For more than a year United States negotiators have been pushing Japan to dismantle the very high tariffs protecting its farmers from imported competition.
But Petersen said after a sweep through key agricultural states in the US in the past fortnight it was still not clear to him that American dairy farmers in particular were prepared to offer the same in their own domestic market.
“There is no doubt the US is trying to have their cake and eat it too and that is to get better access into other markets but at the same time the US dairy lobby is also trying to protect the domestic market for themselves.”
Petersen said he had made it clear during his trip that NZ would have great difficulty signing a deal benefiting American producers but which did not remove barriers to this country’s farmers exporting more to the US.
“If America does not start taking this seriously then this deal probably won’t get done.”
Petersen said he had also pressed American farming leaders to speak up more in support of a US trade bill seen as crucial to getting all 12 countries to come up with a final agreement in the TPP.
So-called Trade Promotion Authority (TPA) means the US Congress would be confined to a simple yes or no vote on the TPP rather than being voted on clause by clause with the potential for major changes.
But Petersen said the bill was politically contentious and had still to be introduced to the Congress and with time now running short before the next US presidential election cycle got underway it needed backing now or it might not make it.
“The people that are pro exports and pro trade and pro TPP need to really work on their Congressmen to make sure they are advocating on their behalf because there are a huge number of critics that really do not see their future in trade and that are stopping that from happening.”
Petersen’s trip also took in Mexico and Canada where high tariffs protecting farmers were proving to be yet another stumbling block to completing the TPP.
As in the US, Canadian farming could benefit from improved access to international markets but was stuck in a mind-set of protectionism exemplified by its supply management system.
Under the system farmers could produce only enough milk to fill their allocated quota which meant production for the industry had stayed constant at 7.5 billion litres for the last 30 years and domestic milk prices were artificially high.
“If America does not start taking this seriously then this deal probably won’t get done.”
MIKE PETERSEN
Trade envoy
As a result of those inflated prices – thought to add an extra C$600 a year to the typical Canadian family’s food bill – dairy quota was extremely valuable and estimated by a recent Ottawa think-tank to be worth as much as C$30b.
Naturally enough Canadian dairy farmers were keen on maintaining tariffs of up to 300% protecting their position in the local market and had kept the funds flowing to mount a strong opposition to the tariff-busting TPP talks.
But Petersen said the inflated price of quota meant the industry had painted itself into a corner when it came to farm succession and the average age of its farmers was rising.
“How do you transfer the assets of a farmer that has 280 cows and probably has a net worth of $40m?”
Petersen told Canadian farmers the future was increasing production to compete on the world market.
He said a time-limited levy on consumers to compensate existing farmers for lost quota could be used and it would still leave consumers and farmers better off in the long run.
Putting hard word on Canada, Japan
The dairy industries in New Zealand, the United States and Australia are to call on their politicians to keep up the pressure on Canada and Japan to live up to the promises they made when joining the Trans-Pacific Partnership trade talks.
A draft of a letter to the respective trade and agriculture ministers from the three countries peak dairy lobbies calls on them to hold the line in the final stages of the TPP negotiation for an “ambitious, comprehensive and commercially meaningful agreement”.
NZ and Australia would take those words to mean scrapping tariffs on dairy products in all 12 countries in the talks within a decade although possibly not the same is true of the US which has frustrated the dairy industry here by vocally calling on Japan to scrap tariffs on dairy imports but seemingly losing its voice when it came to high tariffs buffering American farmers from imported competition.
Plans had been in the works for Fonterra chairman John Wilson to travel to Washington DC last week to meet the US lobbies and President Barack Obama’s top trade official, US Trade Representative Mike Froman, but the trip was cancelled after Wilson stayed at home to deal with fallout from the ongoing 1080 infant formula threat.
NZ’s frustration with the US aside, the focus appeared to be now on Japan and Canada which continue to be major obstacles to getting the TPP agreed.
The letter notes progress in talks between the US and Japan on agricultural market access but says more is needed.
But it saves its strongest language for Canada which it says needs to come under more pressure in the talks.
“It is imperative that Canada provide commercially meaningful market openings for all dairy products if it is to remain a participant in the treaty.”
It also expresses disappointment with Canada’s recent trade deal with the European Union which gave way to demands to restrict use of the names of dairy products associated with European names which the US, Australia and NZ all oppose.
