Framework of the package
While the conclusion of the Uruguay Round does not mean instant riches for New Zealand farmers, it will provide a more secure international trading environment. Equally important, it is but the first step on the road to the long-term reform of agricultural trade and domestic policies: the agreement contains provisions for review and scope for further liberalisation.
Specifically, the Uruguay Round agreement provides that, over the 1995-2000 period:
- internal support be reduced by 20% from 1986-88 base levels;
- all non-tariff barriers be converted to tariffs ("tariffied") and reduced by at least 15% from 1986-88 base levels;
- the volume of subsidised exports be cut by 21%, and budgetary expenditure on export subsidies be cut by 36%, from 1986-90 base levels; and
- Sanitary and Phytosanitary (SPS) measures be revised and tightened, with the aim of ensuring that they are imposed only to the extent necessary to protect human, animal or plant health, according to objective scientific criteria.
These elements are mutually reinforcing: access opportunities would mean little if governments remained free to impose arbitrary SPS standards. Likewise restrictions on export subsidies would be ineffectual if governments were free to compensate producers by providing unlimited internal support.
One of the agreement’s strengths is that, once border restrictions are tariffied, they will be reduced on a formula basis, agreed amongst all GATT members.
The benefits of the Uruguay Round’s formula type approach are clear:
- it can apply over an extended period;
- it can be readily applied to a wide range of goods; and
- it tends to be a transparent process.
Perhaps most important from New Zealand’s view is that a formula approach lends itself readily to multilateral liberalisation, and so is favourable to smaller countries, whose bilateral leverage is minimal.
But the agreement on agriculture also has its limitations.
The Special Agricultural Safeguard on tariffied products allows a country to apply additional duties if import prices of agricultural products fall below a certain reference level, or if there is a surge in import volumes. Its aim is to protect domestic producers of tariffied products should imports of that product expand rapidly.
Another important element of the agreement on agriculture is the "Peace Clause". In essence, this says that agricultural measures, provided they do not contravene the provisions of the Uruguay Round agreement, cannot be challenged by GATT panels, or any other dispute settlement channel, until the year 2003.
It means, for example, that the EU’s Common Agricultural Policy -whose legality under the GATT was questionable - cannot be internationally challenged until three years beyond the six-year duration of the Round itself.
For New Zealand, as for other exporting countries, this element of the agreement represents a compromise: in exchange for conferring immunity on such policies, exporting countries should benefit from reduced levels of protection.
In other areas too, the Uruguay Round disciplines are not as stringent as New Zealand would like:
- export subsidies, though subject to reduction, will continue to disrupt world markets;
- internal support measures are unlikely to reduce current levels of assistance to farmers - the OECD’s farmers could still accumulate Toyota Corollas on an annual basis, but they would have to do without the alloy wheels and anti-skid braking system;
- many of the benefits to New Zealand farmers will be realised gradually: the first cuts in tariffs and export subsidies will not be made until 1995.
Nevertheless the agreement is a very good one for New Zealand farmers. The next section assesses the implications of the agreement for New Zealand agriculture.
Contact for Enquiries
Rural Affairs Coordinator
Sector Performance Policy
MAF Policy
Ministry of Agriculture and Forestry
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0675
Fax: +64 4 4 894 0745
Contact this person
