US backs end to export subsidies

By LIAM DANN

The powerful United States dairy industry has thrown its weight behind New Zealand's calls to end export subsidies.

For the first time, it has agreed that "export subsidies are highly trade-distorting and depress world markets".

And the Americans went even further in a joint statement with the Global Dairy Alliance, which includes New Zealand, Australia and South American dairying nations, calling for the total elimination of all agricultural subsidies phased in over several years.

The end of government subsidies in the US and the European Union would bolster commodity prices around the world, putting more dollars in the pockets of farmers.

The statement, released in Washington yesterday, is timed to influence talks in Geneva this month. The signatories represent two-thirds of the global dairy trade.

New Zealand officials describe the American support as a breakthrough even though it stops short of support for the key issue of market access.

But New Zealand's Global Dairy Alliance representative, Phil Turner, said it was an important step forward.

The US Government supports subsidy reform while continuing to subsidise its farmers. Cynics will argue the US industry is opting for the moral high ground while there is little chance of real policy change in the short term.

But Turner, who is also Fonterra director of government and trade, said: "We've never done this before. There's never been a joint statement from the industries in all those countries."

He said ultimately, the EU remained the most resistant to subsidy reform.

But the US Government can also enforce a ceiling on the world milk powder price by setting the level at which it starts dumping its enormous surplus on the world market.

Trade Minister Jim Sutton declined to comment.

The statement also recognises an EU willingness to consider the elimination of subsidies.

However, the EU has said it will move on subsidies only if there is movement on market access - the one point on which the US is not prepared to move.

Trade talks

* The last round of World Trade Organisation talks - known as the Uruguay Round - was worth at least $9 billion to New Zealand over its 10-year implementation period.

* This round began in 2001 at Doha, Qatar. Disagreement over agricultural trade reform stalled progress at Cancun, Mexico, last September.

* Officials are negotiating a framework for an agriculture agreement.

* The negotiations come to a crunch at the end of this month when trade ministers gather in Geneva.

* If talks fail no further progress is expected until next year.