22 June 2005

Hon Jim Sutton - NZ Society of Animal Production tracebility session,

Ladies and Gentlemen, thank you for the invitation to speak today.

New Zealand has a comparative advantage in agriculture.

Agriculture, horticulture and forestry primary sectors contribute almost 20% to GDP (in current prices, including processing and manufacture) and represent over 12% of employment.

Over 90% of NZ’s agricultural production is exported.

New Zealand is the world’s number one sheepmeat exporter, number one dairy products exporter and number two wool exporter

By 2008, the total value of pastoral agriculture, horticulture and forestry exports is projected to increase by $3.4 billion (19 percent) to $20.9 billion. The largest contributors to this increase are expected to be forestry (up $1.5 billion) and dairy (up $1 billion).

So, maintaining that trade and building it up even further is important to us.

Unfortunately, agricultural products face significant barriers in accessing overseas markets

Agricultural goods are subject to some of the highest tariffs on the world market, with dairy products facing the worst of those.

For meat - tariffs can run as high as tariffs can run as high as 50% in Japan, 150% in the EU, or 200, 300 even up to 700 percent in Switzerland and Norway for various meat products.

Often in markets for dairy, beef and sheepmeat there are tariff quotas which allow a limited amount of product in at a lower rate of duty.

Export subsidies impact our dairy and meat trade.

Our dairy products face competition from others - in the case of our largest competitor in dairy markets - the EU - the competition is grossly unfair.

The EU spends almost NZ$ 3 billion per year on export subsidies on dairy products alone.

So while our exporters are receiving about $2 700 per tonne for butter from the international market, the EU exporters get the same price - and a cheque from the government for approximately NZ$2,250 per tonne of butter they sell.

The EU spent around 283 million euros in 2002/03 on export subsidies on beef - about 800 euros for every tonne of EU beef receiving subsidies.

To top it all off domestic support payments are received by farmers in the EU, US, Japan and other countries.

Domestic support encourages over-production by the subsidising country when it would not normally be economically viable to do so. This displaces imports into the subsidising market - if tariff are low enough for trade to occur anyway. It also lowers global prices as surpluses are exported - often using export subsidies. This reduces export opportunities for others who cannot or do not want to compete with export subsidies.

We, along with other like-minded countries, are working to make the rules of international trade fairer.

Already, as part of the Doha Round negotiations, we have an agreement to eliminate export subsidies. This agreement will only be implemented, of course, as long as the entire round of negotiations are successfully concluded.

International trade is vitally important to us, we rely on it to maintain our living standards.

But access to other countries’ markets is a privilege, not a right. And in some cases, that access was bought with blood.

We need to ensure we are doing everything possible to retain that access.

Another potential requirement for market access in the future may be traceability.

This could be market driven and/or government imposed.

Traceability could be a market advantage for New Zealand exporters to high value export markets which are now demanding farm to plate traceability after recent food scares and growing consumer preferences e.g. organics and animal welfare.

However if exporters had to meet the over zealous mandatory traceability requirements imposed by importers it could reduce our market access and impose unjustifiable costs on New Zealand producers.

Much of these traceability requirements have resulted from BSE. New Zealand does not have BSE and our pastoral based production system means that some information included in other countries mandatory traceability systems, such as feed types, would not be relevant in the NZ case.

Traceability can be required by Government to achieve health objectives. Information collected for marketing reasons should be voluntary and industry led.

It can be argued that traceability is inevitable if New Zealand wants to keep exporting product to high value markets. New Zealand runs the market risk of lagging behind on international developments and demands in overseas markets and retailers seeking assurances about the exact location of all food sources.

A number of New Zealand’s main competitors in animal products exports are already using or have in place policies to implement traceability systems

Major trading partners, including Australia, the United States, Japan, Canada and countries in the European Union have, or are in the process of implementing, animal identification systems, with the requirements these become mandatory across livestock sectors.

Australia completes the mandatory identification of cattle in July 2005.

Australia has a National Livestock Identification Scheme for cattle and the National Flock Identification Scheme for sheep. It is anticipated that the Schemes will be expanded to address all relevant livestock species over time.

In May 2005, the US outlined plans that would force the country’s livestock industry to introduce electronic tracking of cattle, sheep and goats by 2009, as a way of locating diseased animals and safeguarding against “agro-terrorist” attacks.

