Underarm bowling and Australia-New Zealand trade

John Knight, University of Otago

When New Zealand apple growers recently staged a protest about perceived New Zealand Government inaction on Australia’s 84-year ban on imports of New Zealand apples, they bowled apples underarm beneath the gate of the Australian High Commission in Wellington. This gesture alluded to the infamous cricket incident of 1981, when Australian captain Greg Chappell ordered the bowler (his brother, Trevor) to bowl underarm to avoid the (unlikely) possibility that the New Zealand batsman would score a six from the last ball to tie the match. Australia won the game but at what cost? According to the Melbourne Cricket Ground website:

New Zealand Prime Minister Robert Muldoon called it, ‘the most disgusting incident I can recall in the history of cricket’, and ‘an act of cowardice’. Australian Prime Minister Malcolm Fraser called it, ‘contrary to the traditions of the game’. Greg Chappell’s decision was universally condemned (Melbourne Cricket Ground 2005).

Australia’s newly appointed agriculture minister, Peter McGauran, seems in need of educating about this past event and about the spirit and intent of the Australia New Zealand Closer Economic Relations Trade Agreement (CER). Mr McGauran would do well to heed the long lasting feelings of disgust (on one hand) and embarrassment (on the other) resulting from the unfairness of the cricket incident.

Total free trade in goods and services was achieved in 1990—with some exceptions.

The CER agreement came into force in 1983 (New Zealand Ministry of Foreign Affairs and Trade 2003). Under this agreement, total free trade in goods and services was achieved in 1990 (five years ahead of schedule) with the elimination of all tariffs and quantitative restrictions except for five product sectors subject to special exemptions under the Trans-Tasman Mutual Recognition Arrangement. These sectors are therapeutics, hazardous substances, motor vehicles, gas appliances, and radio communication standards. New Zealand and Australian service providers can provide services in each other’s markets without any restrictions on the basis of a ‘negative listing’ approach. New Zealand retains only two inscriptions (airway services and coastal shipping) and Australia six (air services, broadcasting and television (x2), third party insurance, postal services and coastal shipping) (New Zealand Ministry of Foreign Affairs and Trade, 2003). According to former leader of the Australian Liberal Party, John Hewson, writing in the Australian Financial Review in 2000: ‘We now have the cleanest free trade area in the world’. However, this is still not a level playing field, and the new Minister of Agriculture appears bent on tilting it even more unfairly in Australia’s favour.

Mr McGauran is quoted in a New Zealand Press Association release of 4 July 2005 as going ‘on the offensive’ because McCain Foods is sourcing potatoes from New Zealand to supply McDonald’s in Australia. Furthermore, he warned of a ‘disturbing trend for the two dominant supermarkets (Woolworths and Coles Myer) to use cheap imports for their house brands rather than Australian products’. The CER agreement commits the two countries to ‘develop trade between New Zealand and Australia under conditions of fair competition’ (Department of Foreign Affairs and Trade 1997), so the Minister’s comments seem contrary to the spirit and intent of this agreement.

Perhaps Mr McGauran was unaware that Australian-owned Progressive Enterprises has a 45 per cent market share of the New Zealand supermarket sector. New Zealand supermarkets are brimming with Australian produce and this is reflected in the enormous trade imbalance between the two countries. According to official Australian figures, Australia exported A$3.563 billion more to New Zealand than it imported from New Zealand in the 2004 year (Department of Foreign Affairs and Trade 2004). This figure illustrates the gross unfairness of Mr McGauran’s ‘Buy Australian’ calls, which amount to a non-tariff trade barrier for New Zealand.

Non-tariff trade barriers have proven difficult to overcome.

Australian processing company Simplot Australia’s managing director Terry O’Brien, complaining about imports of New Zealand potatoes, was reported as saying: ‘New Zealand is our biggest threat. They have lower farm-gate prices, they have lower labour rates and they have a foreign exchange advantage’ (Tourelle 2005). The irony here is that the so-called ‘Australian processing company’ appears to be a wholly owned subsidiary of American-owned J.R. Simplot Corporation. According to the homepage of this company: ‘The J.R. Simplot Company is a privately held food and agribusiness corporation based in Boise, Idaho. We employ approximately 10,000 people in the U.S., Canada, China, Mexico, and Australia’ (Welcome to Simplot.com 2004).

