long with Britain cannot be broken without hardship and bitterness on both sides. In both Australia and New Zealand, the sentimental attachments to Britain are still so strong that public discussion of the changing political relationships within the Commonwealth is limited and restrained. But, visibly and day by day, the ties with the mother country are weakening.