By John Luxton*
Some of the major players have sought to maintain trade protection rather than to reduce it.
It seems incredible that the US dairy industry has so far convinced the US negotiators that they need to be protected from any increase in New Zealand dairy imports into the US.
The New Zealand dairy industry is the only dairy sector in the TPP which is predominantly export focussed. Around 95% of our production is exported which represents around 25 to 30 percent of New Zealand’s exports by value. The next closest is Australia which exports around 40 percent of their dairy production, but this represents only around 2 percent of Australia’s export earnings. The US dairy sector currently provides much less than 1 percent of the US’s total exports, but by volume the US is still the largest exporter of milk powder, cheese, and dairy proteins in the TPP region. The US dairy industry is four times larger than the New Zealand industry, and exports over 15 percent of its production. The US share of global dairy exports has more than tripled since 2003.
The US dairy sector has stated that access should only be given equivalent to the amount of additional access that they gain from the Japanese and Canadian dairy markets. But this makes no sense given that the US dairy market is significantly larger than the dairy markets of either Japan or Canada, having over 322 million consumers compared to Canada’s 36 million, and Japan’s 126 million. It also consumes nearly 800,000 tonnes of butter and butter related products annually.
The Canadian, Japanese and New Zealand dairy sectors each comprise around 11,500 farms each; however the Canadian and Japanese dairy sectors are heavily protected from imported product with tariffs of up to 300 percent on imports.
Being sheltered from any competition they produce around one third of the milk that New Zealand farms produce and at two to three times the cost.
Dairy consumption is also much lower in these countries because of their high production cost, passed on to their consumers.
There is a parallel in New Zealand. New Zealand used to make cars like Japan does - but at a cost of nearly twice that of Japan. The removal of tariffs on motor vehicles in the 1990s reduced transport costs for all New Zealanders markedly. Free access to our market was given to the Japanese, Canadian and US motor vehicle motor vehicle manufacturers.
To date in TPP Japan has been reported as offering an annual increase in dairy access to New Zealand, equivalent to the production of about three larger New Zealand dairy farms, or .0016 percent of our total production.
Meanwhile in Japan, butter has been rationed and additional emergency imports are regularly being sought. Effectively 11,000 dairy producers are holding 126 million Japanese citizens to ransom in terms of their dairy consumption options.
Canada also appears not to have made a decent offer on dairy. Whilst most sectors of the Canadian agricultural sector want TPP to be successful in order to allow an expansion of cereal, canola and pork exports, the Canadian government still seems to be focussed upon protecting inefficient parts of their farming sector. In this way Canada’s 11,000 dairy farmers are holding 36 million Canadians citizens to ransom both in terms of the dairy products they can access and reducing the export prospects of their more efficient producers.
The US, Canadian, and Japanese trade negotiators need to deliver on the original intent of a comprehensive removal of restrictions on all goods traded amongst the TPP signatories – not just on the exports that matter to them.
The best outcome for dairy would be to enter into a comprehensive approach to opening up these currently closed markets by opening up progressively over 5 to 10 years to allow total access. Then local dairy sectors could then adjust to the changing market.
A comprehensive freeing up of dairy trade in the TPP agreement would also markedly increase the amount of international dairy market open to trade, from currently about 8 percent of all international milk production to around 20 percent. This would markedly reduce the current volatility in world dairy prices resulting from the current thinly traded market buffeted by small surpluses or deficits in global dairy demand.
If Japan and Canada cannot agree with the need for a comprehensive TPP agreement providing duty-free access on all goods then they should leave the talks and come back when they are prepared to honour the promises they made on entering the talks in 2013 and 2012.
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John Luxton is currently the Chairman of DairyNZ. He is a former National Party politician and minister. He is also co-chair of the Waikato River Authority, a Crown/iwi co-governance organisation established through Treaty of Waitangi settlement legislation to clean-up the Waikato River.
22 Comments
What New Zealand needs for the dairy industry is not continued expansion, requiring continuing access to new markets. We need contraction. The country cannot sustain the environmental degradation consequent on the existing industry model.
Neither should we be chasing new markets for high volumes of bog-standard, easily replicated, commodity product. We need product strategies distinguished by value not driven by volume.
We do not need new markets for dairy product from feedlots and industrial sheds. Leaving aside the animal husbandry issues, and the requirement for high dosing of antibiotics, etc, what competitive advantage is there over the denigrated feedlot dairy industry elsewhere in the world?
We do not need new markets for a dairy industry dependent on feeding cows imported palm kernel. The excuse that this is a by-product of destructive environmental choices elsewhere, and therefore shouldn't be considered as part of this destruction, doesn't wash. The product is a direct profit centre in the environmental destruction and the expansion of palm plantations.