The World Trade Organization (WTO) has made significant progress in reducing tariff barriers that impede world trade. However, non-tariff barriers have proven much more difficult to overcome. Product standards, legitimately used by countries to protect public health and safety or ensure product quality in the interests of consumers (Taylor et al. 2003), have frequently been used as technical barriers to trade while pretending to be consumer protection measures. According to Roberts (1998) ‘the disingenuous use of technical measures can be a non-transparent means of providing protection for domestic producers’. The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement), part of the Uruguay Round, allows members to take measures that protect human, plant and animal health, so long as these measures are based on scientific principles and do not act as a trade barrier in disguise.

The ongoing Australian ban on importation of New Zealand apples under the pretext that they constitute a threat of spreading fire blight disease is a prime example of unfair trade practices on the part of Australia (Knight 2005). In 2003, the United States (with New Zealand as a Third Party) took Japan (with Australia as a Third Party) to the WTO Dispute Settlement Body regarding this disease. The WTO ruled that ‘the scientific evidence suggests a negligible risk of possible transmission of fireblight through apple fruit’ (World Trade Organization 2003).

Despite this ruling, Australia has maintained its ban. New Zealand Minister of Agriculture Jim Sutton has said: ‘Australians cheat in matters of biosecurity, and the concept of honest science has no meaning there’ (‘Sutton angry over Aussie apple panel appointment’ 2002). The Australian Department of Agriculture, Fisheries and Forestry revisited the issue, publishing a 565 page draft Import Risk Analysis (IRA) in 2004. In addition to fire blight, this assessment considered seventeen insects, one mite and two fungi that are either not known to occur in Australia, or do not occur in parts of Australia. This IRA recommended that importation of fresh apples from New Zealand be permitted subject to a list of conditions that seem very similar to the Japanese measures that the WTO had already ruled against. For example, the IRA proposed that fruit must be treated with a combination of chlorine and cold storage for six weeks prior to shipment. Despite this, the ban continues and Australian lobby groups have argued vociferously for it to continue. In June 2005 the New Zealand Government lodged a complaint against Australia at the WTO Phytosanitary Committee (‘National would be tougher on apple dispute, says Brash’ 2005).

Despite a WTO ruling against it, Australia has maintained its ban on the import of apples from New Zealand.

Digby Gascoine has discussed what Australia has (or should have) learned from the earlier salmon case brought by Canada against Australia at the WTO, which ruled against Australia. He observed ‘the SPS Agreement, backed by the WTO dispute settlement procedure, is capable of exerting very substantial discipline over the design and implementation of quarantine restrictions by WTO member countries’ (2000). Furthermore, he noted ‘an imponderable is the cost to national reputation if a WTO dispute settlement proceeding finds against a defendant WTO member’.

Australia has claimed to be a champion of free trade in the form of leadership of the Cairns Group of agricultural exporting nations. Alan Oxley, the former Australian Ambassador to GATT (the predecessor of the WTO), who played a key role in founding the Cairns Group says:

‘Australia’s trading partners believe that Australia officially politicizes quarantine management to protect the domestic market for Australian producers. This undermines a reputation Australia once had …. It also creates a hostile environment for Australia to pursue its international trade interests’ (Oxley 2004).

Indeed, the European Union, which has been regarded as the ‘villain’ in many international trade disputes, has been quick to take advantage of the resulting weakness in Australia’s international standing. The EU’s Trade Commissioner, Pascal Lamy, has said: ‘Australia has built a quarantine system which is highly efficient at blocking the import of agricultural products … flagrantly breach[ing]) WTO rules, despite Australia’s claims to be the only beacon of free agricultural trade’ (Welch 2005).

It is surely time for Australia to begin restoring its tarnished reputation in these matters and to practice the fine words of its national anthem.

