The United States has agreed that safeguards against New Zealand lamb will be lifted on 15 November, Trade Minister Jim Sutton announced today.

He said it was a great victory for the New Zealand sheep farmer.

"For the first time in over two years the New Zealand sheepmeat industry will not have to face the burden of additional quotas and tariffs on lamb exports to the United States market."

Mr Sutton said that a deal was concluded by New Zealand, Australian, and United States negotiators overnight.

The United States Administration had agreed to terminate the safeguard by 15 November 2001.

Mr Sutton said if a satisfactory agreement had not been reached, New Zealand and Australia would have been forced to take the United States back to the World Trade Organisation for arbitration and any result would have been some time early next year.

Instead, he said, the United States had finally acted to implement the World Trade Organisation Appellate Body ruling that the safeguards were illegal.

"Frankly, the safeguard should have been lifted as soon as the ink was dry on that decision. New Zealand sheep farmers have had to wait too long for the United States to honour its obligations under the World Trade Organisation.

"I have shared the industry's frustration. But this outcome vindicates the approach I have consistently advocated, with the full support of the industry, of persistent effort and quiet diplomacy.

"The Government has been working closely with the New Zealand industry throughout this long exercise, and I know that it will welcome the outcome."

Mr Sutton noted that the United States sheep industry had been involved in the Administration's efforts to reach a settlement and would support it. This should provide a more positive basis for future development of the US market for lamb.

Mr Sutton said that the WTO's dispute settlement system had proved its worth.

"It is impossible to imagine that by any other means we could have had the safeguard measure terminated early and avoided its rollover next year."

ENDS

BACKGROUND:

What precisely was agreed in Washington last night?

The safeguard will cease on 15 November. The United States will announce this to the World Trade Organisation's Dispute Settlement Body shortly. The US industry will advise the President that it supports the Administration's decision that the safeguard be lifted.

So what does it mean for the New Zealand sheep industry?

It means that by the time the next season's exports get underway, exporters can sell unrestricted quantities of lamb at the previous very low tariff level (US 0.8cents per kilogram). If the safeguard had continued, there would have been a tariff of 3% within quota (in the third year of the safeguard, 15,261 tonnes) but most importantly the out of tariff quota rate of 24% would have continued to apply. There was a strong risk, too, that the safeguards would have been rolled over next July, continuing the restrictions on New Zealand's ability to expand an important market.

What would have happened if this agreement hadn't been reached?

We would have initiated arbitration proceedings in the WTO. The arbitration would have been about the length of time the US would have had to implement the WTO decision that the safeguard was illegal. It is very unlikely that an arbitrator would have compelled the lifting of the safeguard before early next year, so the result today is a very good one.

Why has the New Zealand Government been prepared to wait so long?

A negotiated outcome in New Zealand's favour is far better than further litigation. Had we ended up back before the WTO we would have had to fight every step of the way. I am confident that we would have continued to score victories. But even then it is not impossible that the safeguard could still have been in place a year from now. Getting an agreement with the US government that the safeguard should be lifted had to be the first objective.

What about the Australians?

We've welcomed our close cooperation with Australia throughout this protracted dispute. The Australian Trade Minister, Mark Vaile, and his industry we believe will be pleased with the outcome.

Is the US sheepmeat industry happy with this result?

This result would not have been possible without the US industry agreeing to support it. The US industry has been a very effective lobbyist in Washington. But they could see that the writing was on the wall once the Appellate Body ruled in New Zealand's favour, and that they needed to secure the best deal they could as the price for their support for lifting the safeguard. We understand they have secured additional financial support from the Administration.

Is there any way we can get the money paid in extra tariffs back?

No. WTO decisions do not have retrospective effect.

Is the deal in the bag?

Yes. The US is making a press release concurrently with the release of the Minister's press statement.

ENDS

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