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As the world's trade ministers head to a WTO meeting in Abu Dhabi, the Dairy Companies Association of New Zealand (DCANZ) is calling for an immediate capping of agricultural subsidies and urgency in reducing them to prevent and correct production and trade distortion.
DCANZ executive director Kimberly Crewther said New Zealand Trade Minister Todd McClay must make sure this message was loud and clear, and she believed he would.
Crewther said recent modelling confirmed how seriously subsidies distorted trade, investment and where products were produced.
"And of particular concern is for the trend for [agricultural] subsidies, payments, to be going upwards off a base of OECD member countries already having spent over $800 billion every year.
"The modelling's thrown up that there are significant impacts that agricultural subsidies are having in dairy markets and an example of that is if we had a 50 percent reduction in EU farm subsidies that would lift the traded value of cheese for non-EU exporters by 8 percent. Those are really big numbers when you put it in the context of NZ exporting $3b of cheese a year," she said.
And Crewther said the results were by no means unique to EU dairy subsidies. "This dynamic is universal."
The Global Dairy Distortions Model has been developed by economic consultancy, Sense Partners, in conjunction with DCANZ. It aims to better understand the impacts of subsidies on global dairy markets and provide an evidence-based contribution to international policy discussions.
When introducing the latest 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 warned that they could be harmful for the environment.
Crewther said the can had been kicked down the road for too long on addressing the trade-distorting impacts of agricultural subsidies.
"Agricultural subsidies need to be a central focus of the Ministerial Conference discussions, and there needs to be clear movement forward."
She said all countries benefited from a multilateral rules-based trading system that avoided the negative economic, environmental, and food security impacts of market distortions.