APPENDIX 11
Memorandum submitted by the New Zealand
Government (S 16)
The New Zealand Government welcomes the invitation
from the Select Committee to contribute to its inquiry into the
implications for British agriculture of trade liberalisation and
the next World Trade Organisation (WTO) Round. Following the terms
of inquiry, this submission focuses on the linkages between free
trade, and "non-trade" areas such as animal welfare,
scientific dispute, consumer resistance, and environmental support
regimes. The comments expressed are general in nature, applicable
not only to Britain, but to all agricultural trading countries.
TRADE LIBERALISATION
AND THE
NEXT WTO ROUND
In 1994 a first step in the reform of international
agricultural trade was taken at the Uruguay Round of multilateral
trade negotiations. For the first time agriculture was to be fully
integrated into an international system of rules and disciplines.
Despite some notable advances, however, the use of export subsidies
and credits, high tariffs, and domestic support systems have still
remained common in many countries, distorting the global agricultural
market. These policies will be addressed at the forthcoming WTO
Ministerial in Seattle, as part of the mandated review of agricultural
trade reform.
New Zealand welcomes the upcoming Ministerial.
Our hope is that the preliminary work of the Uruguay Round will
be completed. In common with our Asia Pacific Economic Cooperation
(APEC) partners, we would like to see the elimination of all agricultural
export subsidies which distort production and investment and reduce
growth. We would also like to see the reduction and eventual elimination
of other production based support. The Cairns Group of developed
and developing countries also share these views. Put simply, trade
in agricultural goods should be placed under the same set of international
rules and conditions as trade in other goods. Removing subsidies
and other discriminatory means of support would boost global trade,
creating wealth for countries as market access opportunities ensued,
especially for developing countries. It would also save OECD consumers
and taxpayers much of the US$362 billion which was accounted for
by agricultural support in 1998.
One area of concern that has been highlighted,
especially in Europe, is the effect of trade liberalisation on
important "non-trade" issues, such as animal welfare,
consumer concerns, and environmental protection. It has been suggested
that globalisation, in the form of a free international market
in agriculture, will undermine these important values. The New
Zealand Government vigorously challenges this thesis. In our own
recent national experience, fundamental economic reform and liberalisation
has been carried out alongside significant strengthening of standards
and procedures covering the environment, consumer safety, and
animal welfare. We see no contradiction whatsoever between enforcement
of these values at a national level, and the develoment of trade
liberalisation in agriculture at the international level. Indeed,
we see complementary benefits. Each country is free to set whatever
national standards it considers necessary, provided such standards
are non-discriminatory (as between local and foreign products),
transparent and supported by sound scientfic analysis. Furthermore,
where adoption of an international standard is the most appropriate
option, countries are encouraged to contribute to input into the
design of these standards so that their perspectives can be reflected
in the final outcome.
CONSUMER HEALTH
AND SAFETY
Food safety has been very much at the forefront
of media and public attention in many western countries in recent
years. Concern is running high over certain food production practices,
including the use of growth promotant hormones, antibiotics used
in animal feed, and genetically modified organisms. It has been
argued by some groups that trade liberalisation, as enforced by
the WTO, is overriding domestic law, requiring countries to accept
"unsafe" imported foodstuffs. New Zealand strongly refutes
this suggestion. Current WTO rules help ensure, and in many cases,
enhance the safety of food as they encourage the systematic use
of scientific information in assessing food safety. WTO rules
also provide the essential framework for a fair and open international
trading system, creating the platform for healthy competition
and providing consumers with a greater choice of safe foods.
As a major exporter of primary products New
Zealand maintains a strong interest in sanitary measures, especially
as applied by other countries to our exports. Before 1995 (when
the WTO Sanitary and Phytosanitary (SPS) Agreement came into force),
the principal means of governing sanitary measures proved woefully
inadequate, giving countries considerable latitude to adopt measures
arbitrarily in a protectionist manner and with virtually no means
of redress for those adversely affected.
The SPS Agreement is a significant improvement
on this situation for all countries. Under the Agreement Members
are free to adopt measures necessary for the protection of human,
animal or plant health and life, provided the measures are transparent,
non-discriminatory, and justified under sound scientific analysis.
In this context, agricultural importers may also adopt more stringent
national standards than those developed internationally if there
is sufficient justification, they are applied in a non-discriminatory
manner and if the higher standards are based on appropriate risk
assessment procedures. These conditions are necessary to ensure
that all countries benefit from the international trading system,
and are not subject to sanitary measures being used against them
for protectionist purposes.
