NZ exporters unaffected by EU enlargement

By LIAM DANN, primary industries editor

PARIS - New Zealand has little to fear from the enlargement of the European Union, says France's permanent agriculture representative in Brussels.

Jean-Marc Bournigal says the expansion from 15 to 25 countries, effective from May 1, will not affect agricultural trade.

Enlargement means 75 million consumers will be added to the 350 million already resident in the EU. Four million farmers will join the seven million already battling for subsidies.

In the dairy sector, the new members will increase dairy production by about 20 per cent. Inclusion for countries such as Poland and Hungary is likely to mean improving agricultural standards and rapid increases in production volumes.

But, says Bournigal, this will be balanced by increases in consumption as the standard of living improves in the new member countries.

Purchasing power in the new member states is rising about twice as fast as the average for the existing EU countries.

Regardless of how the supply and demand equation plays out, the EU will spend no new money on subsidies for the additional farmers.

EU leaders agreed in 2002 to put a ceiling on the budget for the common agricultural policy (CAP). A limit of €45 billion ($85.4 billion) will remain until at least 2013.

What was once spread around 15 countries must now be spread around 25, Bournigal says.

Farm subsidies for new member states will be phased in over nine years, and they will initially receive only 35 per cent of the subsidies that existing EU farmers will get. But with spending on subsidies capped, the enlargement cannot alter the balance of world trade no matter how the budget is divided, Bournigal says.

"We do not expect any further surplus [of agricultural production] a global level," he says.

At present about 45 per cent of the total EU budget is dedicated to the CAP, but that level will fall to about 30 per cent by 2013.

This is further proof that Europe is doing its bit to reform trade distorting policies, Bourginal says.

He is typical of French officials in his belief that Europe is unfairly attacked for failing to reform its agricultural policy.

Europe is an easy target because (unlike the US) its policy is transparent, he says.

The other big issue for New Zealand's trade with Europe is quota and tariff levels.

The EU is required by the WTO to ensure that countries such as New Zealand face no new trade barriers because of the enlargement.

In many cases the tariffs in the new member states are higher at present than they will be as part of the EU, so the transition will have no impact, Bournigal says.

But the EU is about to enter into bilateral negotiations with countries that fear they might lose out. So for example, the total of New Zealand lamb imported by the 10 new countries will be calculated.

If there is a negative impact under the new tariff system, a level of compensation will be agreed either in the form of additional quota or as quota for another product. If a bilateral agreement cannot be reached, the WTO will be called on to make a ruling.

* Liam Dann travelled to France as a guest of the French Government.