Foreign Relations of the United States, 1964–1968, Volume XXVII, Mainland Southeast Asia; Regional Affairs

44. Memorandum of Conversation¹

Washington, October 10, 1968, 11:30 a.m.

SUBJECT

• U.S.-New Zealand Relations

PARTICIPANTS

• United States
  • The Secretary
  • Ambassador Winthrop G. Brown, Deputy Assistant Secretary of State for East Asian and Pacific Affairs
  • Robert W. Moore, Country Director, Australia-New Zealand Affairs
• New Zealand
  • Keith J. Holyoake, Prime Minister of New Zealand
  • George Laking, Permanent Secretary, Department of External Affairs
  • Frank H. Corner, New Zealand Ambassador
  • Jack Shepherd, Minister of the Embassy

The Secretary asked how Mr. Holyoakeʼs meeting with the Secretary of Agriculture had gone the day before.² The Prime Minister said he had made no real headway on the basic problem of securing for New Zealand greater access to and competitive opportunity in the U.S. market for dairy products. Ambassador Corner said they had received a “dusty answer” from Secretary Freeman. (Note: This remark had reference to discussions with Secretary Freeman on the subject of the cheese quota; the GNZ had asked for an additional 15 million pounds and Secretary Freeman reportedly told Holyoake that 7.5 million pounds was our maximum counter offer. Secretary Freeman also was unable to accede to the Prime Ministerʼs desire to publicize the fact that New Zealand has been offered an additional quota, since publicity must await issuance of Tariff Commission findings on the subject.)

Holyoake said that the GNZ accepts U.S. restrictions on meat temporarily, in recognition of the “political situation” in the U.S. bearing on the question of meat imports. He said U.S. trade policy was disillusioning, however, since he had always thought of the U.S. as the citadel of free enterprise. The Secretary observed that free enterprise also means competition. The PM replied that he does not fear competition in view of New Zealandʼs competitive efficiency in products such as meat and dairy products.

Ambassador Corner described the history of the rapidly growing meat trade, highlighting New Zealandʼs hopes for it as an avenue of diversification out of wool and dairy products. Now New Zealanders “shudder” as an apparent ceiling on meat exports to the U.S. is approached. He and the Prime Minister explained that lean meat from New Zealand complements the fatter beef produced in the U.S., rather than competing with it, and the Prime Minister noted that it sells for less than half the price of U.S. beef.

Ambassador Corner commented on the lamb trade. He said it had been running about $7–8 million a year but seemed now to be on the verge of substantial growth. New Zealand hopes that the U.S. will not move to block lamb imports (on which there are no present quantitative restrictions). The Secretary said in this regard that it would be advisable to avoid a sudden upsurge in imports, as distinguished from gradual growth. Holyoake remarked that even gradual growth in the beef and veal trade had precipitated restrictions.

Holyoake said that New Zealand could cope with the meat problem after a fashion by turning to other, albeit less profitable, markets, but in the case of dairy products there was no place to turn. He said New Zealandʼs dairy exports to the U.S. amounted to only about $14 million a year—not much by U.S. standards but significant to New Zealand. He said New Zealandʼs quantitative quota had been cut back about 15 million pounds (cheese equivalent) by Presidential action in 1967, in an action designed to curb the inflow of subsidized dairy products from Europe. Thus blameless New Zealand, which does not subsidize, suffered along with the guilty.

Ambassador Corner added that in now making a request for an increase of 15 million pounds in the New Zealand quota, the GNZ is merely asking for restoration of its pre-1967 position. Holyoake said the dairy trade problem with the U.S. had created a “really bad political situation” in New Zealand. Even the usually restrained and realistic leaders of the Dairy Board were now openly accusing the U.S. of “not playing the game” fairly with New Zealand.

Ambassador Corner launched into an eloquent appeal for the U.S. to give special consideration to New Zealand. He said the destinies of the two countries are linked. But, he added, the U.S. has only a small “constituency” in New Zealand of persons with a direct interest in close relations between the two countries. The generalized good will towards the U.S. which is undoubtedly widespread in New Zealand must be made more specific if the alliance is to flourish. Continued friendly feelings on the part of New Zealanders towards the U.S. cannot be taken for granted. There is perceptible anti-American feeling already and it will grow if the political alliance is not given some solid underpinning—most logically in terms of expanded economic relations. Without this, New Zealand could “drift away” from the alliance with the U.S. He alluded to New Zealandʼs traditional economic/political relationship with the U.K. in the “old Commonwealth” as an example of the kind of alliance the U.S. should now be trying to forge with New Zealand (and Australia).

