Dairy trading setback for southern nations at WTO

DUNEDIN - New Zealand stands to gain more than $950 million a year in extra dairy exports if agricultural subsidies are cut. Market access will also be improved if the World Trade Organisation can move forward from the collapse at Seattle.

But the European Union would be the biggest winner financially, according to a study commissioned jointly by New Zealand, Australia, Argentina and Uruguay.

It would gain $US1.4 billion ($2.7 billion) annually in extra dairy exports.

European reluctance to move from the concept of "multifunctionality" - allowing subsidies to maintain otherwise uneconomic farming - was one of the reasons the Seattle agenda setting talks collapsed at the weekend.

The southern hemisphere countries had hoped to convince the EU, in particular, that a freer dairy exporting regime would substantially benefit its own dairy industry, as well as those of smaller farm exporting countries.

The group used an analysis by the Australian Bureau of Agricultural Economics, which modelled dairy trade in a world with sharply reduced export subsidies and improved market access.

It showed trade gains to all major dairy industries and an increase in international dairy consumption.

The European Union stood to gain $US1.4 billion in new dairy exports annually, New Zealand $US486 million and Australia $US107 million.

The EU would gain from both higher prices due to the subsidy cuts and from greater market access following trade liberalisation, according to the study.

Mr Gallagher said New Zealand, Australia, Argentina and Uruguay were calling on the main subsidising countries to create a system that would provide sustainable growth in all dairy exports.

"It's a sad fact that the amount the EU and other dairy subsidising nations currently budget for fruitless subsidies is about the same as the budget for global agricultural development projects supported by the United Nations' food and agriculture organisation." - NZPA