EU cuts NZ out of WTO deal

By LIAM DANN, primary industries editor

STRASBOURG - The European Union will try to exclude competitive agricultural nations such as New Zealand from the benefits of tariff reform when it enters the next round of World Trade Organisation negotiations.

Competitive nations such as New Zealand, Australia and Canada had already reaped most of the benefits from the trade reforms agreed during the Uruguay round of trade negotiations, said EU Agriculture Commissioner Franz Fischler.

Europe had lost market share in all agricultural commodities as a result of the Uruguay round, he told visiting journalists.

"Unfortunately this market share did not go to the poor countries, it went to the most competitive exporters," he said.

Europe will argue that any further tariff reform should be targeted at developing countries - a category in which New Zealand will certainly not be included.

"We propose that all developed countries should remove tariffs for the 49 least developed countries and should give zero tariffs to at least 50 per cent of their imports from the remaining more economically robust developing countries," he said.

But on the issue of farm subsidies, Fischler said Europe had already done enough and the onus would be on the United States to reform its Farm Bill.

"The EU has done its homework but the US has still to live up to its promises," he said. "For them maintaining the status quo is not an option."

EU members have already agreed to restructure farm subsidies so they are no longer linked to production. Instead farmers will receive support based on the size of their farms and historical outputs.

This is expected to reduce surpluses for products like beef and dairy, meaning there will be less distortion of world trade prices.

The reform would cause some European farmers to move from beef and dairy to more viable forms of agriculture, Fischler said.

The biggest impact would be on beef - the most heavily subsidised sector, he said.

That should provide further opportunity for New Zealand exporters.

The EU had also capped the level of farm subsidies at €45 billion ($85 billion) a year until 2013. As this money will be spread across an expanded EU, the total percentage of European GDP spent on subsidies would fall from 0.41 to only 0.33, he said.

The reforms were just now being implemented and the effects had not yet been seen, he said.

The reforms have been opposed by farmer organisations that believe Europe has showed its hand too early in the WTO negotiations and will now be pressured to go further.

Europe will also target the trade practices of what Fischler describes as the "so-called free-trade nations".

In particular, they plan to argue for the abolishment of state-owned trading monopolies - like our former Dairy Board - which are still present in Australia and Canada.

Fischler, a burly former farmer, appeared confused about the New Zealand dairy system and initially included it in his list of state trading monopolies.

After being updated on the formation of Fonterra, he conceded that New Zealand should not be a target in this area.

"Ok if it's totally private then it's not a problem," he said.

* Liam Dann is in Europe courtesy of the French Government.