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.