Hope for $1b farm bonanza from WTO deal

By BRIAN FALLOW

The prospects of a better deal for New Zealand farmers have brightened with a successful outcome in world trade talks in Geneva.

The agreement yesterday, after five days of intense haggling, represents only the half-time score in a negotiating process which is likely to have another two years to go.

But it holds out the promise of the elimination of export subsidies, which rich countries use to dump excess production in other markets at the expense of more efficient producers such as New Zealand.

That could be worth something "in the order of $1 billion a year" to the dairy industry alone, the Government says.

"Everyone is going into celebration mode," Trade Negotiations Minister Jim Sutton said. "My first beer has just been put in front of me."

The Geneva agreement is a milestone in the Doha Round of world trade talks launched in late 2001.

An attempt to launch the round two years earlier ended in acrimonious failure in the "battle of Seattle" and the round came off the rails in Cancun, Mexico, last year when ministers failed to reach the kind of agreement now achieved in Geneva.

Failure this time would have reinforced the suspicion that the WTO is too unwieldy and the issues too difficult for world trade agreements to be possible at all.

Mr Sutton said that if the odds of a successful trade round had been 50:50 before the Geneva talks, they had now improved to 75:25.

The round is especially important for New Zealand because at its heart is liberalising trade in agricultural products, where tariff barriers and trade-distorting subsidies are rife.

New Zealand's WTO ambassador, Tim Groser, chaired the farm trade talks.

The chances of a successful outcome this time improved in May when the European Union offered to axe export subsidies provided similar concessions were made by the United States.

A key breakthrough at Geneva was a deal between the US and African countries whose economies have been devastated by subsidies to American cotton growers.

Among the matters still to be negotiated, in the agriculture talks alone, are when export subsidies would go, the size and speed of the promised "substantial" cuts in tariffs and expansion of quotas, and which sensitive products are to get special treatment.

Under WTO rules nothing is agreed until everything is agreed.

The detailed negotiations will be delayed by the US presidential elections and a change of European Commissioners over the next few months.

World trade talks

What does the deal mean to New Zealand?

Potentially $1 billion a year in dairy exports alone, if it goes ahead.

Is it nailed down?

Not yet. Rich countries have promised to cut export subsidies but still have to agree exactly when, on what and by how much.

Will the US and Europe accept it?

That could depend on the result of the US election and changes at the European Commission. The real deadline is seen as the end of 2006, when US politicians win back the power to tamper with any agreement.