Anderton: UK National Farmers Union Conference
Anderton addresses UK National Farmers Union Annual Conference
Anderton today praised New Zealand farmers and their innovation at the UK National Farmers' Union Annual conference in Birmingham.
Thank you for the opportunity to talk to you about New Zealand's perspective on agriculture. Our land-based primary sectors - agriculture, horticulture, and forestry - together represent eighteen percent of New Zealand's gross domestic product. No other developed economy is as dependent on exports of primary products. We have a comparative advantage in pastoral-based agriculture.
Our temperate climate allows relatively low input costs compared to some other livestock production systems. Our agricultural industry is the only major sector with world-class economies of scale, global market reach and world leading technology.
Our economic success therefore depends, to an extent unlike any other developed country, on the success of our agricultural sector. We are continually seeking productivity gains. Indeed, productivity gains in the primary sector over the last fifteen years have outstripped productivity in the wider economy by a ratio of 2:1.
We also face considerable obstacles: We are small and geographically isolated. If you draw a two thousand-kilometre circle around us today, here in Birmingham, you will take in 350 kilometre European consumers. UK farmers have on their doorstep twenty-four countries they can freely export to without tariffs.
If you draw the same two thousand kilometre circle around Christchurch, where I live, it will cover four million people, together with some penguins and fish.
Our only industry to have overcome the tyranny of distance and achieved global scale is our primary sector.
We export 95 percent of our dairy production, over eighty percent of our meat production, and similar proportions of our key horticulture products. It seems obvious that we would not be able to afford to subsidise the industries that provide the bulk of our income.
But we had to learn the hard way.
We used to provide subsidies per head of livestock and we ended up with seventy million sheep. Not enough of our production was market led. I used to call it our 'family benefit' for sheep.
The process of adjustment was not easy but today sheep farming is highly profitable, with more and higher quality sheepmeat produced from not much more than half as many animals.
The average lamb carcass weight is now over sixteen kilograms, with consequentially higher returns to farmers. There are lessons, however, from the adjustment costs we experienced. We learned it's important to recognise early when change is necessary and to begin to make changes before they are imposed through a sharp shock.
When we prepare carefully for the inevitable, we can ease the process of transition. Our agriculture is now customer focused.
In the global trading environment, our customers' key concerns are price and quality. Productivity gains are vital to reducing costs. Innovation is the key to rising productivity.
New Zealand has invested heavily in R&D, especially in genetics. Better breeding and better farm management have led to a lambing rate increase of twenty percent since 1990.
New Zealand now has an export industry in high quality genetic material.
There is also substantial investment in research into optimum feed as well as in processing techniques, such as robotic milking. The science content of agricultural products is often not very visible.
Looking at an apple does not reveal what complex varietal selection techniques went into creating it. The innovation is embedded in processes to develop agricultural produce rather than the products themselves.
So, compared to a cell phone, a lamb chop doesn't seem a high tech product, but the biological science and techniques used in the production process can, in fact, be very high tech.
While New Zealand is a relatively low cost producer of horticultural and pastoral based agricultural products, we are facing increasing competition from lower cost producers - particularly in Latin America and Asia.
Brazil, in particular, is an increasing competitor as it harnesses its productive potential. Brazil's growth is often raised in Europe.
New Zealand believes it is only fair for the global trading environment to allow Brazil and others to make best use of their own competitive advantages -- just as we expect to. The rise of competitors means neither New Zealand nor the UK can rely on lower prices alone for our sales success. Our products need to be better quality.
If our profitability is to grow, we need to move from bulk commodity production to niche products that command a premium.
In New Zealand, our dairy companies are inventing high-nutrition sports drinks.
The horticulture sector is developing high value plant varieties like Zespri Gold kiwifruit and Jazz apples.
Products need to be market led. Markets change of course - once our customers had the time to roast whole legs of frozen lamb. Few will cook a roast as often today. Consumers are increasingly seeking ready-to-cook diced lamb in sauce, chilled and vacuum packed. So this is what our agricultural producers must supply. In just over a decade, NZ lamb exports went from eighty percent frozen carcasses to 95 percent cut to specification and retail ready.
Customers are also asking searching questions about production processes. For example: Have our products been produced sustainably and ethically, with high standards of animal welfare?
New Zealand and British farmers must meet the same high standards on these aspects because we have the same customers. Both are well placed to provide evidence that they meet these expectations and earn customer loyalty. These requirements hold no fears for New Zealand producers.
We are capable of competing against anyone through our competitive advantage and innovation to produce attractively priced products, which consumers will want to purchase.
If the international playing field were even, our producers would be able to connect directly to customers around the world, and respond to market demand which was not distorted.
Consumers would enjoy considerable benefits.They would enjoy access to a wider range of products with varying prices and attributes. This is what we want from the global trading environment. But it's not the current reality. New Zealand farmers face high tariffs and unfair competition in markets from highly subsidised goods. We battle spurious technical regulations, like those preventing our wine labels from telling consumers what grape varieties have been used.
