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Goff: Speech to New Zealand Meat Board AGM

Hon Phil Goff
Minister of Trade

11 March 2008

Speech Notes

Speech to New Zealand Meat Board AGM

I have been asked to outline some of the trade challenges facing the industry, outline progress being made in our current bilateral trade negotiations and provide an update on the World Trade Organisation Doha Round.

Can I first acknowledge the importance of your industry to New Zealand.

Agriculture accounts for more than half of all our merchandise exports.

Meat is worth more than $5 billion dollars a year in earnings.

As producers you are market driven, unsubsidised and highly competitive.

Innovation and technology keep you ahead of competitors.

The Prime Minister’s announcement today of a huge investment in the long-term science base capability, environmental performance and global competitiveness of New Zealand’s pastoral and food industries will be of real assistance in this regard.

Change is necessary in the Industry. The current season could be one of the toughest in fifty years. While beef has performed comparatively strongly, confidence in sheep farming has been undermined by years of poor prices for lamb and wool prices at record lows.

The high New Zealand dollar has not helped, nor have high fuel and fertiliser prices and regional drought.

Yet the outlook for meat products looks to be a positive one.

Demand for protein in expanding economies like China is growing.

Higher global meat prices should also result from the major impact on land use of the move towards biofuels.

Because of this, land available for feed production is declining and increased costs are impacting on the feedlot cattle sector.

This benefits pasture-based farming. Consumer demand for healthier foods and lower fat content should also promote preference for grass-fed beef.

The rise of Latin American beef producers, especially Brazil, Argentina and Uruguay, and the lower cost of production in those countries poses a competitive challenge.

That puts a premium on New Zealand focusing on quality and meeting consumer demands for natural and sustainable products.

The slogan ‘food miles’ was an ill-disguised attempt by protectionist interests in the UK to exploit environmental concerns. However New Zealand’s more energy efficient farming should produce a lower carbon footprint for our products, notwithstanding distance travelled.
This provides a competitive advantage for us in terms of sustainability.

New Zealand of course continues to have to trade in a world where there are tariff barriers, quotas, behind the border barriers to trade and high agricultural subsidies.

Our preferred approach and first priority is to tackle these problems multilaterally through the WTO’s Doha Round negotiations.

Just like the Uruguay Round before it, it is tough going.
Any consensus based process faces the frustration of seeing pace and ambition set by the most reluctant and defensive interests.

However there are big advantages for small countries such as ours in having a rules based multilateral system. It provides us with leverage to remove trade barriers in countries which would always be reluctant to negotiate agricultural market access bilaterally with an efficient producer like New Zealand.

And when we get a result such as in the Uruguay Round, which provided us with about $1 billion in annual trade benefits, it can be a valuable one.

While small, New Zealand has had a marked influence on negotiations, through chairing the Agriculture Negotiating Committee and our presence in the Ministerial Green Room negotiations.

Key players have expressed the desire to try to reach an outcome in the WTO Round this year. We would need to have a Ministerial negotiation in the second quarter of 2008, to take advantage of a window of opportunity which will close with the US presidential elections in November.

At the Davos meeting this year there was a sense that we needed a global trade deal to bring certainty and confidence to financial markets threatening to tip towards recession.

Agricultural talks, chaired by Crawford Falconer, are making progress, with successive drafts of the text closing gaps.

While market access questions including for us the key area of sensitive products remain outstanding, there is a sense that a deal can be done in agriculture.

Things are more difficult in the Non-Agriculture Market Access area.
Developing economies are pushing to be able to maintain industrial tariffs at a level that developed countries have difficulty in accepting.

Constituencies in the European Union and United States, Japan and Korea would want to see concessions made by them in agriculture reciprocated by access on industrials and in services, in at least the big developing economies.

For New Zealand, tariff quota markets in the US and EU are key for the meat sector.

In sheep-meat, one of our key priorities is to defend our current arrangements in the EU.

This is particularly important given European farmer agitation about the current structural and economic difficulties the sheep-meat sector there is facing.

Meat and Wool New Zealand has been doing good work with its European counterparts in helping to dampen down any negative perceptions about the role that imports might be playing, given the current parlous state of the EU market.

While the WTO is our priority, we have never put all of our eggs in that basket.

