Should we have free trade between Australia and New Zealand? Dicussion paper no. 1
November 16, 2000
The' object of this paper is not to suggest how we may narrow the trade deficit of New Zealand with Australia, but to examine possible changes in trade policies with the objects of improving the efficiency of the two economies, speeding up rates of growth, and improving the standards of living of the growing populations. Co-operation in trade policies has not been great in recent years, despite the trend towards regional free trade in other parts of the world.
Free trade between Australia and New Zealand could stimulate efficiency through increased specialisation, through economies of scale, and through increased competition. The costs of economic integration-uneconomic trade diversion, and disruption of industry and farming-are unlikely to be high. Barriers to trade could be eliminated gradually, overseas investment in New Zealand would be stimulated by greater efficiency, and the capacity of New Zealand to export to Australia would be increased.
There is a prima facie case for increased specialisation and exchange between Australia and New Zealand, and a partial test of the desirability of free trade could take the form of freeing trade in some groups of products.