Breaking down barriers from ground up

JON MORGAN

Last updated 10:39 06/12/2012
alistair polson
JON MORGAN/Fairfax NZ
HANDS ON: Agricultural trade envoy Alistair Polson says any farmer could do his job, "with five minutes' brushing up".

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Alistair Polson has been choosing his words carefully until now.

The agricultural trade envoy is talking about what a successful Trans-Pacific Partnership (TPP) with 11 countries would mean to New Zealand.

Negotiations are ongoing, with another round underway in Auckland this week, and he has learnt to tiptoe through the minefield of international diplomacy.

But then he moves on to Canada and its "cottonwoolled" dairy industry.

"This charade ... this rip-off." He is searching for the right word. "This scam."

Harsh words. But they seem to fit his explanation of the C$30 billion ($36.7 billion) exclusive club that is the Canadian dairy industry.

The government has given farmers the power to restrict milk supply. Each farmer has a supply quota and can buy more.

There's no competition - imports carry a 299 per cent tariff, so few countries try - the system is self-regulating and the farmers decide what to pay themselves.

The result is the price of standard homogenised milk in Canada is C$2.38 a litre and the farmers make on average C$70,000 profit a year.

Outsiders who might want to join the club are knocked back by the C$20,000 a cow cost.

"The farmers are some of the wealthiest in the world and they don't want the system broken down," Polson says. "And that will happen if they lower tariffs and let in imports."

However, he says, repugnant though this might be to its dairy farmers, the Canadian government would not have entered talks on the TPP expecting a special deal.

New Zealand does not have an opinion on such a system. "It's up to Canadian domestic politics what they do with it. What we object to is the 299 per cent tariff."

Canadian dairy protection is just one of the many roadblocks that will have to be removed before a TPP can be signed.

Others include United States access for Australian sugar and Vietnamese textiles and the removal of 45 per cent tariffs for beef into Japan, Korea and Taiwan.

An equally important aim is to reduce non-tariff barriers. Known as SPS - sanitary and phytosanitary - barriers they include compliance with quota restrictions, grade standards, fumigation requirements, additional product testing plus labelling and packaging rules.

"Anybody who does business in Asia knows how difficult it is to deal with those - to be asked to spray for some pest you haven't got," Polson says.

Both types of barriers are not insurmountable.

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"[Ambassador to the US] Mike Moore is talking about completion of the TPP next year and he knows a lot more about it than me. Some of these issues will have to be sorted out at a political level, right at the end when the negotiators have done their best."

He thinks that's when access to the Canadian dairy market will be decided and will hinge on the length of a phase-in period.

The New Zealand dairy industry faces similar tariffs in the US and the fruits of North American free trade have been put at $1b for our cheaper exports. But Polson points out it might not be as simple as that.

"We've got to remember those are mature markets that are not really growing. They're high-paying, for sure, but they will be hard work - you've got to take market share off somebody else."

Far brighter prospects exist in North Asia, where research predicts dairy consumption will grow to 100 million tonnes a year by 2020.

Local production will cover most of it but a shortfall of 10-20m tonnes is forecast.

"New Zealand will help fill that but more will be needed. That's where the US can come in and it is one of the reasons why they're interested in the TPP."

Polson is optimistic a deal will be done.

"There's huge gains for everybody and for the Americans politically it's small enough not to make waves at home. President Barack Obama is a key player, he's looking for a non-controversial issue to mark his legacy and this could be it."

The Mangamahu Valley sheep, beef and kiwifruit farmer, who took on the role of agricultural envoy in 2005, three years after stepping down as Federated Farmers president, says he feels "pretty lucky".

"For a farmer able to step from dagging and drenching on to a plane and fly to the other side of the world to discuss trade issues with industry leaders, think tanks, government officials and farmers is pretty stimulating."

He tells them about the New Zealand experience of removing subsidies: "How it can work, how we're focused on the market and can respond to market signals, and how farmers adapt to changing conditions.

"I tell them, 'There's something in it for you'."

And, although he's been at it for more than seven years, he is modest about his success.

"I haven't achieved much," he says with a smile. "Doha [the world trade talks] has been shelved and we're focusing on the TPP. But there's no agreement yet."

He thinks any New Zealand farmer could do his job.

"There's a huge number of farmers who could, with five minutes brushing up, deliver the stuff I deliver.

"It's in our DNA, we're not just pretending to be free traders and open traders and competitive businesspeople - we live it."

- The Dominion Post

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