Dairy Industry Contends that Agricultural Subsidies are Distorting Trade and Investment

by IS_Indust

As trade ministers from around the world prepare for a WTO meeting in Abu Dhabi, the Dairy Companies Association of New Zealand (DCANZ) is urging an immediate cap on agricultural subsidies and a swift reduction to counteract and rectify the distortions in production and trade. Kimberly Crewther, executive director of DCANZ, emphasized the need for New Zealand Trade Minister Todd McClay to strongly convey this message, expressing confidence in his ability to do so. Crewther highlighted recent modeling, confirming the significant impact of subsidies on trade, investment, and production locations. She expressed particular concern about the upward trend in agricultural subsidies, with payments already surpassing $800 billion annually among OECD member countries.

“The modelling has revealed significant impacts that agricultural subsidies are exerting on dairy markets. For instance, a 50 percent reduction in EU farm subsidies could elevate the traded value of cheese for non-EU exporters by 8 percent. These figures hold substantial weight, especially considering New Zealand exports $3 billion worth of cheese annually,” she explained. Crewther emphasized that these outcomes are not exclusive to EU dairy subsidies, stating, “This dynamic is universal.”

Developed by economic consultancy Sense Partners in collaboration with DCANZ, the Global Dairy Distortions Model seeks to enhance understanding regarding the effects of subsidies on global dairy markets. It aims to contribute evidence-based insights to international policy discussions.

In presenting the most recent OECD Agricultural Policy Monitoring and Evaluation Report, OECD secretary-general Mathias Cormann acknowledged that “such measures alter trade, investment, and the location of production, undermining both the value of market access and the benefits of competitive markets and open trade.” He also cautioned about potential environmental harm.

Kimberly Crewther emphasized that the issue of addressing the trade-distorting impacts of agricultural subsidies has been deferred for too long. She stressed the importance of making agricultural subsidies a central focus of discussions during the Ministerial Conference, emphasizing the need for tangible progress in this regard.

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