Trade hopes ride on Cancun talks

By LIAM DANN primary industries editor

The Mexican island of Cancun will be transformed next week from a laid-back tourist retreat, famous for its white sands and blue seas, into one of the hottest political spots on the planet.

The World Trade Organisation circus is rolling into town.

A collection of negotiators from 146 nations - each with their own agenda - will get down to the unenviable task of laying out a time frame for trade reform. Outside on the streets anti-globalisation protesters will do their best to disrupt proceedings.

Among this colourful and chaotic spectacle will be a small group of New Zealand farming representatives who are all too painfully aware what is at stake.

Real progress on the removal of subsidies, tariffs and quotas would mean more money in farmers' pockets.

The potential returns if New Zealand were to achieve free-market access around the world are almost too big to quantify, says Phil Turner, Fonterra's director of government and trade relations.

It would certainly add dollars per kilogram to the annual payouts Fonterra makes to dairy farmers.

The Government estimates that trade liberalisation during the WTO's Uruguay round gave New Zealand's economy a $9 billion boost and created 17,600 extra jobs over nine years.

Hopes are high that this round (called Doha after the Middle Eastern city where the talks began) will go even further.

A free trade deal with the US has been estimated to be worth $1 billion a year, says Federated Farmers president Tom Lambie.

You could extrapolate that to the rest of the world and get a figure several times that size, he says.

Lambie, who will be at Cancun, says the real value of eliminating trade barriers would extend far beyond those immediate returns.

Access to rich markets in America and Europe would encourage investment in product development, science and technology, he says.

"Trade barriers limit our potential to sell value-added products because most of our available markets can only afford our commodities. More certainty about access would mean more investment."

He points to progress made in sheep meat exports since quotas were opened up.

"Where we have guaranteed access to sheepmeat markets in Europe, the industry has been able to invest in marketing and product development and we have seen sheep meat returns to farmers double over the past two years."

Lambie, with Federated Farmers chief executive Tony St Clair, will arrive in Cancun on September 8 - two days before the official talks begin - to take part in discussions with other farmer organisations.

He is expecting some fireworks but is on a mission to promote an end to trade barriers.

He is convinced New Zealand got it right when it cut subsidies in the 1980s and is determined to explain the benefits to his European and US friends.

"I believe New Zealand has a much greater global perspective than a lot of other countries because of our isolation," he says.

New Zealand has some supporters in this fight.

Developing nations have lobbied heavily to put agricultural reform at the top of the agenda.

They have even more to gain from New Zealand if barriers are reduced.

A report published last week by the International Food Policy Research Institute estimated that the farm policies of rich countries cost agricultural producers in the developing world about $42 billion in lost income each year.

Also last week, the three largest developing nations - India, China and Brazil - issued a joint proposal calling for radical agricultural reform.

Despite this kind of pressure for change, Lambie is realistic about the prospects - the Europeans are a stubborn bunch, he says.

The Cancun talks mark the half-way point of a negotiation process that began in Doha in November 2001 and will end on January 1, 2005.

"Unfortunately, when it comes to the really hard stuff, it will be very near the end of the round before everyone gives up and offers there their final positions."

Lambie will stay at the same hotel as the New Zealand delegation.

Three barriers hurting New Zealand farmers

SUBSIDIES:

New Zealand's biggest bugbear, subsidies are paid to foreign farmers to make up the difference between what their Government decides is the fair value of produce and the actual world price. They distort world markets by encouraging overproduction. The resulting surplus produce is dumped on world markets, lowering real prices even further.

TARIFFS:

A direct tax on our exports. Designed to protect local producers, they penalise efficient producers and protect the inefficient.

They cost New Zealand exporters about $750 million a year.

QUOTAS:

Japan, Canada, the USA and Europe all limit New Zealand trade with quotas. In Europe, where the butter price is twice that of the rest of the world, New Zealand is allowed to sell only 76,000 tonnes a year in a market which consumes 1.7 million tonnes annually.

The big event

The fifth WTO ministerial conference to be held since the WTO was created on January 1, 1995.

It is in Cancun, Mexico, September 10-14.

The conference is the organisation's highest-level decision-making body. It meets at least once every two years.

Previous ministerial conferences:

Singapore - 1996

Geneva - 1998

Seattle - 1999

Doha- 2001