References

Department of Agriculture, Fisheries and Forestry 2004, Importation of Apples from New Zealand: Revised Draft IRA Report, Canberra [Online], Available: http://www.affa.gov.au/content/output.cfm?ObjectID=C6CCFA89-C22B-4F38 [2005, Jul 13].

Department of Foreign Affairs and Trade 2004, New Zealand Fact Sheet [Online], Available: http://www.dfat.gov.au/geo/fs/nz.pdf [2005, Jul 13].

Department of Foreign Affairs and Trade 1997, Closer Economic Relations: Background Guide to the Australia New Zealand Economic Relationship, Commonwealth of Australia [Online], Available: http://www.dfat.gov.au/geo/new_zealand/anz_cer/cer.pdf [2005, Jul 13].

Gascoine, D. 2000, WTO dispute settlement: Lessons learned from the salmon case, paper presented at the Conference on International Trade Education and Research: Managing Globalisation for Prosperity, Melbourne, 26–27 October.

Knight, J. 2005, ‘Advance Australia fair? The anatomy and pathology of an 84-year trade dispute’, Journal of Public Affairs, forthcoming.

Melbourne Cricket Ground 2005, Cricket: The underarm incident [Online], Available: http://www.mcg.org.au/default.asp?pg=historydisplay&articleid=194 [2005, July 13].

‘National would be tougher on apple dispute, says Brash’ 2005, New Zealand Herald 23 June [Online], Available: http://www.nzherald.co.nz/index.cfm?c_id=3&ObjectID=10332278 [2005, July 13].

New Zealand Ministry of Foreign Affairs and Trade 2003, The Australia New Zealand Closer Economic Relations CER, Trade Agreement: 1983–2003 Backgrounder [Online], Available: http://www.mft.govt.nz/foreign/regions/australia/cer2003/cerbackgrounder.html [2005, Jul 13].

Oxley, A. 2004, Management of Australia’s quarantine system – concerns and future challenges, paper prepared for submission by Pipfruit New Zealand to the Senate Rural and Regional Affairs and Transport Committee Inquiry into the Administration of Biosecurity Australia – Revised draft import risk assessment for apples from New Zealand [Online], Available: http://www.aph.gov.au/senate/committee/rrat_ctte/apples04/submissions/sub33.pdf [2005, Jul 13].

Roberts, D. 1998, ‘Preliminary assessment of the effects of the WTO agreement on sanitary and phytosanitary trade regulation’, Journal of International Economic Law, vol. 1, no. 3, pp. 377–405.

‘Sutton angry over Aussie apple panel appointment’ 2002, Dominion, 15 January, p. 2.

Welcome to Simplot.com 2004 [Online], Available: http://www.simplot.com/ [2005, Jul 13].

Taylor, C., Walsh, M., & Lee, C. 2003, ‘The US/EU beef controversy and a proposed framework for resolving standards disputes in international trade’, Journal of Consumer Affairs, vol. 37, no. 1, pp. 101–113.

Tourelle, G. 2005, ‘New Australian farm minister heightens anti-NZ stand’, New Zealand Herald, 4 July [Online], Available: http://www.nzherald.co.nz/index.cfm?c_id=1&ObjectID=10334133 [2005, Jul 13].

Welch, C. 2005, ‘Science or protection? Australia’s quarantine regime and the WTO’, in Casebook in international business: Australian and Asia-Pacific Perspectives, eds P. Ramburuth & C. Welch, Pearson Prentice Hall, Upper Saddle River, NJ, pp. 78–81.

World Trade Organization 2003, Japan - Measures Affecting the Importation of Apples – Report of the Panel, 15 July [Online], Available: http://www.worldlii.org/int/cases/WTOP/2003/8.html [2005, Jul 13].

Dr John Knight is a lecturer in marketing at the University of Otago School of Business. His paper entitled ‘Advance Australia Fair? The Anatomy and Pathology of an 84-Year Trade Dispute’ is about to appear in the Journal of Public Affairs.