20 Dec 2015

Dairy farmers hopeful after WTO deal

7:24 pm on 20 December 2015

Dairy farmers are hoping a World Trade Organisation (WTO) agreement eliminating dairy export subsidies over the next four years will help stabilise global dairy prices.

Friesian cow.

The deal would see agricultural export subsidies removed over the next four years. Photo: RNZ / Alexander Robertson

After more than 50 years of talks on the issue, a ministerial conference in Nairobi has reached deals on agricultural subsidies, food aid and other issues.

Trade Minister Todd McClay said the gradual removal of all dairy export subsidies would level the playing field for New Zealand exporters.

Fonterra chairman John Wilson said the deal was good news for the country's dairy farmers.

"Export subsidies have long been acknowledged as the most damaging form of subsidy and their removal from agricultural trade is a watershed for global trade."

Export New Zealand executive director Catherine Beard agreed, saying removing subsidies would help balance supply and demand - and hopefully also stabilise prices.

"The last thing you want are big stockpiles of food around the world that have been created through artificial means."

She said if demand and supply were matched more closely, the real price would come through.

John Wilson (centre).

Fonterra chairman John Wilson described the deal as a watershed for global trade. Photo: RNZ / Diego Opatowski

Federated Farmers dairy chairman Andrew Hoggard said, while it was a step in the right direction, domestic subsidies given to European Union farmers must also go.

"New Zealand dairy farmers are making production cuts to try and ride through this rough patch. Unfortunately the Europeans in the last year have just got more subsidies from their government, so it's led to international prices going down."

He said the New Zealand government needed to increase pressure on the European Union to remove these subsidies too.

Agreement hailed as turning point

Delegates said the deal in Nairobi had drawn a line under years of stalemate over the direction of global trade negotiations.

Todd McClay

Trade Minister Todd McClay Photo: NZ Parliament

US Trade Representative Michael Froman said the agreement "marked a turning point".

Speaking from Dubai, Mr McClay described the deal as "very good" for New Zealand.

"We've waited more than 50 years for unfair subsidies on agricultural products to be removed from around the world.

"It was a very tough negotiation in Nairobi that ran over four days, but this was a very good deal for New Zealand, and it's a deal New Zealand farmers will welcome."

The negotiations "started a new phase in the WTO's evolution" and showed "what is possible when the multilateral trading system comes together to solve a problem".

The Geneva-based WTO has been trying and largely failing to agree on a worldwide package of trade reforms since a meeting in Doha in 2001 hatched an ambitious plan to cut trade barriers.

Agreement to disagree on Doha

The conference this week was extended by a final 24-hour negotiation between major trading powers, who agreed on a package that included phasing out agricultural export subsidies and restricting agricultural export credits.

However, they agreed to disagree about the potential for success in the Doha round of talks.

Both India, which had insisted on completing the existing Doha talks before any further negotiation, and the US, which wanted to move on from Doha, had to give ground, an EU official said.

The had compromise meant more issues could be loaded onto the negotiating agenda, the EU official said.

Some international trade experts greeted the deal after the talks, also known as the Doha Development Agenda (DDA), with scepticism.

"DDA = Doha Dead Again?," Richard Baldwin, a professor of international economics at Geneva's Graduate Institute, said in a tweet.

Kenya's Foreign Minister Amina Mohamed, who had described the WTO's negotiating function as broken at the summit's opening, said she was confident that the Nairobi talks had actually "strengthened" the body over the week.

"For me, Nairobi will be remembered as having made that leap from a time when we were divided along this developed and developing divide," she said.

The summit, the first ministerial meeting to be held in Africa, had earlier hailed an agreement to remove import tariffs on 201 information technology products, marking the first major global tariff-cutting deal in 19 years.

In addition, more countries have signed onto the Trade Facilitation Agreement, which eases the passage of goods between countries.

- RNZ / Reuters

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