It wasn't all sweetness and light

This commentary by Dr Jim McAloon first appeared in The Dominion Post on 12 July 2016.

Jim McAloon debunks the view that Britain and NZ were trade-mates before the EEC.

In the wake of the British vote to leave the European Union there has been a great deal of nonsense talked about Britain's pre-1973 trading relationship with New Zealand.

Winston Peters, UKIP's former leader, Nigel Farage, and the Daily Telegraph (Dominion Post, July 11) all describe Britain's decision to join the (then) European Economic Community (EEC) as a betrayal, and as the destruction of a happy relationship of mutual benefit.

When Britain did enter the EEC, New Zealand's trade minister Jack Marshall had secured a reasonable deal for this country's continuing access to British and other EEC markets.

More generally, Britain's trading relations with NZ were always governed by British selfinterest. NZ's economy was unstable in the 1920s and 30s partly because of excessive dependence on the weak British market. As a consequence, NZ's Labour government elected in 1935 developed plans for manufacturing industry along with its social welfare reforms.

In 1939, Walter Nash, the finance minister, had to negotiate the rollover of some large loans from Britain. The British government and the Bank of England threatened to refuse, as a way of pressuring the New Zealand government to abandon its welfare and economic policies.

The objection, of course, to New Zealand developing manufacturing industries was that British manufacturers would lose a captive market.

After 1945, the British government tried to shape NZ economic policy entirely to suit British economic recovery. NZ, like other Commonwealth countries, had exported vast quantities of material to Britain during the war and the earnings remained in London. British ministers demanded a free gift of a substantial share of these sterling balances and threatened to freeze New Zealand's account if they didn't get it.

This outright extortion was followed by continuing demands that NZ prioritise exports to Britain, because Britain could pay NZ in sterling, rather than scarce US dollars.

Worse, NZ was expected to purchase only minimal quantities of capital and consumer goods from Britain, so that Britain could export such things elsewhere for dollars - and NZ was also pressured to refrain from importing cheaper and better goods from America because that, too, would use dollars out of the t Commonwealth pool which Britain wanted for its own use.

The Labour government in NZ had to maintain politically unpopular rationing until its defeat in 1949.

B ritish bulk purchase of NZ farm exports ended in 1954 and from then NZ had to negotiate access. One limit on NZ exports was the increasing output of British farmers - a policy decision which was understandable in light of British vulnerability to blockade in time of war. Another was Britain increasing dairy imports from Scandinavia, Eastern Europe, and Ireland.

In 1957, the minister of agriculture, Keith Holyoake, had to threaten to end preferential treatment for British manufactured exports to NZ in order to secure continued free access for NZ meat and dairy produce to Britain. NZ access to Britain now had no price guarantee, whereas the British were guaranteed a certain share of NZ's import expenditure.

In 1958, Holyoake's successor, Labour's Jerry Skinner, had to repeat the threat in order to reduce British access to NZ so that trade deals could be negotiated with other countries. British ministers brushed aside New Zealand protests about other countries dumping dairy exports on the British market.

Matters did not improve during the 1960s. Britain continued to import dairy produce from NZ's European competitors. From 1961, NZ reluctantly accepted quotas on dairy exports to Britain as the only way of maintaining reasonable prices.

At the end of 1966, NZ's wool prices crashed, and, in the recession which followed, Treasury and the Reserve Bank urged Holyoake's government to devalue the New Zealand currency (in those days exchange rates were fixed).

Devaluation would have increased exporters' incomes and reduced import spending; whatever its merits, Holyoake procrastinated. One reason for his indecision was British lobbying against devaluation: it would raise the price of British goods in the NZ market, and reinforce pressure to devalue sterling itself.

Holyoake only agreed to devalue once the British succumbed to the inevitable and devalued sterling in November 1967. By succumbing to British pressure, Holyoake lost a chance to shape the discussion about NZ's economic future.

Clearly, NZ's economic relationship with Britain before 1973 was no lost utopia, and it is long past time that the myth of 1973 as a betrayal was given a decent burial.

Jim McAloon is an associate professor in history at Victoria University, where he teaches New Zealand history.