1996 Post Election Briefing - Policy Issues Facing the Agriculture Sector

Policy Issues Facing the Agriculture Sector

Macroeconomic Environment

The agriculture sector has benefited, and the sector’s competitiveness has improved, from:
low inflation and a stable macro economic environment;
reduced tariffs;
low taxation rates across a broad base;
the Employment Contracts Act 1991 (ECA), which has brought about increased flexibility, improved labour productivity, easier introduction of new technology, better customer service, and fewer hours lost due to industrial action;
policies and strategies that have reduced the cost of, or increased the standard of service of, inputs being used including deregulation of the financial sector, telecommunication reforms, transport reforms and competition policy; but
some of the sector believe that they, along with other exporters, are shouldering an inequitable burden, through high interest rates and exchange rates, in achieving the objective of price stability.

Legislation Issues

The agriculture sector believes the Accident Rehabilitation Compensation and Insurance Act 1992 (ACC) needs urgent review.
In addition to the MAF legislation carried over from the previous Parliament, there is:
an urgent need to update and consolidate relevant sections of the Meat, Dairy Industry, Animals, Plants and Apiaries Acts to take advantage of new opportunities for innovation resulting from the WTO SPS Agreement to provide quality assurances necessary for consumer protection and overseas market access; and

- a need to update New Zealand’s animal welfare legislation in view of changing societal attitudes; the emergence of animal welfare as an issue affecting the purchasing preferences of domestic and international consumers; and the availability of relevant research findings on which to base policy recommendations.

Compliance costs arising from the Resource Management Act 1991, the Health and Safety in Employment Act 1992, and the Commerce Act 1986 are of major concern to the agriculture sector.

Services to Rural Communities

A critical question with respect to the services available to rural communities is whether they are adequate to meet the needs of people living, working, or operating businesses in those areas. Some of these communities regard their access to services such as transport, communi-cation, health and education, as being inadequate. Viable communities are a key to sustainable agricultural practices and continuing export growth.

Market Access for Primary Products

The conditions of access for New Zealand primary products on world markets are of vital importance to New Zealand. Working closely with industry and other government agencies, especially the Ministry of Foreign Affairs and Trade, MAF is active in seeking to improve the conditions of access. This objective is being pursued through New Zealand’s four trade policy strategies: policies for a competitive domestic economy, and multilateral, regional, and bilateral trade policies. MAF’s main input is through the provision of technical and economic policy advice and in certifying that exports from New Zealand meet the food safety and quarantine requirements of importing countries.
The key trade policy issues for MAF revolve around trade liberalisation. This requires ongoing participation by MAF in a range of international fora and activities including the FAO, OECD, Codex, OIE, IPPC, the Cairns Group, and APEC in addition to the WTO. Of overriding importance in coming years will be the need to ensure agriculture features prominently in the next round of WTO trade negotiations.
Consumers worldwide are becoming increasingly concerned with animal welfare and environmental degradation issues. Such concerns have the potential to act as barriers to trade, especially as the more traditional barriers of tariffs and quotas are reduced. Improved sanitary and phytosanitary SPS) rules and measures are critical to ensuring that countries do not unfairly use technical measures to protect their domestic industries in the face of increasing import competition.

Marketing Structures for Primary Products

The world markets on which our primary products compete are constantly changing and there are questions as to whether existing marketing structures are maximising net benefits to New Zealand.
There are many potential alternative marketing arrangements but these should not be implemented unless they are likely to provide greater net benefits to New Zealand than the structures or arrangements they replace. MAF will continue to provide advice on the relative merits of different marketing arrangements in the context of the changing world markets within which New Zealand primary produce competes.
As a generalisation, those producer boards that have both commercial and regulatory functions can face real or perceived conflicts of interest. When the referee is also a player there will be concerns that the referee may control the game to the disadvantage of other players. The Dairy Board and the Apple and Pear Marketing Board have published guidelines against which proposals for exporting by alternative exporters are considered. In the case of proposals for apple exports, these are considered by a Consents Advisory Committee (CAC) established by the Board. The Board considers the CAC’s recommendations and makes the final decision. This process has been criticised by other parties wishing to export apples — they would like the Government to establish, in legislation, an independent committee to rule on all applications for the exporting of primary produce.

Commodity Levies

Despite a large number of successful applications, organisations seeking compulsory levies under the Commodity Levies Act 1990 have expressed frustration with the process. They have found the Act costly and time-consuming to comply with. The costs mostly arise from the safeguards in the Act, deliberately inserted, because compulsory levies are effectively taxes.

