NZ farmers would share in NZ$74 billion trade bonanza - Danes

By NZPA

Friday 14th March 2003

New Zealand would share about $US40 billion ($NZ74 billion) annually with Canada, Japan, and Australia from a $US100 billion boost in global income if wealthy northern hemisphere Governments reduce export subsidies for agriculture, according to a Danish study.

The lion's share of the rest of the $US100 million would go to the main offenders -- European Union ($US25.8 billion) and United States ($US14.7 billion) annually -- as consumers paid less for food and taxpayers pay less in farm subsidies.

The remaining $US19.5 billion would mainly benefit developing countries, as global trade in commodities including wool, rice and oilseeds increased by a quarter through shifts of food production shifts to poor nations.

The report by the Danish farm ministry's Research Institute of Food Economics was based on a study of the negotiations under way at the World Trade Organisation.

A draft proposal by the Geneva-based WTO last month sought to give global market-opening talks a boost by proposing that wealthy governments halt export subsidies to their farmers within nine years of a WTO deal and slash other support by 60 percent. A second draft is due this month.

That would boost annual global income by $US100 billion, or equivalent to 0.3 percent of the world's real income, and farming may also shift from Europe and the USA toward cheaper countries -- including New Zealand -- paring farmland values in the industrialised world, according to the study.

"Gains are achieved by re-allocating production to where it is economical instead of where it is mostly protected and supported," said the report.

The WTO is running up against an end-of-month deadline to agree on the outline of a deal on agriculture, and an agreement on farm tariffs and subsidies is key to a wider agreement on trade and tariffs. Without the deal of agriculture the Doha round of negotiations in which the WTO's 145 member governments are seeking agreement on industrial tariffs and commercial services scheduled for the end of 2004 may collapse.

The EU and Japan criticised the WTO proposal for cutting subsidies and import tariffs while negotiators from the USA, Australia and Brazil said it didn't go far enough.

Land values would decrease as commodity prices drop and production move up by as much as 39 percent and 6.4 percent respectively. The report also says that international sugar exports may rise by 27 percent, oilseeds by 20 percent and processed rice as much as 67 percent.

"While global trade in almost all the agricultural commodities increases, global production only expands marginally" because of the "significant geographical redistribution" of production, the Danish report said.

Subsidies accounted for 35 percent of farmers' total income in the EU in 2001, and 21 percent in the US, according to the Organisation for Economic Cooperation and Development. Japanese farmers depended on aid for 59 percent of their income, the fourth highest among OECD members after Switzerland, Norway and South Korea.

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