The Economic Relations Agreement Between Australia and New Zealand: A Tentative Appraisal

The New Zealand-Australia Closer Economic Relations (CER) Trade Agreement was signed in 1983, its goal being to establish a zone where most trade between the 2 countries would be free of tariff and quantity restrictions. The central feature is that CER automatically includes all traded items unless specifically excluded. Both Australia and New Zealand have small, mostly localized manufacturing sectors and are highly dependent upon agricultural or other primary production. Average New Zealand weekly wages are substantially lower (65%-80%) than those in Australia. The costs of other factors of production are relatively similar in the 2 nations, but the Tasman Sea remains a natural barrier to trade and investment relocation. Since CER, trade between Australia and New Zealand has increased noticeably. However, trade within CER has grown only marginally faster than trade with outside countries. New Zealand companies appear to be more interested in exploiting the opportunities under CER than Australian companies.