Resource Management

Government policies should be designed to enable present and future generations of New Zealanders to obtain maximum net benefit from natural resources. Ecological, cultural and social values are an important part of our quality of life and must be included in this equation. With growing consumer interest in how goods are produced, plus the need to protect the resource base for future production, producers also have a self-interest in good environmental management.
To ensure efficient use of resources and maximise national welfare, users should pay the full cost of resource use, including environmental costs. It is in New Zealand’s interest to promote this principle internationally.

• MAF has a sustainable agriculture facilitation programme. It is an integral part of the Government’s collective approach to achieving the sustainable agriculture and land management objectives sought.

• The Resource Management Act 1991 has raised producer awareness of the need to care for the environment. Regional and district planning processes have led to some very positive initiatives focusing on influencing farming practices and typically involving land users, industry groups and agencies.

Border Control

Three fruit fly incursions in 1995-96, cost the Government some $6.6 million and the horticultural industries significantly more, as a result of export exclusion zones imposed by trading partners.
Border inspection staff check that all goods entering New Zealand on commercial consignment are in compliance with standards set to protect New Zealand’s plants, animals and humans from the introduction of exotic pests, diseases and undesirable biological species.
In September 1996 the Government announced an integrated package of measures affecting passengers coming into New Zealand, to further protect our plant and animal health status. The package includes a comprehensive quarantine awareness strategy, expansion of the quarantine detector dog programme and the installation of seven x-ray machines for airport baggage and mail screening.

Science Policy Issues

The science reforms are now yielding significant benefits through better integration between the science providers and the sectors they serve — particularly at the strategic level. It is critical that there is now a period of stability and that the strategy indicated in the publication RS&T 2010 is followed. In particular, it is important that the resolve to increase overall Government science funding to 0.8 percent of gross domestic product is not lost.
The potential decline in real funding over the next four years through the Public Good Science Fund presents difficulties for many agricultural and horticultural science providers.
MAF believes that greater emphasis needs to be placed on the transfer of technology between science providers and industry to maximise the benefits from the Government’s investment in agricultural research.
Ambivalent public perceptions of science remain a significant issue.

MAF Resources

• MAF’s key resource is its people and their intellectual capital. Without an ongoing presence of well qualified and trained staff MAF will not be able to provide the extensive range of services that assists the agriculture, seafood and food sectors to trade and prosper in the longer term.

In the course of consultations MAF undertook when preparing this briefing document, sector leaders made various observations about the MAF staff resource including:
a questioning of MAF’s capacity to respond to a disease outbreak or emergency given current staffing levels;
their firm conviction that MAF must continue to be a major participant in agricultural trade policy;
concern that a number of senior staff seem to be overstretched, and don’t appear to have time to be able to "recharge their batteries"; and
concern that an undue emphasis on cost-cutting and restructuring over the past five years will result in future problems because MAF will not have the capability to respond to sector demands.
The above observations are a subset of concerns expressed in the report "The Spirit of Reform: Managing the State Sector in a Time of Change", prepared by Professor Allen Schick for the State Services Commission and The Treasury, in August 1996. These issues need to be addressed in discussions on the pricing of outputs with the control agencies and Ministers.

Status of the Agriculture Sector (in mid-September 1996)

Agricultural sector growth is being dampened by the impact of higher exchange and interest rates and depressed international prices for some products.
Despite weakening international prices during 1996, the dairy sector continues to perform well with record production and payouts achieved last season.
The national sheep flock is expected to stabilise at around 47 million with improving sheepmeat returns apparent over 1996, largely in response to BSE induced effects in the EU, New Zealand’s most important market.
Beef prices remain depressed reflecting increased beef and poultry production in the US. The national beef herd has fallen below 5 million as farmers reduce herds in response to lower prices.
Some upward movement in wool prices is expected over 1996/97 compared with the previous season although the extent of this will depend on developments in the major export destinations for New Zealand wool, in particular the volatile Chinese market.
The deer industry is moving into a growth phase, buoyed by strong demand and improving prices in European markets.
Prices for the main horticultural export crops — apples and kiwifruit — remain subdued, reflecting a range of factors, including increasing supply and less favourable exchange rates.
Farmer revenues, debt situation and morale reflect the fortunes of the various sectors, with dairy and deer farmers in general currently better placed than their counterparts in the sheep and beef, and horticulture sectors.
Over the medium term the prospects for agricultural products will continue to be heavily influenced by external factors such as ongoing implementation of the Uruguay Round, technological improvements and economic growth in New Zealand’s major trading partners.

Contact for Enquiries

MAF Information Services
Pastoral House
25 The Terrace
PO Box 2526
Wellington, NEW ZEALAND

Fax: +64 4 894 0721
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