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New Zealand’s prosperity depends in large part on exports of primary products – making the rules governing agricultural trade critical for safeguarding our livelihood. However, the WTO rules on agricultural trade are not as well developed or effective as the rules for trade in industrial goods. The WTO Agriculture negotiations are New Zealand’s key vehicle to addressing the un-even international playing field which undermines our competitive advantage.
Summary
New Zealand stands to gain considerably from agricultural trade reform through the WTO. In essence, we want agricultural exporters to be able to benefit from the same opportunities in world markets that have been created progressively for industrial goods since the 1947 GATT.
New Zealand believes that achieving these objectives would also make a significant contribution to fostering global development, providing considerable benefits for most developing country members in terms of rural development, food security and export earnings.
Many countries retain a range of barriers to agricultural imports, such as high tariffs and tariff quotas, so there are still significant distortions to trade in this sector. New Zealand's agricultural exports frequently come up against these barriers. Because of this, New Zealand advocates for ambitious and urgent reform of agricultural trade rules to address international practices which distort trade. We are not alone in calling for ambitious and urgent reform of agricultural trade.
WTO Agreement on Agriculture (AoA)
The WTO Agreement on Agriculture (AoA) was a good first step in liberalising agricultural trade. This was agreed as part of the Uruguay Round of trade negotiations and came into force with the creation of the WTO in 1995.
The AoA initiated reductions in subsidies and other trade barriers through establishing commitments in market access, export competition and domestic support (the three pillars). The AoA also provides for WTO members to continue negotiations for future reform, recognising that many trade barriers are not yet resolved.
Our agricultural sector has benefitted significantly from these reforms – but through the Doha Round we are working to achieve further improvements to the rules.
Three Pillars of the Agriculture Negotiations
Negotiations on agriculture are geared toward creating a fairer and market oriented agricultural trading system. The negotiations have occurred across ‘three pillars’:
- Market access – substantial improvements by reducing barriers to trade and improving rules
- Export competition – including reducing and phasing out subsidies paid to exporters (Effectively resolved after the Nairobi Decision in 2015 where WTO Members agreed to eliminate agricultural export subsidies).
- Domestic support (otherwise known as Agricultural Subsidies) – reducing the trade-distorting subsidies that are paid to farmers and limiting government price guarantees.
Market Access
Since the Uruguay round, there has not been significant reform in the market access pillar. However, New Zealand has to a large extent guaranteed our market access through Free Trade Agreements (FTAs), with now some 70% of our current goods exports covered by FTAs. (See more on New Zealand’s FTAs here)
New Zealand still stands to gain from further reforms in market access rules. For example, through substantial cuts to all tariffs; raising the quantity and quality of market access provided through tariff quotas; and removal of a range of non-tariff barriers. These would benefit both New Zealand farmers and consumers in other member countries.
Export Competition
Seen as one of the most egregious forms of trade distorting practices, negotiations on agricultural export subsidies have been relatively quicker and more successful since 1995. In the 2013 Bali Ministerial Package, WTO Members made a strong commitment to determine rules to eliminate all forms of export subsidies. This was effectively addressed through the agreement at the 2015 WTO Ministerial meeting in Nairobi to eliminate all forms of agricultural export subsidies. This landmark decision was led by New Zealand as chair of the agriculture negotiations at the time.
Domestic Support
Progress in the Domestic Support negotiations remains outstanding. When concluding the Agreement on Agriculture (AoA) in 1995, all WTO Members made binding commitments to cap and reduce to some extent spending on agricultural subsidy practices that distort trade. However, WTO Members agreed to continue making progressive reductions in spending under article 20 of the AoA. Domestic Support has therefore been a significant focus of the agriculture negotiations to date – although little progress has been achieved and agricultural subsidy spending continues to rise.
New Zealand’s primary goal in the agriculture negotiations is to limit the use of agricultural subsidies which distort trade by artificially encouraging production where it would not otherwise have taken place. According to the OECD, global agricultural subsidy spending exceeds 800 billion US dollars per year. Without substantial reform to limit this, agricultural subsidy spending is on track to reach $2 trillion by 2030.
These subsidies have grave impacts on New Zealand’s competitive advantage, creating an uneven playing field for our agricultural exporters. They also undermine efforts to achieve sustainable agriculture, with over 87 percent of agricultural subsidies between 2013 and 2018 being considered environmentally harmful (according to the FAO).
Given this, New Zealand is actively negotiating to secure major reductions in domestic subsidies which distort trade.
The Cairns Group
New Zealand is a member of the Cairns Group(external link) a negotiating coalition of 20 like-minded agricultural exporting countries who push for ambitious agricultural trade reform.
Cairns Group countries span five continents and together account for almost 30% of global agricultural exports. The group was set up in Cairns in 1986 at the outset of the GATT Uruguay Round and Australia is the permanent chair. Since the Group's establishment, its members have continued to push for liberalisation of global trade in agricultural goods. With membership being a majority of developing countries, the Cairns Group is committed to achieving free and fair trade in agriculture that provides real and sustainable benefits for the developing world.
Current members are:
- Argentina
- Australia
- Brazil
- Canada
- Chile
- Colombia
- Costa Rica
- Guatemala
- Indonesia
- Malaysia
- New Zealand
- Pakistan
- Paraguay
- Peru
- the Philippines
- South Africa
- Thailand
- Uruguay
- Ukraine
- Viet Nam.