Sector Wide Implications
Agriculture stands to benefit most from the Uruguay Round, principally through cuts in subsidised export volumes, improvements in market access and guarantees on existing access levels. Improved farm incomes will have beneficial effects on upstream and downstream industries, and on rural communities in general. But gains will be gradual and it is likely to be more than a decade before they are fully realised.
New Zealand Access
World agricultural prices are likely to rise, though the extent to which this will occur is uncertain. Australian research and MAF’s own investigations suggest that there will be significant increases in the world prices for cheese, milk powders and perhaps beef (to foot and mouth disease-free markets) compared with what would otherwise be the case. Sustained price increases in excess of 20% are, however, unlikely.
For other agricultural products the Uruguay Round is likely to generate only modest improvements in prices: for example, sheepmeat and wool are likely to exhibit price increases of less than 5%. Moreover, some of the improvement in dairy, grain and meat prices would be eroded if the EU and US were to replace their export subsidies by deficiency payment schemes linked to the current level of production. These schemes would be exempt from the internal support disciplines.
Dairying, especially cheese, stands to benefit most from reductions in subsidised export volumes. The EU, however, does have the flexibility to increase subsidised exports of butter, especially over the 1995-2000 period. Such an action could offset the otherwise positive impacts on dairy prices. Gains to sheepmeat will largely come through improvements in the quantity and quality of access to the EU sheepmeat market and will depend on the extent to which exporters are prepared to undertake further development of the chilled lamb trade.
The positive impact on New Zealand farm product prices will stimulate some increase in agricultural production volumes. This is likely to be largely confined to dairying and beef owing to the expected improvement in the profitability of dairy and beef relative to sheep, grains and horticultural crops. The volume of agricultural output overall, however, is likely to show only a modest improvement - perhaps of the order of 4% over the next six years. In part this reflects competition for the available land but also the relatively moderate nature of the expected price gains. The combined effects of increases in output and price, and improved access opportunities, may see sector-wide farm revenue rise by 10% to 15%, assuming current exchange rates, over the period up to the year 2000.
Many of the benefits of the agriculture agreement, however, resist accurate quantification. The certainty of future access, and restrictions on subsidised exports, should reduce the risk associated with agricultural investment. Tighter sanitary and phytosanitary requirements and firmer rules on technical barriers to trade will also enhance trade. The effects of all these changes, though, while they will be positive and significant, are extremely difficult to calculate.
More readily quantifiable are the likely benefits from better access opportunities. Assuming recent prices and exchange rates, and neglecting the effects of trade diversion from lower paying markets, improved access to key markets - namely beef and cheese to the US and butter and sheepmeat to the EU - is likely to be worth around $1.6 billion over the six year period to 2000.
This figure for gross gains only partially captures the longer term benefits to New Zealand. There will be improved access to many markets for most of New Zealand’s agricultural products, while the export subsidy disciplines should also boost returns to the sector.
The importance of the agriculture sector to New Zealand cannot be overstated. It is the nation’s principal export earner and largest single industry. While other sectors have been able to compete in a reasonably fair international trading environment, New Zealand agriculture has been stifled by the profligate farm policies of the developed countries. The Uruguay Round outcome marks the beginning of the end of this worldwide Dark Age for agricultural trade. It will create many new and improved opportunities for New Zealand agriculture, whose full potential has yet to be unleashed.
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
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