TNAG-0281-FCO40-317-Visit-of-the-Chancellor-of-the-Duchy-of-Lancaster-to-Hong-Ko-1970 — Page 44

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substantial markets other than Britain for these products. He emphasised that Japan did not offer good prospects as a market for New Zealand dairy produce except in the very long term. The Community had indeed frustrated New Zealand attempts to develop alternative markets by dumping butter in third countries, thus forcing New Zealand to sell in certain of these areas at prices well below the cost of production. Until alternative markets were available New Zealand should not be excluded from selling to the enlarged Community. New Zealand's difficulties in finding alternative markets would have to be taken into account in any review of the continuing arrangements sought by New Zealand. He naturally wished to have as long a period as possible between reviews, but this was for negotiation.

Elements of dairy products problem

7. There were four elements to the dairy products problem as New Zealand saw it.

These were:

(a) maintenance of New Zealand's present volume of trade in dairy products; (b) a bigger share of the British market for other members of an enlarged

Community;

(c) the need to avoid a drop in consumption in Britain;

(d) and the need to move slowly to harmonise price levels.

8. The Community would want price levels to be harmonised as early as possible. New Zealand wanted harmonisation to be as gradual as possible and if possible at a level lower than the present Community level. Mr. Rippon said that Britain wanted the longest possible transitional period for agricultural products. This transitional period would not however be long enough for New Zealand's dairy products. There was no point in having a transition to disaster. But no farmer could be guaranteed a market for fixed quantities for ever. A balancing act was needed between value and volume. The Six would want to know where they came in. Mr. Marshall explained that Britain currently imported approximately 100,000 tons of butter per annum from countries other than New Zealand which would be outside the enlarged Community. It should be possible to phase these suppliers out of the British market thus making room for an increase in supplies from the enlarged Community while still maintaining New Zealand's present volume of trade: but only if there was no undue drop in British consumption. The price of butter in Britain would go up sharply when harmonised with Community prices. It would perhaps be the biggest price rise of all. Sir Con O'Neill suggested that even on the assumption that British consumption were maintained at current levels, that the whole of the 100,000 tons were available, and that production from the Six remained static, there were two important and unfavourable factors to be taken into account, namely that British production would rise and so would that of the other applicants. Mr. Marshall doubted whether this was true of the Danes whose production was in decline. The Irish might but they had a relatively small base from which to expand. Mr. Marshall emphasised that the more gradual the process of harmonising prices the better the chance of limiting the drop in consumption. It might be possible to harmonise prices downwards as advocated by Dr. Mansholt. Mr. Rippon said that Britain would certainly argue for annual price reviews for agricultural products. Sir Con O'Neill reminded the Committee that Dr. Mansholt's arguments had so far met with no success. Mr. Marshall admitted that there were political obstacles but said that everybody, even the Six, agreed that Mansholt's economics were right. Consideration might be given to consumer subsidies. There was a greater argument for subsidies on butter than on most other foodstuffs. Mr. Rippon said he thought

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