Keeping trade doors open

In a speech in London at the end of March this year, World Bank Group president Robert Zoellick said a study by his organisation showed 17 of the G-20 countries have implemented trade-restricting measures since their public promise to reject protectionism last November.

He predicted national leaders will come under increasing pressure to shift problems to others as 2009 progresses and unemployment increases.

Significantly for New Zealand, both the United States and the European Union (EU) have reactivated export subsidies for their dairy products. New Zealand Trade Minister Tim Groser says the New Zealand government has protested strongly against these moves. 

New Zealand has received support from all 18 other Cairns Group countries. The unified approach, says Groser, is essential to ensure the issue is not seen as an isolated concern pitting New Zealand against the US and EU dairy sectors. 

“But the basic point is that under the existing Uruguay Round agreement, the EU and the US are legally allowed to use these subsidies…. So there was no question of taking them to disputes settlement in the World Trade Organization (WTO).”

He says the EU has “massive firepower” that it could use. “They have refused to suspend these payments but we’ve reached some kind of uneasy equilibrium at this stage whereby the amount of subsidies they are applying are relatively moderate and not impacting too severely on world market prices.”

Groser says the government is doing everything in its power to keep trade doors open for New Zealand exporters.

“There is nothing more that we can do than the protests and organised political campaigning that we have done. We are doing all the normal things – writing letters, meeting people, using international forums. But until such time as the law is broken, that’s the limit of it.”

Long term, says Groser, the solution is straightforward. “We have a chance again to conclude the Doha Round in the WTO. Whether we will take it, I don’t know. Any conclusion to that round will include finally – after 60 years of diplomatic effort by countries like us – the elimination of export subsidies… But in the meantime, we are living in a grey zone.”

New Zealand trade officials see a successful completion to the Doha Round as the key to stop the creep back to protectionist measures and to stimulate the global economy.

Groser says New Zealand is voicing its concerns around protectionist measures via “strong communiqué language and criticism through a variety of different mechanisms”.

Following its 33rd ministerial meeting in June this year in Bali, Indonesia, for example, the Cairns Group of countries issued a communiqué re-iterating the need to eliminate export subsidies ‘once and for all’.

“Such reforms will provide valuable assistance against the growing threat of protectionism, and will help move the international trading system closer to a level playing field,” the communiqué stated.

“At this critical time in the global economic downturn, it is essential that we guard against increased protectionism in agriculture, which includes not only tariffs but also subsidies and other restrictive non-tariff measures.”

Referring to dairy products, the communiqué went on to say that the recent re-introduction by the EU and US of export subsidies for one major commodity has deepened that risk.