This could be significant

August 31st, 2013 at 7:00 am by David Farrar

Nigel Stirling writes at Farmers Weekly:

The fight for open access for New Zealand farm exports into the United States has taken a big step forward, with key American agricultural lobbies giving their backing to a comprehensive Pacific Rim trade deal with no exclusions for agriculture.

Thirty-seven of the US’s peak agricultural and farming lobbies have written to their government pledging support for the TransPacific Partnership () free-trade talks, which aim to eliminate tariffs and other barriers to trade between 12 countries.

In a letter sent to new US Trade Representative Mike Froman and Secretary of Agriculture Thomas Vilsack, the industry groups gave their backing to US negotiators to pursue a comprehensive deal, with no exclusions for agriculture in any country involved in the talks.

The importance of this is quite huge. If the major agricultural lobby groups do not try and block eliminating agricultural barriers and tariffs, then not only is a deal more likely, but it may actually get past the US Congress. These lobby groups have considerable sway in smaller rural states.

“There must be no product or sector exclusions, including in agriculture. Exclusions would limit opportunities in each of the member countries to reach new markets, grow business and generate economic growth and jobs,” it said.

Importantly the letter was signed by the US Dairy Export Council and the National Milk Producers Council.

Both groups have in the past been sceptical about the US joining the TPP and have highlighted the threat to American farmers from opening their domestic market to competition from NZ exports.

They may be starting to see the potential gains from having their own access to some Asian markets.

Trade Minister Tim Groser said the backing from the US dairy industry could be critical in getting a deal past American lawmakers that included agriculture and therefore was beneficial to NZ.

“The political game here is pretty obvious. The way Congress works is through these sorts of letters and people add up the number of lobbies for and add up the number against and that is the political process under way,” Groser said.

The letter was sent to US Government officials last month but came to light only last week.

I’ve been very skeptical up until now that the US might make meaningful concession on the agricultural side. This changes that.

He expected the US to have made an offer on dairy by the time TPP country leaders meet on the sidelines of APEC in Indonesia in early October.

Excellent.

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16 Responses to “This could be significant”

  1. Matt (227 comments) says:

    I wonder what will be Europe’s response?

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  2. JamesBlake (62 comments) says:

    It could also be that they see the current damage that has been done to Fonterra’s image as the best time to allow competition. They can smear the heck out of NZ and Fonterra products in their own and over sea’s markets and offer a new alternative.

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  3. you reap what you sow (35 comments) says:

    What does that mean for NZs GMO free status?

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  4. Pete George (23,567 comments) says:

    Yes, this could be a major step in a positive direction for trade with the US.

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  5. johnbc (16 comments) says:

    Can’t wait to turn every square inch of NZ into a dairy farm. Yeh!!

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  6. Griff (7,727 comments) says:

    America does nothing except look after her own interests.

    Last year :http://www.ers.usda.gov/topics/in-the-news/us-drought-2012-farm-and-food-impacts.aspx#.UiDywn_cB4o

    The 2012 drought rapidly increased in severity from June to July and persisted into August. As of September 12, over 2,000 U.S. counties had been designated as disaster areas by USDA in 2012, mainly due to drought.
    As of August 14, 60 percent of farms were located in areas experiencing drought. By mid-August, the impacts of the drought would have been fully realized for the majority of field crops.
    Based on the 2011 value of production, at least 70 percent of both crop production and livestock production was in areas experiencing at least moderate drought as of August 14.
    Severe or greater drought in 2012 impacted 67 percent of cattle production, and about 70-75 percent of corn and soybean production.
    More than 80 percent of the acres of major field crops planted in the United States are covered by Federal crop insurance, which can help to mitigate yield or revenue losses for covered farms.

    This year http://www.bloomberg.com/news/2013-08-29/expanding-u-s-drought-excessive-heat-hurt-iowa-corn-soy-crops.html

    High heat and little rain during the past week led to an unusual, quick expansion of drought conditions in Iowa and Illinois, damaging crops in the biggest U.S. corn- and soybean-growing states.

    About 25 percent of Iowa had a moderate drought on Aug. 27, up from 7.9 percent a week earlier, while Illinois jumped to 20 percent from none, the U.S. Drought Monitor said yesterday in a report. Parts of Iowa received less than 25 percent of normal rain during the past 60 days, and much of Illinois got less than half of normal since June 30, data from the High Plains Regional Climate Center show.

    After a wet May and June delayed planting, the U.S. Department of Agriculture cut its soybean-crop forecast by 4.8 percent on Aug. 12 and reduced its corn estimate for a third straight month. July was the 20th coldest in 119 years in Minnesota, Wisconsin, Michigan and Iowa, National Weather Service data show. Soybean futures are up 17 percent from an 18-month low on Aug. 7 on forecasts for dry weather, and corn rose 7.5 percent from a 35-month low on Aug. 13.

    Maybe the USA has realized its food supply may not be as secure as those in denial of climate change wish.

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  7. CryHavoc (46 comments) says:

    It’s always fun to watch the nutters come out when you post a trade article DPF.

    This is potentially very significant. The NMPF in particular has always had a huge anti-import agenda, mainly because its market has historically been the US domestic market and it fears significant competition. I don’t think there’s any doubt, then, that this letter means that all the signatories recognise that, in agriculture, this deal won’t be about NZ or Australian exports to the US, but about NZ/Aus/US exports into Asia, where the demand for protein is rising exponentially (in places).

