Story: Overseas trade policy
Page 3 – The post-war economy
General Agreement on Tariffs and Trade (GATT)
Talks held in 1948 established the General Agreement on Tariffs and Trade (GATT). This was a broad agreement amongst participating countries to negotiate reductions in barriers to world trade. New Zealand was one of 23 foundation members. For New Zealand the promise of GATT was that trade in agricultural produce would be freed up. This would make New Zealand produce cheaper overseas, and so more people would purchase it.
There were eight GATT ‘rounds’, beginning in 1947, but the first six (up to 1967) mainly tackled manufacturing tariffs, and agriculture was seen as a sideline. In fact, in 1955 the US secured a waiver from the GATT’s already weak agricultural provisions.
Butter for buses
Economic historian John Singleton summed up New Zealand’s dependence on trade with Britain after the Second World War: ‘New Zealand had a trading relationship in which butter and lamb were effectively swapped for Vickers Viscounts and Leyland buses.’1
Britain remains important
New Zealand’s major trade focus continued to be protecting its access to the British market. From 1944, with its own food resources severely depleted, Britain again committed itself to buying New Zealand’s exportable surplus of meat, butter and cheese. The agreements were renegotiated for seven years in 1948. However, bulk purchasing ended a year early, in 1954, as production recovered in the UK. The circumstances of the 1930s returned – New Zealand was anxious for secure access to the British market.
Britain also remained an important source of New Zealand’s imports. In the 1950s more than 50% of New Zealand produce received no preferential treatment in Britain, yet 90% of British goods got preferential treatment in New Zealand.
In 1958 New Zealand negotiated an agreement that gave it the option to reduce the preferential treatment given to British imports. However, it did not use this option because it was nervous of losing market access, and high levels of preferential treatment for British imports continued until the late 1960s. The net benefit of this arrangement to Britain in the early 1960s has been estimated at $540–$617 million per year (in 2008 terms).
Nonetheless, New Zealand did look for new markets. A market for meat was developed in the US, and in 1958 New Zealand signed a trade deal with Japan. In return for lower tariffs on Japanese imports and removal of other trade barriers, New Zealand received concessions for its exports of wool and meat to Japan. In 1965 New Zealand signed a free trade agreement with Australia, the first significant agreement since 1922. It worked for some products, such as cars from Australia and carpets from New Zealand, because those products didn’t threaten domestic industries in the other country. However, most other products were more politically fraught. Vested interests on both sides of the Tasman ensured that little progress was made in freeing up trade.