The Secretary asked about New Zealandʼs trade with Japan. Ambassador Corner said it was important and was growing. He then asserted that (unidentified) officials in the Department of State sometimes suggested to him that New Zealand should desist from its efforts to obtain a special trading relationship with the U.S. and develop its trade with Japan, its natural trading partner. Ambassador Corner said his answer to this was that it would be in neither New Zealandʼs nor Americanʼs political interest if New Zealand became an economic satellite of Japan. Moreover, if New Zealand became extensively dependent on the Japanese market she would have to make concessions to Japanese manufactured goods, to the detriment of U.S. trade with New Zealand. Holyoake and Laking echoed Ambassador Corner on this point.

The Secretary asked if New Zealand devoted much of its agricultural production to foreign aid. Holyoake said it was relatively little, adding that most of New Zealandʼs foreign aid was in the form of cash grants or technical assistance. Ambassador Corner said that New Zealand, unlike the U.S., produced no agricultural surpluses.

Ambassador Corner turned to the question of Defense procurement. He suggested that the U.S. should be more “imaginative” in this area, should conduct procurement in New Zealand in such a way as to build up New Zealand industry and thus strengthen an ally. As an example, he mentioned the desirability of our utilizing New Zealand facilities for the overhaul and maintenance of Deepfreeze vehicles and equipment. The Secretary asked how much DOD spends in New Zealand now. Ambassador Corner said it was about $3 million annually but Mr. Moore said the total would be more like $5–6 million.

In any case neither figure is large, Ambassador Corner pointed out. He went on to say (echoed by the PM) that the amounts the U.S. would spend in meeting GNZ pleas would not be large to the U.S. The Secretary said that the small figure had to be “multiplied by a thousand” in contemplating U.S. action however, since many nations approach us in this way seeking special economic treatment. Ambassador Corner said this only meant that the U.S. had to make choices, had to decide which of its allies were most useful and dependable. The U.S. could not be everything to everybody. The Secretary said he heard this same argument from every Latin American Foreign Minister who visited him.

Pursuing his argument that it is in the U.S. interest to give special treatment to a good and loyal ally like New Zealand, and the corollary argument that the U.S. has been indifferent to New Zealand, Ambassador Corner said he had from time to time asked U.S. officials to tell him what the U.S. had done for New Zealand during the 25 years since World War II. They had been able to cite practically nothing, he said.

Ambassador Brown suggested that this was an oversimplification He noted that the U.S. was committed to New Zealandʼs defense. He pointed out that, notwithstanding certain trade restrictions, New Zealand exports to the U.S. have grown steadily and the U.S. is now New Zealandʼs second customer.

The Secretary asked what percentage of New Zealandʼs GNP is devoted to defense. Holyoake said it was a small percentage. Then, the Secretary said, New Zealand is in effect being subsidized so far as defense is concerned.

In a sense this is true, Ambassador Corner admitted, but he said there are New Zealanders who would and do argue that small remote New Zealand needs no defense, is in no danger, that if she is in danger of attack it is only because of her association with the U.S. Ambassador Corner said that this kind of thinking is of course rejected by the GNZ. It is deceptively plausible, however, and is making significant inroads among intellectuals. It can spread unless the U.S. takes deliberate steps to create closer bonds between the two countries (mainly, he implied, through a special economic relationship).

The Secretary remarked that this fallacious line of argument—to the effect that if we just stay at home and mind our own business we have nothing to worry about—is heard in the U.S. also and has greater seeming validity here because of independent defensive capability. (Note: At a lunch he gave for Holyoake the day before, October 9, the Secretary had emphasized the importance of continuing to adhere to the concept of collective security. He told the Prime Minister that the U.S. was entering on a great public debate in which that concept would be set against a philosophy of reduced engagement in world affairs. He said the outcome of that debate would be influenced by the actions of other countries. The American people would want to see that others, too, were committed to collective security; they would not want to feel that the U.S. was expected to carry the burden of maintaining peace by itself. That is why the Australian and New Zealand contributions to the common cause in Viet-Nam are so important. That is why American public attitudes towards the war might be much different were the British with us in Viet-Nam—even with so little as a brigade.)³

1. Source: Department of State, S/S-Visits Files: Lot 70 D 418, V 70A. Secret. Drafted by Moore and approved in S on October 15. Bundy sent Rusk a briefing memorandum for this meeting on October 5. (Ibid). The meeting was held at Blair House and lasted until approximately noon. (Johnson Library, Rusk Appointment Book)
2. No other record of this meeting has been found.
3. Holyoake met with Deputy Secretary of Defense Nitze at the Pentagon on October 8 from 4:50 to 6:50 p.m. They discussed the war in Vietnam, increased U.S. defense procurement in New Zealand, the political situation in New Zealand, and the role that economic considerations were likely to play in New Zealand general elections in 1969. (Memorandum of conversation, October 9; Washington National Records Center, RG 330, OASD/ISA Files: FRC 72 A 1498, New Zealand 000.1 (333 New Zealand))