Attacks on Fonterra simply delaying tactics, says Sutton

Jim Sutton

European attacks on Fonterra, wrongly labelling it a state trading enterprise (STE), at the international trade talks in Hong Kong are simply delaying tactics, says Trade Negotiations Minister Jim Sutton.

"Delaying indefinitely over the issue of what will be the date by which export subsidies will be eliminated is a way of avoiding getting to the next item on the agenda," he said.

At the halfway point of the World Trade Organisation (WTO) talks in Hong Kong, there has been little movement on the key area of agriculture, with Europe still resisting demands from nations such as New Zealand and Australia to do more to open its protected farm markets to competition.

The European Commission negotiators had not come up with a good offer on cutting farm subsidies because they did not have a mandate for it from the European Union, Mr Sutton said.

EU Agriculture Commissioner Mariann Fischer-Boel said yesterday New Zealand, as well as Canada and Australia backed the continued use of what she called state trading enterprises (STEs) and this practice had to end.

Ms Fischer-Boel said the EU wanted exporters such as Fonterra, as well as the Australian wheat company AWB and the Canadian Wheat Board, out of business because as "monopolies" they were not transparent.

But the claim was just a stunt, said Mr Sutton.

The EU was embarrassed because "it can't put an offer on the table on market access that any way lives up to the commitments they made at Doha and again last year in Geneva".

"There are some things that the big economies need to do at the moment (that) they're finding extremely difficult to do politically."

Mr Sutton said today EU Trade Commissioner Peter Mandelson had "totally implausibly" accused New Zealand of delaying the trade talks because New Zealand refused to acknowledge it was subsidising dairy farmers through Fonterra.

When New Zealand offered to stop any subsidies that the EU could identify, "Mr Mandelson turned around and said: 'Your true agenda is to deny that you're doing what you're doing, we can't trust and therefore our offers are off the table'," Mr Sutton said.

"None of the other countries in the Green Room take this seriously for a single moment," Mr Sutton said.

Mr Mandelson also said he was sick of nations such as Canada, Australia and New Zealand being sanctimonious about export subsidies used by the EU.

Fonterra's director of strategy, government and trade, Philip Turner, also said that the attacks were diversionary.

"The EU appears to be seeking to distract attention away from the main issue in the agriculture negotiation, which is the commitment to substantial improvement of market access."

Fonterra was not an STE or enjoying subsidised support, and any company could collect, make and export dairy products.

Fonterra did manage access to New Zealand-only quotas in some lucrative markets such as the EU, in an arrangement due to expire from 2007, but Mr Sutton said this was a competition issue which the Europeans were trying to sneak on to the agenda.

Fonterra, a dairy cooperative owned by about 12,000 farmers, controls more than a third of all the world's milk traded internationally.

Fonterra's investments in United States operations have also made it the largest US dairy exporter and it has argued that even without subsidies, US farmers can compete with those in Australia, New Zealand, Brazil or Europe.

Dairy producers are the only US farmers paid subsidies to encourage exports and US trade representative Rob Portman has offered his WTO counterparts in Hong Kong a 60 per cent cut in US subsidies.

Mr Turner said ending those subsidies would probably force an immediate jump in world dairy prices and then build up milk production in areas outside of Europe.

The Minneapolis Star-Tribune, in the dairying state of Minnesota, reported that dairy farmers, one of the largest recipients of government farm aid on that side of the Atlantic, were jettisoning their protectionist past and cautiously embracing plans to reduce their price supports.

A system of government payments, purchases and import quotas that date to the Great Depression makes milk one of the most protected products in the US, with government support reaching US$4.5 billion ($6.55 billion) a year, more than any other agricultural product.

Mr Sutton said negotiators at the WTO had time remaining -- if they could push through an agreement in the next 12 months, President George Bush would have six months left of his mandate to sign binding treaties.

"The Americans have put a good offer on the table in respect of cutting farm subsidies -- and they will further improve it -- but I think though the EU have put a very low-quality offer on the table for market access, they will come up with something better with more time and more pressure."

- NZPA