THE PRESS WEDNESDAY, SEPTEMBER 16, 1987. Fairer deal in farm trade

Press, 16 September 1987, Page 18

THE PRESS WEDNESDAY, SEPTEMBER 16, 1987. Fairer deal in farm trade

The United States, as its Ambassador to New Zealand, Mr Paul Cleveland, insists, might now lack the relative economic strength to solve the world’s economic problems on its own. Nonetheless, the United States economy and United States trading policies still provide most of the impetus for trade and economic well-being among the countries of the Western world. United States proposals to reorder the way in which most of the world conducts its trade are of vital importance to most of us; proposals that concentrate on the trade in agricultural produce, on which New Zealand depends for most of its export income, are doubly important for New Zealand. Australia is no less alive to the threat and its Prime Minister, Mr Hawke, has spoken firmly about the possibility of United States action against imports of agricultural produce damaging 1 relations with Australia. Mr Cleveland provided a measure of reassurance for New Zealand’s producers and exporters of primary produce when, in an address to the Auckland Chamber of Commerce last week, he listed New Zealand firmly among the allies of the United States, at least in the drive to liberalise the international trade in agricultural products. The United States proposal for consideration in the present round of trade talks under the General Agreement on Tariffs and Trade is revolutionary rather than evolutionary. It would result in a more rapid and more complete removal of agricultural trade restrictions than New Zealand would have dared hope for as recently as a year ago. In simple terms, the United States proposes the complete removal, by the year 2000, of all barriers to markets and all subsidies that distort world trade in agriculture. The concept is simple; the reality much different. Of all the sectors of the world economy, none has proved more stubborn for negotiators trying to reduce trade barriers than agriculture. Mr Cleveland’s contention that there is a simple explanation for this — namely, that farmers are good at politics — might be overly simple. Most countries place a strategic value on the security of a domestic food supply that accords agricultural production a political importance beyond the wiles of simple countryfolk. Mr Cleveland’s broad argument is valid, however. In many countries the political clout wielded by the farming lobby prevents timorous Governments from following the good economic sense they preach to others. The economic comprehension agreed on in th? abstract becomes blurred when Governments in the European Economic Community, or the United States, or Japan come to deal with their domestic problems. The threat to domestic political stability in European countries posed by a too-rapid removal of agricultural subsidies, for instance, obviously outweighed the damage being done' to the E.E.C. budget by the crippling demands of the Common Agricultural Policy. The $37,000 million the E.E.C. will spend this year in direct subsidies to farmers is not only greater than the whole of the New Zealand Government’s Budget for the same period, but amounts to 40 per cent of what European farmers will receive for what they produce. The United States, as Mr Cleveland freely admits, is far from guiltless in this and will provide its farmers with 20

per cent of their returns from produce with a farm-subsidy budget of $40,320 million. Adoption of the United States plan would mean the virtual dismantling of Europe’s Common Agricultural Policy. The E.E.C. is far from enthusiastic and intends to present its own proposals for farm-trade reform before the end of this year. These are unlikely to be as dramatic as the American suggestions, and might even be limited to a sharing out of world markets and mediumterm arrangements for the disposal of food surpluses — leaving individual countries to decide for themselves how best to keep production down in the future. The Japanese, whose farmers are cosseted by Government subsidies that account for an artificial 70 per cent of the value of what they produce, are most unwilling to open their markets even though a staple, such as rice production, is five times more costly in Japan than in California.

The biggest threat for New Zealand in this is that a cosy cartel could develop among the E.E.C., the United States, and Japan. The three have been engaged in serious trade rows for some time now. Settlement of these rows could encourage the parties to a threeway accommodation that would leave others, such as New Zealand, out in the cold. The reforming zeal of the Reagan Administration could yet be tempered by the powerful farm lobby in the United States. Some countries, with an eye to the strong protectionist sentiment being shown in the United States Congress, have wondered more or less aloud whether it makes sense to negotiate with the United States in the fading days of the Reagan Administration. Will any deals be worth the paper they are written on? Mr Cleveland acknowledged in Auckland that a key question has been whether the United States Government “can deliver the United States Congress on this issue.” Mr Cleveland’s answer was cautious: “If others go along, the United States Congress can be persuaded.” This probably is the best that can be expected. The rest of the world will just have to wait for the dust from the United States congressional and presidential elections next year to settle to see whether the United States enthusiasm for freer agricultural trade will last. New Zealand must hope that it will. The present impetus for reform is the most promising yet. Europe and Japan have gone as far as endorsing calls at the Venice economic summit and at the recent Paris meeting of the Organisation of Economic Cooperation and Development calling for cuts in farm support so that production is more responsive to market demands. These acknowledgements that something should be done are a start.

The timetable suggested by the United States is urgent enough in global negotiations of this sort; the 13 years left to the turn of the century is not a long time in this context. In reality, the need for a breakthrough is more pressing than this. Not only is it likely that the farm-support issue will loom large in next year’s elections in the United States, but the Japanese Prime Minister, Mr Nakasone, will soon be replaced also. Changes in attitudes to trade in these countries could ease the pressure on the E.E.C. to liberalise agricultural trade and the moment could be lost, if not forever, then for a very long time.