By 2008, all US farms, ranches and livestock will have to have unique identity numbers. National Animal Identification System (NAIS).

Tracking of animal movements will be mandated by 2009.

Canada mandated individual identification of livestock in 2002 and decided to adopt permanent Radio Frequency Identification tags from 1 January 2005. By 2007, the 180 million beef cattle in Brazil will be individually identified.

Under the Brazilian System of Identification and Certification of Origin for Bovine and Buffalo (SISBOV) which commenced January 2001, the Brazilian Government requires Brazilian producers to register both their properties and their cattle.

Initially SISBOV was only mandatory for animals destined for the EU, however this has since been extended.

Uruguay has had an individual traceability system for exports to the EU since 2001.

Major importing countries like Japan and Korea have already mandated animal identification and traceability in their domestic markets.

Currently New Zealand has no single national animal identification system for livestock which traces farm to plate.

We do have several animal identification systems in place for particular needs e.g. bovine Tb traceability, but these are often manual, or if electronic the information cannot be readily shared.

One concern has been that, while New Zealand can provide adequate information on animals, the international demand for more stringent systems is growing, based on a concept of “farm to fork”. Domestic consumers’ expectations are becoming increasingly sophisticated and influenced by preferences.

In New Zealand, the view is that we need to invest in similar systems of animal identification to meet our own domestic needs and manages the risk of our major markets demanding equivalent traceability once their own systems are in place.

We are moving closer to a national livestock traceability system. The Government is supportive of an industry-driven process that is well underway now.

The authors of a MAF and NZFSA-published discussion document on Support Systems for Animal Identification and Traceability facilitated the establishment of an animal identification working group.

That industry-led working group, chaired by Jeff Grant of Meat and Wool New Zealand, began work last year. It includes representatives of the cattle, deer and meat processing sectors, Federated Farmers, MAF and NZFSA.

The working group is now ready to consult with its wider membership and to draw in the other animal livestock sectors. It has been developing: - A set of guiding principles on animal identification and traceability - Mandatory data requirements - A work plan for future action.

The committee has been reviewing domestic and international developments in animal traceability, including domestic identification systems and foreign states’ tracking methods. Findings from the working group’s review will be released in July and form the basis for consultation with farmers.

Following consultation a business case will be developed outlining the preferred option for developing a national livestock identification system.

It is envisaged that the cattle and deer sectors will adopt the system in the first instance. The current aim is to develop an open system with recording and sharing of data through a series of business rules, and coordinated by a governing body.

The Government remains committed to supporting the work of the Animal Identification Working Group.

Discussion on the funding and resourcing of the final animal identification systems to be developed is still subject to further negotiation. However by working from first principles and looking strategically on the needs of the livestock sectors, there has been good buy-in from the participating sectors.

New Zealand system will build on existing practices and overseas experience of implementing traceability systems. By waiting and watching NZ can take the best from each of the models that our competitors have implemented. So we can implement something that is cost effective, provides a long-term solution meeting our needs while remaining consistent with international trends.

Meat and Wool will also be funding research to see how animal identification can be put to profitable use on the farm.

The Government’s position on encouraging traceability is that essentially the ability to trace animals from farm to plate is largely a commercial concern, between New Zealand primary industry and demands of international consumers.

However the New Zealand Government does have interests in being able to speedily trace the movements of animals for biosecurity reasons and product for food safety. The speed at which animals implicated in a disease outbreak can be pinpointed greatly determines the extent of the outbreak’s impact on agriculture.

In this sense it is in the Crown’s interest to have access to some information collected by a tracing system that traces forward or back animal movements. The Government could require mandatory components of a traceability system only to achieve health outcomes. Information collected for marketing reasons within a traceability system should be voluntary and industry driven.

Ladies and Gentlemen: Gains in market access for our agricultural exports resulting from the WTO Doha Round may have associated traceability requirements.

To capture the gains resulting from increased market access industry may need to meet consumer expectations of farm and fork tracing systems.

However if traceability requirements are too onerous and are used by countries to afford protection to domestic producers, the New Zealand Government will make every effort via bilateral diplomatic and scientific channels to secure fair, scientifically justifiable measures. Countries’ traceability requirements need to comply with the WTO’s TBT and SPS obligations.

ENDS

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