Jim Sutton speech to agribusiness seminar

Hon Jim Sutton - Agribusiness seminar, Wellington.

Dr Sonka, Ladies and Gentlemen: It is a pleasure to open such an illustrious gathering. I like to take all the opportunities I can to speak directly with the agriculture community. This sort of event helps to remind me of just why we are putting so much effort into further trade liberalisation.

New Zealand is unique among OECD countries in its reliance on agriculture. The sector accounts for 50 to 60 percent of our merchandise exports. The same figure for our closest comparable neighbour, Australia, is only 30%.

In spite of massive distortions in the global trading system, our agriculture sector is very competitive in world markets.

But we would be foolish to ignore the wealth of research that shows just how significant the benefits could be to each New Zealand farmer and to the country as a whole if those distortions were removed.

Even leaving aside potential gains, I'm sure that you have all pondered on the long-term damage to your competitiveness and export opportunities if those distortions were allowed to stand, or even to be increased.

That, after all, is why we are here today ? to talk about the implications of one highly-distortionary domestic agriculture policy: the United States Farm Bill.

Certainly on the face of it, the 2002 Farm Bill is a U-turn for agricultural reform in the United States.

The 1996 FAIR Act largely split off government payments from farmers' production decisions. It tried to take the United States towards a more market-oriented agricultural policy.

By contrast, the 2002 Farm Bill includes many provisions that bring the government back into the farming business.

Increased loan rates and counter-cyclical payments, and the cementing-in of US farm spending at close to the total permitted levels under the World Trade Organisation, are matched up with a raft of individual provisions like country-of-origin labelling and check-off schemes.

What that adds up to is new ways to undermine our exports to the United States and into third markets. One of the sectors that remain the most highly protected and supported under the Farm Bill is the very one where we have the most at stake: dairy. Our meat and fruit exports are also affected.

I will leave you in the experts' hands on the detail of those points. I'd like to comment instead on what the Farm Bill, and subsequent American actions, may mean for the WTO agriculture negotiations. I see those negotiations as our first-best opportunity to improve New Zealand's agriculture future.

I remain concerned about the damaging signal that the Farm Bill sent to the negotiations. In meetings with both Agriculture Secretary Ann Veneman and United States Trade Representative Bob Zoellick, I told them that the Farm Bill made us doubt whether America was actually committed to reform.

Not only that, I feared that the Farm Bill set completely the wrong precedent for other big players such as the EU, grappling with its own domestic policy reviews.

The United States seems have taken on board the concerns that many countries have voiced about the impact of the Farm Bill, substantively and strategically.

First, it was and is clear that the Bush Administration is pro-agricultural reform. It fought hard while the Farm Bill was going through the House and Senate for policies that were less interventionist, and more market-oriented.

Sadly, in a story that was actually all about politics, domestic political considerations won out at the end of the day. But while the Administration is likely to defend the Farm Bill in the meantime I don't think it was the death-knell of American ambitions for a more liberal world trading system.

The Administration now has Trade Promotion Authority, which greatly frees up its hands to engage seriously in the Doha Round.

The Farm Bill also specifically requires the new policies to be consistent with WTO obligations, including ? presumably ? whatever comes out of the new Round. This obligation has never appeared in previous Farm Bills.

Most significantly of all, the United States has now come forward with an ambitious proposal for the WTO agriculture negotiations.

Its proposal would deliver far-reaching reductions in tariffs, the elimination of export subsidies, and pretty big cuts in domestic support levels.

The proposals that New Zealand and the rest of the Cairns Group put forward last week on market access, and will table soon on domestic support, go even further. They would deliver a fair deal to our farmers, and to those in developing countries, and would put agriculture on an equal footing with other industries for the first time ever.

But my point is this: good as they may be, the Cairns Group proposals are only proposals.

It is a fact that we will get nowhere without the big boys, and that includes the United States. Together we are a powerful force for change. Even then, we have a big fight ahead of us to get just half of what we're asking for.

Protectionism never sleeps and we find it creeping into legislation such as the Farm Bill and popping up in the WTO in new guises such as animal welfare, geographical indications, and the like.

However it's certainly not time to throw up our hands in despair just yet.

One of the overarching questions for this workshop is whether "the Farm Bill is the end to trade liberalisation as we've known it, or just another bump in the road?"

I would come down strongly in favour of the latter.

At this stage, what we need to secure a good, trade-liberalising outcome is real determination from across the WTO membership to see improvements in the global trading system.

To get that, we need credible leadership from those that influence the debate most powerfully. The United States is now showing that leadership.

The Farm Bill is very unfortunate. But we have a much bigger prize in sight.

I of course intend to keep pressing the United States to moderate the most pernicious effects of the Farm Bill.

More importantly, I will continue to work closely with my American counterparts to keep them committed to the high level of ambition in their comprehensive agriculture proposal.

It looks like I may have the chance to meet with Bob Zoellick next month when he may be attending the Cairns Group Ministerial Meeting in Bolivia. Rest assured that I will be urging him in the strongest terms to take the trade liberalisation mantle forward proudly.

And I look forward to keeping closely in touch with you, the agriculture community, as we progress through the negotiations. Please do not hesitate to share your concerns and priorities with me and my officials, including the new insights that I am sure you will all get out of this useful workshop.

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