August 2004
Media Statement

Marathon negotiation gets WTO back on track

The Doha Development Round is firmly back on track to success, Trade Negotiations and Agriculture Minister Jim Sutton said today.

Mr Sutton, speaking from Geneva where he is at the WTO meeting which approved “frameworks” for the next phase of multilateral negotiations after intensive debate, said that it had been a real marathon, but the WTO got there in the end.

“The Doha Round is firmly back on track to success. That’s good news for New Zealand.

“These frameworks, especially the one on agriculture, give a huge boost to the Doha Round. I’m delighted that after the disappointment of the Cancún Ministerial Conference last year, WTO Members have been able to find this common ground.”

Mr Sutton said it was not just a case of picking up where the WTO had left off last year. What we have now is significantly better than what was on the table at Cancún.

“This is a triumph for multilateralism. Rich and poor countries have reached agreement to open markets and advance the rule of law in international trade. That’s good for the world’s economy. It’s good for New Zealand. And it’s good for global development. The position on cotton agreed between African producers and the US was a key to clinching this deal. We welcome that.”

Mr Sutton said all WTO Members could be satisfied with the flexibility they’ve shown.

“We owe a vote of thanks to our dedicated negotiating Chairs, including Ambassador Shotaro Oshima of Japan, who managed the overall process, and the New Zealand Ambassador Tim Groser who took the lead on agriculture.”

A representative group of countries, including New Zealand, worked through the night in the so-called “green room” on the agriculture and industrial products package.

“Agriculture is at the heart of the Doha Round, so this is a major achievement. The EU and the US have agreed to eliminate all agricultural export subsidies. That’s a great outcome for New Zealand. It’s also a great result for the developing world, by signalling the end to rich countries dumping their surpluses onto global markets and collapsing prices for unsubsidised farmers.

“Other elements are also positive. We now have a sound basis to advance our agriculture market access objectives. And the framework targets the root cause of global agriculture distortions by requiring big cuts in government subsidies.”

Mr Sutton said that reaching agreement on agriculture has helped to unlock progress in the Round more broadly.

The package also covers the core issues of non-agriculture goods, services, and others which are likely to deliver benefits for developing countries, such as reform of the trading environment for cotton and new rules to facilitate the flow of trade.

Mr Sutton said agreeing the frameworks was a huge step forward.

“But we do have to remember that we’re not yet at the finish line. We still have a way to go before we conclude the Round,” he said.

MEDIA BACKGROUNDER: WTO AGRICULTURE NEGOTIATIONS

The Doha Development Agenda (or “Round”) was launched in November 2001 in Doha, Qatar. Agriculture is one of the key issues in the negotiations – and it also one of the most controversial.

The mandate agreed at Doha on agriculture included ambitious language calling for “substantial improvements in market access; reductions, with a view to phasing out, of all forms of export subsidies; and substantial reductions in trade-distorting domestic support”.

· Export subsidies are widely recognized as the most distorting of all trade policies. They depress world prices, undermine competitive exporters (such as New Zealand and many developing countries) by allowing uneconomic producers to export, and enable wealthy countries to “dump” subsidized surpluses on world markets. The EU is the largest user of export subsidies (approx Euro 2 billion per year).

- One of the big issues in the negotiations has been the “parallel” treatment of “all forms of export subsidies”. Export subsidies can also be provided through government-subsidised export credits; through food aid (the surplus disposal of subsidized product such as milk powder and grains) and through other measures. This has also been picked up in this document. The EU and US have also argued that more disciplines are needed on exporting “State Trading Enterprises” (STEs) to avoid any trade distortion.

- The framework provides for the elimination of classical export subsidies (such as those of the EU).

- It also includes new disciplines to eliminate any export subsidies provided through mechanisms such as export credits and food aid. Parallel disciplines are envisaged for STEs where export subsidies are applied.

For New Zealand, the elimination of export subsidies would deliver considerable benefits to the dairy sector – perhaps in the order of over $1 billion per year. This is a top priority for New Zealand for the Doha Round.

· Improvement in market access is one of the most controversial issues in the negotiations. Many markets – including the EU, other European countries, Japan and the US are protected by very high tariffs, at least on some products.

- Although reducing tariffs and addressing other market access barriers is core WTO business, many countries are reluctant to improve access into their markets for their most politically “sensitive” products, including livestock products (dairy and meat) and others.

- Developing countries are also very concerned to ensure that their “special products” are given adequate flexibility. (In other words, products that play a key role in ensuring food security, livelihood security and rural development – all essential to meeting the development goals of developing countries.)

- The framework includes basic principles for the main tariff reduction formula, including that there must be substantial improvements for all products, and that the highest tariffs will be reduced by the most.

- The framework also includes flexibility for both “sensitive” and “special” products – while recognizing that, for sensitive products at least, the mandate of substantial improvements in market access must be met for all products.

For New Zealand, improvements in market access are a key objective for the Doha Round. New Zealand exporters would benefit from substantial reductions in tariffs, including in-quota tariffs, and from expansion of all tariff quotas.

· Reform in trade-distorting domestic support is an important issue for many WTO Members, especially developing countries, who see such policies as the root of all distortions in the global trading system.

- At present, many developed countries (especially the EU and other European countries, Japan and the US) provide significant government support to the farm sector, through direct production-linked payments to farmers and rules to keep market prices high.

- One of the biggest issues in the negotiations has been the so-called “blue box” of domestic support. (The most distorting support is the “amber box”; the blue box is less closely related to production but still trade-distorting. The “green box” is for non-trade-distorting domestic support. New Zealand government support to the agriculture sector is all in the latter category – e.g. including pest and disease control, research and disaster assistance.) The EU is currently the largest user. The US has sought a new form of blue box support to cover its present “Farm Bill” policies.

- The framework requires a 20 percent downpayment in reductions of trade-distorting domestic support in the first year of the implementation period.

- It also foreshadows new rules for the blue box and for the reduction of the individual elements of trade-distorting domestic support and overall.

For New Zealand, substantial reductions in domestic support, in line with the Doha mandate, will deliver long-term benefits through lower levels of distortion in the world trading system. It will raise world prices and that is to the benefit of New Zealand farmers.

The mandate also requires the special needs of developing countries to be an integral part, reflecting the major role that agriculture plays in the economic development of most developing countries. The mandate also calls for “non-trade concerns” (i.e. issues not directly related to trade) to be taken into account as provided for in the existing Agreement on Agriculture.

ENDS

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