Also involved in the palm kernel issue, is increasing incidence of stomach cancer in cows and other ills. We do not need new markets to support and reward this callous indifference to animal health.
We do not need new markets for an industry already incapable of meeting any obligation under the polluter-pays principle, and thus subsidised at substantial and increasing cost by rate payers and tax-payers.
We do not needs new markets for an industry sheltered from any consequence of its considerable climate change impacts.
We do not need new markets for an industry dependent on paying minimum or below-minimum wages to imported workers.
We do not need new markets for an industry that depends on lobbying for every regulatory exemption possible - as in avoidance of the most basic of health and safety legislation, as if industrial dairy were not an industrial site like any other.
These are the faults of the industry model. These are not the faults of individual farmers, who are merely dependent on a failed model.
The best thing the US, Canada and Japan could do for the New Zealand dairy industry is to keep the doors firmly shut on it. Continued expansion merely papers over the cracks in an industry driving New Zealand and New Zealand farmers into the ground.
Perhaps only then will this industry focus on cleaning up its act, allowing New Zealand some ability to remediate its pollution and re-assert the country's clean green advantages to the benefit of this and every other agricultural and horticultural endeavour as well as our tourist market.
Perhaps only then will the industry develop a strategy not based on overbearing debt, volume in undistinguished product, protection, subsidy and exemption, but based on a genuinely 21st century, holistic concept of value.
The industry needs to rescue itself, not look for rescue elsewhere.
At last a man with real vision !!
You capture the essential issues facing us, with clarity once again !
The problems we have are that those in power, with the ability to make changes for the better in New Zealand, do not have the brain power or common sense to even look at the possible options. Instead, the good ole boys do the same back room deals at our expense.
Workingman, you should give up working and go on the hustings !!
This article is - to be very kind - misleading. There are two sides to most stories but what Luxton presents here is pure propaganda. While Canadian dairy farms are small and average only 55,00 Kg MS Canadian retail milk prices are lower than in NZ.
The link is to how DairyNZ's Canadian equivalent sees things:
http://www.dairyfarmers.ca/what-we-do/supply-management/myths-realities
The retail price comparison is very relevant and includes NZ:
http://www.dairyfarmers.ca/var/df_site/storage/images/media/images/dfc_…
John Luxton is currently the Chairman of DairyNZ. He is a former National Party politician and minister. He is also co-chair of the Waikato River Authority, a Crown/iwi co-governance organisation established through Treaty of Waitangi settlement legislation to clean-up the Waikato River.
Luxton's article doesn't reflect well on the credibility of the institutions he is associated with.
Without making a judgment on either argument (his or yours), if Canada's dairy industry is so efficient, what possible threat could open markets be to it ? A number of Canada's 'myths' argue against themselves. Looks like pure (farmer-selfish) protectionism to me.
I made no claim that Canadian dairy farms are efficient and I didn't see the Canadians doing so either. However despite Luxton's:
Being sheltered from any competition they produce around one third of the milk that New Zealand farms produce and at two to three times the cost.
Canadian retail milk prices don't appear to be higher than NZ's. If that is the case then Luxton's argument about Canadian dairy farmers holding Canadians to ransom is false.
It may also bring up the question of whether NZ's more efficient dairy farmers are holding NZ to ransom:
http://www.dairyfarmers.ca/var/df_site/storage/images/media/images/dfc_…
Canadian Dairy Commission sets the Support Price it will pay for milk - a very different system to that in New Zealand. They in effect control the price of dairy in Canada, as well as how much milk is produced for both export and domestic requirements. Comparing Canada and New Zealand Dairy is like chalk and cheese. You have to admire them for protecting their own. ;-)
The Commission annually reviews and establishes support prices for butter and skim milk powder for the year to come. Support prices are the prices at which the CDC purchases and sells butter and skim milk powder within the framework of its various programs. Provincial milk marketing boards and agencies use support prices as a reference to determine the price paid by processors for the portion of the milk that is used in the production of butter, skim milk powder, cheese, yogurt, ice cream and other processed foods.
http://www.cdc-ccl.gc.ca/CDC/index-eng.php?id=3809
In Canada, the federal authority to regulate the marketing of fluid milk (used for table milk and cream) in interprovincial and export trade is delegated to the provinces. The Dairy Products Marketing Regulations, made pursuant to the Canadian Dairy Commission Act, provide federal jurisdiction over the marketing of industrial milk and dairy products in interprovincial and export trade, and the basis for the necessary co-ordination and dovetailing of federal and provincial powers.
