WTO agreement to eliminate agricultural export subsidies

A World Trade Organisation conference in Kenya has agreed to eliminate the ability of WTO members to subsidise their agricultural exports.

This will benefit New Zealand as we are one of the few major agriculture traders who don’t use subsidies.

NZ Herald reports in Export deal will boost dairy prices, Fonterra says.

Fonterra chairman John Wilson said the historic breakthrough would be good news for dairy farmers.

“For years the use – or even the threat – of export subsidies have resulted in world dairy prices below their true level, reducing returns to dairy farmers,” Wilson said.

It should also help with our meat, wool and other agricultural exports.

A World Trade Organisation ministerial conference held in Kenya and attended by New Zealand Trade Minister Todd McClay has agreed on the WTO Nairobi package, which will eliminate the ability of WTO members to subsidise their agricultural exports.

That is an outcome successive New Zealand governments have sought for decades, with trade envoys identifying agricultural subsidies, along with tariffs, as one of the biggest obstacles to free trade.

McClay said it had been illegal to subsidise the exports of industrial goods for more than half a century, and it was a major achievement to have that extended to agriculture.

“This outcome directly benefits New Zealand agricultural exporters who have to compete in some markets with subsidised goods.”

New Zealand has led the way in free trade and has become competitive in an uneven playing field. As the rest of the world moves in the same direction our trade will benefit more.

A survey by the Worldwatch Institute last year showed New Zealand’s largely subsidy-free status was not the norm – and that the top 21 food-producing countries paid out an estimated US$486 billion ($722 billion) in farming subsidies in 2012.

China paid US$165 billion in 2012, mostly to support rice and wheat farmers, with Japan paying US$65 billion, the European Union more than US$100 billion and the United States $30 billion.

That’s huge subsidies that will have distorted pricing.

Federated Farmers National President William Rolleston said it was a positive and potentially significant deal. “Given the scale and significance of New Zealand’s agricultural export earnings, the removal of any instrument that can distort market forces and disadvantage our exporters is an important step forward,” he said.

“Achievements at a WTO level also remove the need to develop bilateral solutions with individual trading partners, so we hope there are more deals of this nature to come from the WTO.”

The deal completed a year of important international wins in what have been difficult market conditions for much of New Zealand’s farming sector, he said.

Agricultural production and markets will always have ups and downs, but this should reduce the impact of the downs and boost the returns from the ups.

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8 Comments

  1. Timoti

     /  21st December 2015

    Seeing is believing… and even then.

    Reply
  2. I could not find one word in this mornings Dominion Post that mentioned a single word about this triumph of long term negotiation. Instead they headlined another crack at the Police and the political commentator waxed lyrical about how good the Labour leader has been in 2015. Par for the course, Yellow Banner news!!

    Reply
    • Agreed on this being a Triumph, if it comes to fruition… as Timoti points out… Some of our biggest export markets have us at a competitive disadvantage currently, so long term peeling back the onion that is tariffs can only help our primary industry.

      Reply
  3. Invictus

     /  21st December 2015

    Lowering trade barriers will always be good for NZ, even Helen Clark knew that

    Reply
  4. Ban subsidies for exports….. but what about subsidies for national consumption? A subsidy is a subsidy is a subsidy.

    You can bet your bottom dollar that the powerful farm lobbies of the EU, US, Japan etc etc will not ensure that tax payers funds go their way and that imported competitor products are handicapped somehow….. Lawyers make a living getting around regulations with smart words and sharp acts…

    Colour me cynical on this but I don’t see this as going anywhere particularly fast.

    National Food Security could become a very prevalent catch cry to ensure subsidies flow …

    Reply
    • @dave1924 – “Colour me cynical” – Snap! But it seems if we blink we’ll miss it –

      “developed-world countries agreed to end nearly all direct export subsidies for agricultural products – with some crop-specific exceptions – effective immediately, with emerging-economy countries to follow by 2023.

      The world’s 50 least-developed countries, most of them African, will be allowed to continue offering subsidies until 2030”

      Reply
  5. Blazer

     /  21st December 2015

    aaah…’free trade’…one day…some day!

    Reply
    • @ Blazer – “Somewhere over the rainbow … ” eh?

      I dream of “fair trade” someday, and I know that under our present economic system, these two things, free trade and fair trade, are not the same.

      Reply

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