611.47H31/34
The Consul General at Wellington (Hitch) to the Acting Secretary of State
[Received August 15.]
Sir: I have the honor to refer to your instruction of May 17, 1933, regarding reciprocal trade agreements that may possibly be entered into between the United States and New Zealand. In accordance with the first paragraph of the second page of this Instruction, and supplementing my Despatch No. 318 of June 21, I beg to submit herewith a statement1 giving statistics of the principal commodities entering into the export trade of the United States to New Zealand in the year 1929. This year was chosen as being the last year before the world-wide depression, (although the slump had already begun to be felt in this Dominion), and as being before the Ottawa Agreements had been put into effect. Figures are given showing, in order, total imports of British origin, imports from the United States, imports from the next competing foreign country of origin, and the grand total. The figures represent values only; they [Page 115] are given in New Zealand pounds sterling, and are computed by adding 10% to the value in the country of origin. For purposes of comparison the corresponding figures are given for this past year 1932, and a further column is added showing the Customs tariff at present in effect. Goods which are admitted free of duty into New Zealand have been omitted from this list, even though entering in quantity into the trade, as, there being no duty charged, no concession could be made.
From a study of this list, certain items may easily be noted for which tariff concessions would benefit the United States. A good example of this is hosiery. In 1929 the United States supplied approximately one-tenth of the total imports, and the next largest foreign competitor roughly one sixty-third, or an almost negligible amount. In 1932, however, imports from the United States had fallen off greatly to one one-hundred-and-seventieth. As the proportion of other foreign imports also decreased, it may be reasoned that America’s loss was the British Empire’s gain. With very slight foreign competition in this line, a reduction of the British preference would be of great benefit to the United States. Other similar items are: Artificers’ tools; hardware, hollow-ware, etc.; electrical batteries and appliances; gas and oil engines; Douglas fir and redwood; and motorcycles, automobiles and parts and tires therefor. All of these articles had a considerable sale in New Zealand during 1929, and met with almost negligible foreign competition. In 1932, imports of all had greatly diminished, although Empire imports had increased, foreign competition, however, still being at a minimum. Moreover, in every instance, the difference between the general tariff schedule and the British preferential is at least 30%, (25% plus 9/40ths), and frequently very much higher.
As has already been mentioned in previous reports, a Tariff Commission is now sitting in New Zealand for the purpose of bringing this Dominion’s Customs duties more nearly into line with those proposed by the Ottawa Agreements. Hearings are being conducted in Wellington at present, and later on will be held in the other principal cities. All phases of the existing tariff are being exhaustively studied, and all interested persons are invited to present their views on revision. It is believed that an entirely new schedule of duties will be drawn up and recommended for adoption, but it is too early yet to forecast the tendency of this revision. In fact, a member of the Commission was asked recently in the course of a private conversation whether the new schedule would increase or lessen the margin of preference accorded to British goods, and he replied that he had no idea; that every article would be treated separately, and that the proposed rates would be in accordance with existing conditions of supply and demand.
[Page 116]In the hearings that have been held to date, arguments have been advanced for greater all-round protection, for a greater margin of British preference and for a general lessening of the duties, each person arguing from the point of view of his own advantage. Generally the arguments have been aligned either for free trade or an approximation thereof by the agricultural interests, or greater protection asked for by the manufacturers. It appears very unlikely that any progress will be made in the direction of decreased British preference. Although a few merchants realize the benefits that would accrue by removing some of the restrictions to trade with America, the bulk of the people are firmly convinced that the United Kingdom is their only market and that, in order to dispose of their exports, they must cater to Great Britain in the matter of imports. It is true that they have seen prices rise, of late, due to American participation in the wool and skin sales, but the true meaning of this participation is not generally realized as it has largely taken place in United Kingdom markets, although the products dealt in are of New Zealand origin. Whether Great Britain wants or expects more than the 20% preference established as a minimum at Ottawa is another matter. Importers from the United Kingdom are, of course, endeavöring to secure the maximum, but the British Trade Commissioner in New Zealand once remarked, in the course of a recent conversation, that 20% was all that his Government wanted and that any firm unable to compete with this advantage deserved to lose business.
Within recent weeks a new situation has developed which may be of very great importance in strengthening our position. As protection for its own farmers, England is urging with ever increasing insistence the adoption of a quota on the amount of New Zealand dairy products imported annually, a restriction which is being unanimously and energetically opposed throughout this Dominion. Under the Ottawa Agreements, of course, such a quota may not be imposed at present without the consent of the Dominion, but the Agreements, in that particular, have not much longer to run, and it looks very much as if some sort of restriction would be made effective at the earliest possible moment. Large stocks of butter and cheese in Great Britain are keeping prices well down at present, and New Zealand is, and has been for some time past, casting about anxiously for additional markets in which to dispose of its surplus output. Should a quota be imposed in England, the situation from the Dominion’s point of view would be very greatly aggravated. Under these conditions American concessions opening the United States to New Zealand’s dairy products, notably butter and cheese, would come as an enormous relief to the agricultural interests here and would undoubtedly call forth similar concessions to our principal items of export.
[Page 117]A certain amount of trade between the United States and New Zealand there will always be. But without tariff reductions this trade can never assume very large proportions, as can be shown by the following figures. In 1929 we shipped goods to this Dominion to the value of £9,319,926, and in 1930 to the value of £7,573,053. In 1931, however, the total value of all shipments had declined to £3,885,073, and in 1932 it had fallen off still further to £3,267,086. During these four years, economic conditions changed somewhat and prices fell, but not in proportion to the drop in the trade with us. Index numbers of export prices of pastoral and dairy products, the principal and almost sole items of export, fell from 1634 in 1929 to 1279 in 1930, 965 in 1931, and 870 in 1932. Thus the index numbers declined by 47.76%, but imports from the United States declined by 65%. Exports from New Zealand to the United States in 1929 were valued at £3,653,427. In 1930 they amounted to £2, 116,752, and in 1931 and 1932 they were, respectively, £920,931 and £940,015, showing a decline over the whole period of 74.2%. There can be no question but what this great decline is responsible for the drop in our export trade, and, in turn, the responsibility for the decline must rest in large part with the Hawley-Smoot Tariff, which became effective in June, 1930. Any breaches that can be made in the wall which it has built around the United States will be correspondingly reciprocated in the New Zealand tariff, and are bound to show an immediate effect in the mutual trade between the two countries.
Respectfully yours,
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