How board sees sheep meat proposals

Press, 23 June 1978, Page 15

How board sees sheep meat proposals

The : zcompanying item has been written by Mr Charles Hilgendorf, the chairman of the Meat Board.

The E.E.C. Commission’s proposals for a common sheepmeats regime were announced in early April and are now being considered by the various technical working groups and political committees of the E.E.C. system before being referred back to the Council of Agricultural Ministers.

It is probable that progress through all these stages will take some time and, given the divergence of views, the council debate could be protracted. During this time the possibility exists for substantive amendments to part or all of the proposals, but at least they will form the basis for discussion.

The board has consistently held the view that, given the. low level of self-sufficiency of the community in sheepmeats and the diversity of production and consumption patterns that exist, a com’ plex regime is neither practicable nor necessary. The board respects the right of the community to determine how its markets should be regulated or organised, though, as New Zealand is a major supplier to those markets, we have a vested interest in the outcome of the dis-, cussions on the proposals. Our concern is that any regulation that may be in troduced should not include measures that are considered unnecessary or are likely to seriously distort present market relationships. As the proposals stand at present there are some aspects which could be considered as reasonable, but there are others of a more stringent nature, similar to those used in other “classical” restrictive common regulation which the board consider to be inappropriate for a product in which the community is only 65 per cent self-sufficient. The commission’s proposals call for the abolition of present member coiin= tries’ national policies on trading in sheepmeats and the establishment of free intra-community trade, with a combination of measures to support producers’ incomes. It is proposed that measures to support market prices should take the form of aids to voluntary private storage rather than the more traditional means of official intervention buying and storage. This means that, if representative prices in the community fell to a pre-determined level, financial incentives would be offered to traders to voluntarily freeze and store meat for later release onto the market. The aim would be to temporarily reduce supplies and raise market prices. In addition, there is provision in the proposals for the possibility of premium payments or subsidies to offset the likely drop in producers’ incomes in those markets (where prices are relatively high) which would result from imports from those coun-

tries in the community where prices are relatively low.

The application Of both these support measures would be determined by reference to a community basic price for fresh and chilled sheep carcases which would be established each year. Further domestic pro’ ducer support may also be possible through extensions to the existing special grant aids to sheepfarming in mountain, hill and “less-favoured” farming regions.

The proposals with respect to imports from non-member countries provide for the replacement vide for the replacement of the present “ad valorem” duties by a system of variable import levies. These would be determined by a complex series of calculations relating to import prices and the established basic price. However, recognition has been given to the G.A.T.T. binding on the present 20 per cent ad valorem Common Customs Tariff, so it is proposed that where this is applicable the levies should not exceed that amount.

Further to this, though, it is proposed that imports would be subject to the presentation of import licences. There is also a safeguard clause which provides for necessary measures to be taken at community level to alleviate any problem caused by imports or exports which might endanger the objectives of the market organisation in the sheepmeats sector.

The board believes that since the proposals have now been produced by the commission and submitted to the Council of Agricultural Ministers, as legally required under both the Treaties of Rome and of Accession, New Zealand’s efforts should now be concentrated on endeavouring to improve it or modify some of the provisions to ensure that our interests are protected if, and when,

a regulation is finally debatecT and agreed. To some extent this view differs from that of the Government, which considers that we should continue to oppose the introduction of any regulation. In principle, both organisations have the same general' aim of ensuring the most liberal access possible for New Zealand’s lamb and mutton to E.E.C. markets, though the point of emphasis is slightly different.

The board is opposed to any regulation which conflicts with its objective of securing continuous and reasonably free 'access to all countries of the community. It considers that the commission’s acceptance of the E.E.C.’s commitment under the

G.A.T.T., which limits the duty payable o'n imports of frozen sheepmeats to a maximum of 20 per cent, is commendable since it believes that the present tariff rate offers more than sufficient protection to E.E.C. producers and would strongly resist any moves to deconsolidate the G.A.T.T. binding. In this respect, the board recognises that the commission has avoided any attempt to impose quantitative controls, which would be contrary to the G.A.T.T. undertaking.

Also, given the differing production circumstances in the community, the board regards the move towards the use of deficiency payments as a progressive step. However,there are several other points in the commission's proposals which give rise to some concern. These are: (i) the establishment of the basic price; (ii) the provision for private storage aids; (iii) the inclusion of a safeguard clause; (iv) the provision for import licences; (v) the lack of a specific over-all transition period. It is proposed that a “basic price” will be established for sheepmeat for each marketing year, which is intended to be used as a benchmark for determining if and when the various support measures are required, and in calculating the amounts of the variable levies on imports. There is, as yet, little detail of the way in which these prices would be established. Unlike other regimes, this basic price is not intended to be a target level for market prices since these are expected to find their own levels under the influence of supply and demand forces. However, the very fact that such a price is set could be seen by producers in the E.E.C. as a required price level, and, if returns around this level are not achieved, it is possible that pressures will increase within the community for action to be taken, particularly against imports. It is imperative, therefore, that the exact nature of this basic price is clearly spelt out and understood. Also, more information will be required on the relationships between the basic price and import prices in the determination of the variable levies before the effects of these measures can be calculated. The commission has stated that in view of the relatively low level of self-sufficiency buying-in

by official intervention agencies will not be necessary and yet it proposes to offer aids to private storage. This seems to be an admission that the implementation of the proposals could disrupt the market even though they consider that it is not required under the current market organisation. The board’s concern with this measure is that any inducement to freeze and store domestic sheepmeats will distort domestic supply patterns and there could be serious price-depressing effects with the possible release of these frozen stocks at a time when imported supplies were coming onto the market. It has been evident that there has been some lack of skill in the community during the beef intervention operation. The board is concerned that the consumer image of lamb, which New Zealand and European producers jointly have been trying to promote, could suffer if significant quantities of domestic product were to be stored and then marketed in the frozen state. It is also feared that if the aids are used and they do not prove to be effective as a means of supporting market prices, there could be pressure for the introduction of stronger measures. It should be noted that intervention in the beef sector began in a similar manner.