    JamesBlake – the largest exporter of American dairy products is… Fonterra. They happen to be very very good at this stuff.

    Johnbc: the point of the FTA is to return more value to NZ for each product sold. This means that in theory less land would be “needed” for dairy. It’s all a bit redundant though; dairy is returning so much more to farmers than other pastoral farming at the moment, so those land conversions are already happening, and the FTA won’t make a heck of a lot of difference to that. Indeed if the TPP resulted in better returns to sheep and beef farmers then it might slow down some of those conversions.

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  8. Griff (7,727 comments) says:

    Instead of the insults why dont you find The US’s reason for accepting movement on its previously not negotiable position on agriculture.
    Chattering about milk ignores the fact that animal husbandry in the states relies on the historically protected corn industry for its stock feed.
    Due to the climatically extreme conditions across the entire country this crop is showing increasing signs of stress.

    America is placing herself strategically into the future.

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  9. homepaddock (408 comments) says:

    US farmers have finally realised they’ve more to gain than lose with free trade – http://www.agrihq.co.nz/article/breakthrough-on-us-market-access?p=11.

    But whatever their motivation, free trade is ultimately better for producers and consumers and if successful, the TPP could be worth an extra couple of billion dollars for NZ.

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  10. CryHavoc (46 comments) says:

    OK Griff, my apologies (genuinely). That was a bit crass (though I wasn’t necessarily thinking of you or your comment – more the general misconceptions about trade agreements that are out there: it’s all a big Monsanto ploy, etc).

    Your point is fundamentally right, i.e. that the US only looks after its own strategic interests. Why should it do anything else? We don’t. Nor does anyone. The art of a trade negotiation is to convince your partners that your strategic aims are (ideally) the same, or (if not) compatible. The China FTA for example swung on an assessment by the Chinese that they needed greater, more secure access to protein; we were looking to be the world’s best producer of it.

    In this case, we might be “chattering about milk” but that’s because it has been a huge fault-line in the negotiation, and of course it’s of major interest to NZ. Your point about the protected corn industry isn’t clear to me. But perhaps the US is moving to secure more supply of grains for cattle feed? If that makes the corn industry less protected, then that’s a good thing for trade and a good thing for the environment in all probability.

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  11. Simon (724 comments) says:

    NZ’s future is very bright. If the lefttards could be reined in then NZ would be one of the finest countries on the planet.

    Too bad the turds in Wellington cant stop taxing and regulating. Wellington guts the NZ economy by at least 60 billion each year. Much more if adding the cost of regulation. Compound that over ten years and the State damage to society is immense.

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  12. Griff (7,727 comments) says:

    The corn industry and its harvest dictates the animal husbandry’s hence milk costs.
    The increasing cost in price has meant the corn industry no longer requires protection to maintain income. The methanol industry uses corn to produce 10% of Americas domestic fuel supply putting even more stress on the usa agricultural economy. I believe that one of the reasons the usa has relented on agriculture policy is strategic in guaranteeing future food supplies in a increasingly unreliable world . We have an interesting market dynamic playing out here in our own dairy sector because of drought restricting global supply the price has continued to firm giving farmers higher return despite less production.

    Ps Tom hunter if you are lurking
    I would like to remind you the direction in price due to drought was obvious this time last year despite your low level of faith in my forecasting ability :lol: from $6:12 to $7.82 proves my point

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  13. Viking2 (11,471 comments) says:

    At the end of the day America is oned by China and so america needs access to China.
    It has finally realised that there is no traction in the Arab states only grief.
    It should also be noted that the Russians are flat out doing business with China especially with oil and gas and have stated that they really don’t care what happens to Europe in terms of its oil and gas supplies.

    So not surprising Americans have moved.
    Like the rest opf the world they are more feared of the Muslims than they say.

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  14. john (47 comments) says:

    CryHavoc and Griff have between them given as good a summation of where US agriculture sits as there is. Corn costs drive feed costs in confinement dairies and the subsidized ethanol industry has increased corn demand putting real price pressure on feed and therefore on the US dairy industries ability to remain competitive in it’s domestic market. This combined with drought and reduced domestic demand for dairy products leaves them nowhere else to go other than seek export markets now that export prices support feed costs.and sub

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  15. john (47 comments) says:

    How cool is it that we are talking about something that is both positive for me and the economy. Todays dairy price will see another $5-600,000 wash through my business over last year. The 5 staff I employ know their immediate futures are secure, the tax man will pick up about a third of that increase, provincial economies/businesses will strengthen their sales and the changes in environmental management required to farm systems for a more sustainable future become more affordable. As others have said FTA,s and the like provide better profit and profit drives all manner of positive change.

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  16. UpandComer (537 comments) says:

    Can anyone tell me what the likely timeline on this following through to completion might be? At what time roughly will NZ dairy/agricultural produce have access to the American markets, and does this Trade agreement include Australia? Article says the US will make an offer to Dairy on TPP in October- DPF can you do a follow up post on the contents of that offer, if that’s okay? Very interesting. Just fantastic if we can pull this off. Old noddy Norman and his gang won’t like it.

    [DPF: There are no public details yet on the draft dairy chapter, but yes details will be interesting]

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