NZ may reap dairy bonanza from world trade deal

By BRIAN FALLOW

The Doha Round of trade talks is back on track after members of the World Trade Organisation reached a breakthrough deal to end export subsidies on agricultural goods, and to cut domestic subsidies.

After five days of intense negotiations in Geneva the WTO's 147 members have agreed to a framework for further, more focused talks.

"The text we have agreed tonight is a very significant improvement on what was on the table in Cancun," Trade Minister Jim Sutton said yesterday, referring to the talks in Mexico last September which ended in acrimonious failure.

But this was only the half-way point, he said. "We will try to complete the negotiations in 2005, but a lot of people think the likely date for completion will be late 2006.

"That's a real deadline because then we will be coming up against the expiry of the [United States] President's mandate from Congress to negotiate trade agreements."

The agreement to end export subsidies removed the "biggest thorn in our side", Sutton said.

Background material released by his office said it would deliver considerable benefits to the New Zealand dairy industry - "perhaps in the order of over $1 billion a year".

Sutton said it was also a great result for developing countries, signalling the end of rich countries dumping surpluses on to global markets and collapsing prices for unsubsidised farmers.

The agreement requires exports subsidies to be eliminated by "a credible end date".

Sutton said he suspected member states "would not want to hang around on that. I think we would see all of them go within five years of a [final] agreement and most of them within two years".

The European Union is the largest user of export subsidies. It offered to axe them in May, provided there were similar commitments on other forms of indirect subsidy through export credits and food aid programmes, used more by the United States, and by state trading enterprises.

Exports subsidies are dwarfed by domestic support measures, estimated by the OECD to cost rich countries' taxpayers and consumers almost US$1 billion a day.

The Geneva deal imposes a ceiling on the use of trade-distorting "blue box" domestic support to 5 per cent of a country's agricultural output.

"That's a pretty meaningful limitation," Sutton said. "It will change the face of farming in some countries."

Countries with higher levels of domestic support will have to make the deepest cuts, starting with a 20 per cent cut in the first year.

On market access, the Geneva agreement avoids putting any numbers around the commitment to "substantial improvement" made when the round was launched in Doha in 2001.

It does, however, require that every country - apart from the least developed - make a contribution and that tariff reductions be progressive, with deeper cuts to the higher tariffs.

But it allows countries to negotiate special arrangements for commodities they deem sensitive.

"We don't like this in principle," said Sutton, "but everyone realises there are some bullets that are just too hard to bite politically, for example rice in Japan."

Fears that difficulties over market access in industrial goods would derail the talks proved groundless.

"In the end the developing world was so keen to make progress on agriculture that when they saw an agricultural deal was there on the table they found ways to put aside their other concerns," Sutton said.

He said an agreement between the US and African cotton producers was a key to clinching the deal.

The Doha Round

The latest round of world trade talks was launched in November 2001 in Doha, capital of the Gulf state of Qatar.

Its avowed aim is to aid the development of poor countries, so agriculture is a key focus of the talks.

In past trade rounds the outcome was largely driven by the United States and Europe.

Over the past year the G20, a group of leading developing country producers, including Brazil and India, has emerged as a major player.

An agriculture deal struck between the US, European Union, Brazil, India and Australia paved the way to success at Geneva.