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.

More ungloomy export news

NZ Herald have another instalment in their Gloombuster series – Fruit exports surge.

Demand for premium kiwifruit, apples and avocados helps counter weakness in dairy and forest products.

Data out from Statistics NZ showed the value of fruit exports reached an all time high of $2 billion in the year to June, up almost 20 per cent from a year earlier. Wine was another strong performer, up 7.3 per cent to $1.4 billion in the June year.

The performance of fruit and wine wasn’t enough to offset downturns in other parts of the primary sector – dairy exports were down by 24 per cent to $12 billion and log exports were down 11.3 per cent at $3.56 billion – but the data showed the downturn was not universal.

Both higher prices and a greater quantity of fruit exports – up 9 per cent – contributed to the overall rise, Statistics NZ said.

Kiwifruit and apples led the monthly increases, with exports in May 2015 being the highest value recorded for both kiwifruit ($280 million) and apples ($157 million).

Statistics NZ said kiwifruit was responsible for 59 per cent of fruit exports, followed by apples (28 per cent), and avocados (5.7 per cent).

Agriculture, horticulture and viticulture markets all wax and wane.

Agricultural analysts are bullish about kiwifruit as the sector continues to recover from the devastation caused by the Psa virus since its outbreak in 2010.

ANZ, in an analysis of the sector, said New Zealand kiwifruit sector typified many aspects of true “value-add” leading the way in producing and selling a premium offering.

While dairy trade is significant there is far more to the New Zealand economy than milk.

The apple sector is going from strength to strength with new plantings, by area, increasing by 5 per cent a year. NZX-listed Scales Corp – the country’s largest grower, packer and marketer of apples – said its export grade apple volumes were about 13 per cent ahead of prospectus forecasts.

The higher percentage of both premium apples and percentage of sales to Asia and “near” markets is expected to result in a higher average price per carton than prospectus forecast, said managing director Andy Borland.

Both higher volumes and higher prices.

The Opposition in particular and the media generally put a lot of focus om narrow negatives. It’s good the see the Herald lookig at the wider export economy.