Jim Sutton Speech To Fed Farmers

Hon Jim Sutton Speech Notes 21 November 2001

11.30am, 21 November 2001

Federated Farmers Council meeting, Wellington

Chairman Alistair Polsen, chief executive Tony St Clair, ladies and gentlemen: thank you for the invitation to speak with you today.

It's only a week ago that I was seeing Alistair and Malcolm Bailey twice a day - morning and night - at the World Trade Organisation meeting in Doha, Qatar. I almost expect them to show up at my office at 8am and 6pm every day?.

Ladies and Gentlemen: it's the WTO meeting I want to speak about with you today.

New Zealand did outstandingly well.

We succeeded in working with various groups of other WTO members in persuading all the141 other members to support a text that will form the basis of the negotiations that will now start. That text includes a significant number of issues that were important for New Zealand.

First and foremost was the inclusion of the phrase "phasing out" of agricultural export subsidies.

For New Zealand and other agricultural exporting nations in the Cairns Group, that phrase had to stay. We would have preferred the word "elimination" - but the Europeans would not wear that. For a while, it looked like the French and Irish members of the European Union would not wear "phasing out" either - they threatened to walk out, blocking the launch of a new round. I had a few stiff words to say at bilateral meetings with the French and Irish ministers, I can tell you. Although I think Alistair might have told you about that already.

As we told the Europeans, they are already reducing some agricultural subsidies, and the chances are that they will do a lot more in the next few years as the membership of the European Union grows and the Common Agricultural Policy undergoes urgent restructuring.

The Qatar text is, after all, only the basis for negotiations - it's not the end-point. We have another four years of fierce negotiations to go before we'll see a final result for all this work. But if sectors are to be included in those negotiations, we have to get them on the table right at the start.

That's why I am delighted to have references to phasing out agricultural subsidies and improvements to market access for agricultural goods in this text. It's a good starting point.

Now the Cairns Group of agricultural trading nations and the developing world can work together to see progress on this vital issue.

Agriculture was left out of international trading reform for more than 50 years. It made it onto the agenda for the first time for the Uruguay Round. But it is still a long way behind manufactured goods.

The average bound tariff rate for manufactured goods has fallen from 50 per cent to less than 4 per cent during the past 50 years, the average bound tariff rate for agricultural products is still more than 40 per cent.

It's time to have a catch-up for agriculture. It's time countries from the Cairns Group and from the developing world benefited from the international trading system the way industrialised nations have.

At Doha, European ministers were always asking why we wanted special treatment for agriculture in these negotiations. We're not. We're asking for nothing more than to have agriculture treated in exactly the same way as other sectors are treated already.

New Zealand, Australia, other Cairns Group members, and the developing countries (many of whom have up to 80 per cent of their workforce engaged in food production) need market access on fair terms.

We are well aware of the European Union and Japanese positions on the need for agricultural protection and subsidies, which they base on a concept called multifunctionality. That holds that it is acceptable to give farmers trade-distorting subsidies, because they will then provide environmental measures for the countryside, maintain rural employment, and similar things. Of course, this impacts negatively on efficient agricultural exporters such as New Zealand - a fact that has concerned the subsidizing countries not one jot.

These multi-functional features of agriculture , of course, are legitimate areas for public policy. Cairns Group members are also concerned about the environment, the need to maintain rural employment, and to keep the countryside attractive. But if you want your rural areas' fences painted white or your hedgerows trimmed, then pay farmers subsidies to do those things. Don't pay them production subsidies in the hope that some of the money will be spent on paint.

It is quite clear that such subsidies encourage European farmers to inefficiently produce in quantities not wanted by their consumers. That surplus production is then dumped into international markets, with the assistance of further explicit export subsidies. This naturally depresses prices for unsubsidised farmers in other countries.

We need to stop that. Agriculture needs to be treated as other products are, so that we can all concentrate on producing what we do best. And on producing things consumers actually want.

You can be proud of the team that formed the New Zealand delegation.

Not only did they work extremely hard to achieve the inclusion of the phasing out of agricultural subsidies, but they also won the inclusion of a commitment to eliminate fish catch subsidies.

New Zealand, as convenor of the "Friends of Fish" group at the WTO, has led the way on this issue since 1997. It has been a hard fight, again against the Europeans, Norway, Japan, and Canada, but this result holds real promise.

The global fishing industry is worth about US$50 billion a year - 20 per cent of that in subsidies.

If we can wind back subsidies to fishing industries, it will be good for fisheries exporters such as New Zealand, good for developing countries competing agains subsidised rich country fleets, and above all, good for fish stocks being ravaged by subsidised overfishing.

Perhaps the proudest New Zealand achievement was to broker the ice-breaker deal of the conference - the TRIPS agreement which enables poor countries to use cheap, generic drugs to fight public health emergencies, such as the HIV-AIDS scourge.

That was the first sector to reach agreement at the Doha conference, and our people were right in the middle of it.

No wonder WTO director-general Mike Moore describes New Zealanders as the master race to anyone who will listen?.

The results from the Qatar development round are still someway off, perhaps four years away.

But there are tangible results already from the Doha meeting. The accession of China and Taiwan, which will come into force in about a month, means significant benefits for us.

The membership packages negotiated with both economies means benefits of about $100 million in tariff reductions, based on current trade levels. That's not to be sneezed at.

And we don't have to do anything - we don't have to lower our tariffs an iota - no jobs here are at risk because of China and Taiwan joining the WTO.

There is a lot of confusion out there in the community about what our trade policy is.

Let me repeat it again, the Labour-led Government is not a free trader. We are not going to reduce our tariff barriers unilaterally, just because some ideology says we should. We do not believe in unregulated free trade, in the law of the jungle.

Quite the contrary.

The New Zealand Government promotes rules-based trade liberalisation, both here and internationally. It is the only way a small economy such as ours can force large economies to play fair - the way the United States was forced to drop unfair safeguard measures on our lamb exports, and the way Korea was forced to drop unfair barriers to our beef exports.

We also promote the linkage of trade and labour, and trade and the environment, to ensure that the WTO takes account of the work of other international organisations in its own negotiations. Trade doesn't happen in a vaccuum.

Both within the WTO and within many other international fora, New Zealand works hard to promote the improvement of living standards throughout the world. That means promoting the rule of law, enhancing peace, and fostering innovation.

New Zealand lives by trade. We need vibrant, healthy trading partners throughout the world in order to do well ourselves.

We have a strong interest in ending war and civil unrest in other countries, in seeing them develop good legal systems that can protect their citizens and ensure that businesses obey the rules. Poor people who have been forced from their homes by war don't tend to buy our exports.

Ladies and Gentlemen: this is a very internationally oriented speech.

But as farmers, who produce 80 per cent of your output for export, you know full well how important international events and trends are for your business.

Thank you for your attention today, and I look forward to answering any questions you may have.

Office of Hon Jim Sutton

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