A federal/provincial agreement, the National Milk Marketing Plan, sets out the structure for the calculation of the national industrial milk production target (Market Sharing Quota) required to meet the demand for domestic and export markets. The Plan also provides for the allocation of this quota to the provinces.
http://www.cdc-ccl.gc.ca/CDC/index-eng.php?id=3804
Our dairy farming mates in Canada say the most valuable thing in their operation of dairy farming is their quota.
http://dairyinfo.gc.ca/pdf/farmcashdairy_e.pdf
http://dairyinfo.gc.ca/pdf/farm_input_e.pdf
How about offering our own citizens a bit of 'protection' instead of prostituting our Nation to the highest bidder !
Stuff the TPP deal and all that goes with it. There is nothing in the very limited amount of the document that has been disclosed that benefits us, when weighed up with what we stand to lose.
Lets start fixing our internal imbalances before we start on the world's.
This is 'old energy' and at the very time we all need some 'new'!
I don't know a heck of a lot about the TPP
From my reading of the gyrations so far, it seems the large late-comers are holding it to ransom
The minute America joined in it brought with it it's agriculture lobby which will never concede anything
The sticking points appear to be an argument between Canada and America
Perhaps it would be better to go back to the original P4 proposal
Getting rid of America, Canada and Japan as Luxton suggests is a valid proposition
Historically, the TPP or the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4) was signed by Brunei, Chile, Singapore, and New Zealand in 2006.
In 2008, additional countries joined for a broader agreement: Australia, Canada, Japan, Malaysia, Mexico, Peru, the United States, and Vietnam, bringing the total number of participating countries to twelve.
Yes, the time has come for NZ to exit the TPPA. It is a toxic document drafted by 604 transnational corporates and one individual pig farmer. No way NZ is going to outfox agribusiness. And including ISDS, the corporates suing the NZ govt in a kangaroo court using corporate appointed judges in secrecy with no appeal is lunacy. What are you after, PM? What are you hiding?
John Luxton is absolutely right. the levels of dairy protection in Canada and Japan are nose bleed high. There is of course no justification for them as they impoverish both Canadians, Japanese and New Zealanders. From a farming perspective it is a medium term problem as no doubt the level of the NZ dollar will fall to levels that allow NZ to export food profitably. However, the lower exchange rate will make us all poorer. NZ will need to stand up to the US, Japan and Canadian blackmail.
world sharemarkets taking a dive today Dow Jones dropped over 500 points on China fears, largest drop since 2008. Will US we have bigger problems than worrying about TPP?
http://www.nbcnews.com/news/us-news/stock-market-plunge-dow-plunges-low…
The TPPA appears to be transfer of protectionism for countries to protectionism for corporations. We will never have the chance to vote corporations out once they have a certain amount of say in how countries in this thing can legislate, so to me it is tantamount to signing ourselves up to totalitarianism, you can stick it.
It could be claimed that in the CER we have with Oz is a working example
With the theory going re TPP, we should be creaming dairy wise. And yet Mainland cheese is knocked off the shelves by some buyers agents, who then design mock copies. And the ice cream never got going. And sadly fgm price there now is higher.
Flip side is we here recently are offered prime Oz beef at seemingly terrific value prices (from those buyers agents) - the trick being its prime northern Oz beef, the stuff otherwise boated live to Jakarta, the stuff the local Oz trade steps aside from. Their response is you should have known by the price.
I guess I do and that's why I don't buy it, and it seems CER did not stop Australia from keeping our apples out for pretty spurious reasons for a long time. And of course more exporting by us will mean less of our stuff for us to consume thus more rough Aussie meat and irradiated tomatoes as there is nothing else for us.
Not withstanding workingman's excellent comments. - As we initiated the TPPA negotiations and they did not include the USA, Japan and a few others; why did we allow them into the negotiations? It has always been obvious that they would hijack the process and screw it round to their advantage. When has any body benefited from a free trade deal with the USA? Never. They are bullies and have such powerful lobby groups that no body has or ever will get a fair deal with them. We would have been far better to do a deal among a group of modest ordinary countries excluding these large bullying countries. Having established that, we then could have later admitted them on our more equitable terms. The USA may have gone along with that as they strongly wish to project their influence for geo-political reasons and not want to be excluded. Is it to late to wind back the situation to the original participants. The best deals are the ones made between parties who are equals.
After the TPP is signed, we can expect a major influx of corporate funds promoting US style dirty politics to make sure PM Key is re-elected, insuring that the TPP is not rescinded by another party. Especially now that Hager and his ilk have been neutralised. The WhaleOil guy is about to become wealthy beyond his greatest dreams.
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