Bilateral FTAs give us the ability to move ahead at a faster rate in some key markets. Not to enter the bilateral game would risk New Zealand being left disadvantaged in relation to our competitors.

A free trade agreement should be signed with China in early April. This agreement with the world’s fastest growing economy and our third largest trading partner is our most important FTA since we signed CER with Australia in 1983.

For the meat and wool industry, China is our second biggest wool market and our fifth largest sheep-meat market.

I am unable to go into details about the agreement until it is signed but you will be aware that New Zealand was seeking to the greatest extent possible to eliminate tariffs over time on our merchandise exports.

It has been a hard negotiation but I believe the deal we have negotiated meets the benchmarks of being comprehensive, high quality and of mutual benefit.

As in any negotiation, however, neither side gets all that it wants.

The FTA text and a full National Interest Analysis will be tabled in Parliament and published on a dedicated NZ – China FTA website once the FTA has been signed. We will also be arranging a series of road shows in the main centres to explain the detail of the agreement and to assist companies to build up capability for doing business with China.

With the Gulf Cooperation Council, we have held two negotiating rounds and we would hope to conclude an FTA by the end of the year.

The GCC is collectively New Zealand’s seventh largest export market worth $800 million a year. The negotiations are expected to see the removal of tariffs and other barriers affecting our main export interests.

New Zealand and Australia are jointly negotiating an FTA with the ten members of ASEAN. This is collectively our fourth largest export market for merchandise goods, worth $3.7 billion, which has grown by over 17 per cent in the last three years.

To date progress has been slow and prospects are for an outcome at the lower end of ambition.

However an ASEAN agreement is not simply about trade issues. It is important to our longer term strategic engagements with the region as a whole. Countries like Japan, China and Korea already have partial FTAs with ASEAN, and the most important outcome may be laying the foundations for our involvement in the region in future.

Discussions with Malaysia about an FTA are on-going and the scope for further negotiations will become clearer when we better understand the implications of last week’s elections.

The P4 agreement, with Singapore, Chile and Brunei, entered into force in 2006, resulting in immediate tariff savings for New Zealand and all tariffs eliminated by 2017.

The P4 agreement is open to accession by other countries. As a high quality and strategic agreement, it has attracted the attention of the United States.

The US has announced it will join the current P4 negotiations on financial services and investment and has begun a consultative process with domestic stakeholders about participating in a comprehensive FTA.

That would achieve New Zealand’s longstanding ambition for a free trade agreement with the United States, our biggest beef market and second largest trading partner.

With Japan, while we have established a working group on strengthening trade, there has been resistance from them about discussion of an Economic Partnership Agreement.

This reflects their traditional protectionist position and concern that 40 per cent of New Zealand exports to Japan are agricultural, even though much of that does not involve sensitive areas.

Government and businesses are continuing to work hard to build an FTA constituency in Japan, including through the efforts of the International Business Forum chaired by Graeme Harrison.

More progress is being made with Korea, with a joint study completed at the end of last year finding that an FTA between New Zealand and Korea would bring substantial economic benefits to both countries.

Officials will meet together in the near future to explore the study’s findings and I will likely meet my new Korean counterpart shortly after that.

An FTA would be important given the $2.5 billion in two way trade between us.

With India, good progress has been made towards agreeing to the terms of reference for a Joint FTA Study Group.

We hope this group will complete its work within a year.

That hopefully gives you a broad overview of progress towards liberalising entry for our exports into some key and important potential markets. Overall, I am pleased with that progress and believe it will make a positive difference for the industry.

Two other positives are the debate about meat industry structure and the Prime Minister’s statement today about a major boost in funding for research and development and innovation in the pastoral and food industries.

The former is important because efficiency in processing and marketing is vital for the industry’s competitiveness. Because of the sensitivity of our major lamb market in Europe, it is however vital that this is done carefully to avoid any negative reaction.

The $700 million investment into an endowment fund for research and innovation in the agriculture sector over the next decade is critical.

Meeting the challenges from lower cost producers in emerging economies requires smart, sustainable and highly productive agribusiness.

We need to be ahead of the world when it comes to environmental performance, competitiveness and delivering new products to market.

Finally, can I thank the Meat Board and Meat and Wool New Zealand for the excellent and cooperative relationship that I and Government have with it.

New Zealand Inc. is vital to our future progress.

I wish you well for a successful conclusion to your conference.


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