CER: Twenty years after
The Hon. Hugh Templeton gives an insider's account on the history, formation, nature and future of the New Zealand and Australian Closer Economic Relations Agreement.

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Why CER?

Australia and New Zealand are Trans Tasman partners. There is no one else. CER sprang from that regional relationship, a close family relationship. Twenty years ago a CER free trade relationship became an imperative for New Zealand. Our Nafta partial free trade agreement with Australia had run into the sand. A new world was emerging.

• Britain had entered the European Community.
• Commodity Prices had fallen permanently.
• The two great oil shocks had led to a shift in the balance of power.
• Investment in new plant and technology for regional and global markets required economies of scale that only a regional market could provide.

Failure to act would leave New Zealand isolated just as the new communication technologies overcame the tyrannies of distance.

Concept

The aim was a comprehensive Free Trade Agreement. We had the example of a Scandinavian free trade area. A CER would assist the development of New Zealand Industry. It would then provide the basis for a customs and Economic Union like that of the EU. With an ANZCER in place we could negotiate a regional link with our closest regional neighbours in Asean.

As the New Zealand Minister in charge of negotiations I was fortunate to work with Doug Anthony in Australia. He shared my view about the absolute urgency of securing a CER and then moving on to a free trade relationship with Asean. This was not the case with many of my colleagues, particularly my Prime Minister, Rob Muldoon who delayed CER at critical points.

The Imperative

After World War II neither Australia nor New Zealand had pursued the regional cooperation implicit in the 1943 Canberra Pact. In 1965, faced with difficulties in securing markets for our plantation forests, Jack Marshall had negotiated with Black Jack McEwen, a partial free trade agreement in Nafta.

By 1979, despite the Fraser Tallboys Nareen Declaration of 1978 promising greater cooperation, the Nafta was bogged down. Doug Anthony indicated he would walk away from the Nafta agreement.

The fall of the Shah in January 1979 created the imperative for action. We had to extend the deal or Australia would leave New Zealand on its own. Nobody moved. So I took Australian advice and as Minister of Customs took responsibility at Manila in May 1979 for opening negotiations with Malcolm Fraser.

Fraser was keen. The aim should be full free trade. A customs union and an economic union were “not out of reach”. But “I am not going to have it said that we forced you into anything. You must take the lead.”

Action

Returning home in 1979 I made a speech at the Chamber of Commerce calling for a CER with Australia. Some of my colleagues were angry, but the PM said nothing.

The Australians took this Ministerial speech as a green light and sent the Hon. Vic Garland to press the case for building on the Nafta. Muldoon remained cautious and sceptical although in 1980 our officials made real progress in preparing a full free trade Treaty as the basis for a new relationship.

At the first Ministerial talks in March 1980, Fraser stressed that a free trade area would express “ a partnership” that made sense. The New Zealand Prime Minister would not accept that an agreement was more than a possibility. In his 1980 Budget Muldoon even hinted at abandonment. He allowed the negotiations to spill over into 1981, an election year. Despite this our negotiators made real progress on the for New Zealand difficult area of manufacturing and for Australia on dairy and wine. By mid 1981, with Anthony leading the way, we had a basis for completing an ANZCER Treaty.

Stalemate

In a volatile election year, despite support in his caucus, Muldoon refused to advance. He put off action until 1982. He cost the country a year of start up time and, in a closely run election, nearly lost his administration, and the credit for CER.

In 1982 we found it was the Australians who were balking. Anthony pressed me to go over the Canberra to sell the concept to his doubting colleagues. By March New Zealand desperately needed CER to break out of the shackles of our tiny isolated country.

How best to do this? I decided to use Fraser’s “fair go concept” and involved governments and oppositions, parliaments and committees, business and press and the public on both sides of the Tasman, in Canberra and in the States, even going separately to talk to farmers in Tasmania to make the case for ANZCER.

In March 1982 CER had been in the balance. Australia, which had said clearly “it was not going to dig out the New Zealand economy”, then accepted that both sides would gain.

With this success I expected to be able to sign the Treaty in June 1982, when the Prime Minister went to Sydney. But throughout 1982 he hesitated and delayed until final negotiations in October enabled us to sign Heads of Agreement in December.

Even then his delays might have lost both sides the prize. When the Fraser Government called an election in February 1983, the Australian Labour Party refused to allow signature. Fortunately when the Hawke Government took power they accepted the ANZCER Treaty.

Regionalisation and a Trans Tasman Community

So after much effort, many hesitations and some costly delays, Australia and New Zealand laid the basis for a Trans Tasman Community and ultimately for a wide Austral Pacific Community that could establish regional links with Asean and other groupings. Here much work needs to be done for the future of both countries.

Since 1945 regionalisation has become a world side phenomenon. It is a key component of internationalisation and globalisation. It is specially important to New Zealand as a small country for our own social and economic progress and in the struggle, as with the EU, against its adverse impact on our traditional markets.

Institutionalisation

Now that CER has proven its value New Zealand needs to progress with the Australia the advantages for both countries of an Economic Union. We need to look at ways of limiting the disadvantages of our small size, and the limitations of our currency as the major currencies in America, Europe and Asia develop. The logic of Free Trade always was to move through a Customs Union, to a Common Market.

The longer we delay the more difficult it becomes. Strategically as the world moves on and the Americas and Asia follow Europe in regionalisation, the small Trans Tasman community needs to come together regionally. The history is interesting. 15-18 years elapsed between Nafta in 1965 and CER in 1979-83. It’s now 20 years since CER. Why wait for crises, as in 1965 over forestry, and then in 1979 over the second oil shock, to strengthen both countries and the region.

Where Now?

Australia and New Zealand would strengthen themselves in establishing an integrated regional grouping. It would provide the basis for more effective regional cooperation in the arc of instability to the north. It would assist in facing up to the challenges of globalisation in a world economy. In short in anticipation of longer term moves to global currencies, already being talked about, the Trans Tasman community should move this decade to a full Economic Union with a common currency and joint Reserve bank. This would reflect the coming together of our two economies and our banking and insurance systems in a way that would at the micro level lower transaction costs and at the macro, strengthen both countries in a demanding world.

Hon. Hugh Templeton hntemp@paradise.net.nz

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