Norway's duty on beef, expressed as a percentage, is over 600 percent, while Japan charges 360 percent on butter. It is nearly impossible to quantify the losses to New Zealand from these tariff and non-tariff barriers. There are so many markets and products affected. As an example, our horticulture sector estimates that its produce is subject to tariffs that equate to about 10% of its total revenue: a straight loss of potential income.
But even higher losses are caused because some tariffs are so high they make sales simply uneconomic.
There have been steps towards reform of world trade.
New Zealand recognises the substantial commitment that the EU has made towards the elimination of export subsidies. Likewise, the EU CAP reforms have been substantial.
New Zealand is working with the EU to ensure that the other major subsidiser - the US - also undertakes the meaningful reforms that are necessary to free up international markets.
Export subsidies and trade-distorting domestic support are two pieces of the puzzle that are being locked in during the current Doha Round negotiations.
Reductions in market access barriers must be another key deliverable from the current Doha Round of negotiations in the World Trade Organisation.
New Zealand is looking to the EU to improve its offer on market access. Removing the 'water' from maximum bound tariff rates, without impacting at all on actual applied rates, is just not good enough
We're also calling for other movements by majors. The US needs to do more on domestic subsidies. A number of developing countries should take more responsibility for reducing non-agricultural tariffs. But nor are we asking for 'give, give, give' on the part of the EU.
Exporters, including New Zealand, have made
We have agreed to a 'sensitive products' category - which provides a mechanism for continued protectionism for key products while still providing some room for competitive rates.
I also want to reassure you that we're not out to destroy your livelihoods or the European agriculture sector.
The vast majority of the EU market will remain in the hands of EU domestic producers following this Round. But your consumers are entitled to the products we can bring them. All we are looking for is some improvement that will allow New Zealand and many developing countries to gain from trade in the same way as Europe has in the industrial production area for many decades. Your consumers would benefit.
There would be efficiency gains and innovation in the European agriculture sector. And improvements in market access in other important markets, such as the US and Japan, would offer new opportunities to European farmers.
The WTO is New Zealand's number one priority in international trade because of its potential contribution to our future prosperity. New Zealand is also pursuing bilateral and regional trade agreements as the Round has made slow progress.
New Zealand is not seeking improvements to the agricultural trading system purely out of self-interest. We have already removed all tariff and access barriers to trade with the 'least developed' nations.
We also all have an interest, and a duty as good global citizens, to ensure that this 'development round' lives up to its promise. There has never been a time when the messages from our communities have been clearer that we need to do more to lift countries out of extreme poverty.
There are some spectacular claims being made about the desire of some countries to do more. But the very best difference we can make to improve the livelihoods people in impoverished countries is to provide real economic development and commercial opportunities.
Allowing farmers in developing countries to participate in global agricultural trade will increase their incomes and help to lift millions out of poverty.
The IMF has estimated the potential gains from a successful Doha round at USD$167 billion. The European Commission has criticised the Cairns Group, of which New Zealand is a member, for aiming too high in the negotiations. It has claimed developing countries would be better off opposing trade liberalisation.
I believe in letting the facts get in the way of a good story. Developing countries make up the majority of the Cairns Group: fifteen out of the eighteen members are developing countries. And we work closely with another very large developing-country group, the G20.
I'm well aware that Governments facing significant policy changes in sensitive areas are in a difficult position. I understand the desire of governments to avoid causing pain to their citizens during the transition period.
The early part of my political career was spent criticising the way these issues were handled in New Zealand. And believe me we made many mistakes and you need to learn from them. But you won't find anyone in New Zealand who now argues they should not have been addressed at all.
The lesson instead, is that the sooner change is made, (and the better it is managed), the sooner you can benefit from the outcomes to produce positive results for everyone. The more you put off the date when change is made, the more brutal it may be when it does come.
I acknowledge that the EU is well on the way to less trade distorting support for farming. This and other reforms undertaken since the Uruguay Round, mean that the EU is well placed to contribute to an ambitious outcome in the negotiations.
New Zealand is calling on the major distorters to do the right thing by their consumers and by developing countries. They need to take a leadership role in reaching agreement. They need to make further offers in their defensive areas so that an outcome can be reached that everyone can sign onto.
Yes...the US will need to do more
on domestic subsidies reform.
Yes...India and Brazil will need to do more on opening their markets to non-agricultural exports.
But these should not be allowed to distract from the key to the round: Agriculture. There needs to be a substantial improvement in agricultural market access.
Success in this Round is critical for the development agenda, for companies and consumers -- and for the long-term health of the multilateral trading system. There is a lot at stake.
New Zealand farmers have overcome immense disadvantages in our distance from markets. But our innovation, our natural competitive advantage and our consumer led business practices give us an excellent product.
It is asking too much to ask countries like New Zealand to overcome the unfair barriers erected when we bring our high quality products to market. More open and accessible markets will benefit all nations, and all nations must accept that meeting the challenge to succeed in this endeavour is a responsibility for us all.
Thank you for this opportunity to outline the issues before us from New Zealand eyes. May I wish you well for this conference and for successful years ahead.