One area of concern that has surfaced in recent
years has been the attempt by some countries to apply the "precautionary
principle" to decision-making in the sanitary and phytosanitary
areas. In so doing, some countries have attempted to legitimise
scientifically unjustified trade barriers through a perverted
interpretation of the precautionary principle, which disregards
the principle's basis in scientific risk assessment. Such attempts
seriously undermine the science-based decision-making framework
of the SPS Agreement and will only result in the proliferation
of arbitrary and unjustified barriers to trade. To the extent
that the precautionary principle is relevant to international
trade law it is circumscribed by clear existing rules, and cannot
be used in the abstract as an acceptable justification for trade
restrictive measures. Employing this principle in a non-scientific
manner to impose restrictions on trade for protectionist or political
purposes is a clear abuse of WTO rules—as was illustrated
in the EC-Hormones dispute.
However that is not to say that precaution should
not be used in assessing food safety. It is worth noting that
the element of precaution is an integral part of decision-making
at the international level—for example, many of Codex's
food safety standards already build in a high margin of safety
to take account of risk and scientific uncertainty. In fact science-based
risk assessments and the determination of acceptable levels of
risk both imply the routine use of margins of safety to ensure
adequate precautions are taken. Where there is an unacceptable
risk to health, the SPS Agreement does provide for protective
measures. But in employing such measures, countries must base
their measures on objective, transparent and rigorous scientific
risk assessments. A consistent, objective foundation for agricultural
trade is absolutely vital to food exporting nations like Britain
and New Zealand. To adopt anything less risks opening the floodgates
to protectionist barriers based not on science, but on conjecture.
What then is to be done when positive scientific
analysis and risk assessment do not satisfy consumer concerns?
For the international trading system to work, and to avoid past
exploitation of sanitary issues as protectionist barriers, sound
science must prevail with regulators developing public confidence
in their systems. Food safety scares do nothing to instil public
confidence in food regulators. For this reason, New Zealand welcomes
efforts to improve food safety records. However, the reality is
that most food scares that undermine consumer confidence have
largely resulted from a failure to implement correctly domestic
systems and safeguards. Sanitary measures that can be applied
consistently with WTO rules are extensive. Free international
trade should not be put at risk because of isolated incidents
which do not relate at all to a lack of powers available to protect
public health.
ANIMAL WELFARE
In recent years animal welfare issues have achieved
a high profile in many countries, including within the European
Union. As the Select Committee is aware, the European Commission
passed a directive on battery hens in 1999, setting out minimum
welfare standards for European producers. In this context, the
current WTO framework has been criticised for not sufficiently
recognising animal welfare issues in international trade.
One of the fundamental principles of a liberal
international trading system is non-discrimination. Members of
the WTO must provide like treatment for like products, irrespective
of origin. The rule effectively prevents a country banning or
restricting imports of a product merely because the exporting
country has different methods of production, regardless of whether
those differences are based on attitudes to the environment, animal
welfare or other social policies. This is a very important principle
to a trading nation like New Zealand. To allow subjective moral
considerations to apply would risk creating an easy pathway for
any country wishing to protect local producers by restricting
imports. Such measures inevitably have little to do with animal
welfare, and would be, in effect, an unjustifiable non-tariff
barrier.
These WTO rules, which make fair trade possible,
do not prohibit individual countries from adopting their own national
measures. New Zealand, for example, maintains an excellent animal
welfare infrastructure, reflecting the fact that as a people we
value this very highly. But our own requirements are not used
as a basis for arbitrary discrimination, and address welfare objectives
in a non-restrictive manner. In our view, the market itself can
play a significant role in addressing animal welfare concerns
through the use of voluntary labelling. There is nothing in the
WTO that would prevent voluntary "free range" or "freedom
food" labelling on eggs. The consumer is the final arbiter.
If a production method is deemed inappropriate, the product in
question will struggle to be sold, even if it is cheaper than
its local counterpart. It ultimately depends upon whether the
consumer if prepared to pay the difference, which in itself depends
on whether he or she is sufficiently persuaded of the unacceptability
of the animal welfare practices inherent in the production process.
Another possible avenue for addressing animal
welfare concerns bilaterally is the principle of "equivalency",
where one country accepts the methods and standards of another
as equivalent to their own, provided they adequately fulfil the
objectives of their own regulations. In the animal welfare context,
this would switch the focus from processes to outcomes, reflecting
the fact that different production processes can achieve the same
welfare outcome. This approach can give assurance to consumers
that good animal welfare standards are being observed while reducing
barriers to trade.
ENVIRONMENTAL PROTECTION
The linkages between international agricultural
trade and environmental concerns are another growing focus of
debate. There is increasing concern regarding the relationship
between agricultural trade liberalisation under the WTO, and policy
measures taken to protect the environment and promote agricultural
development. New Zealand considers policies designed to liberalise
agricultural trade, and provide for sustainable development, are
complementary, not contradictory. As the Ministerial Decision
on Trade and the Environment at the Uruguay Round affirmed, "there
should not be, nor need be, any policy contradiction between upholding
and safeguarding an open, non-discriminatory and equitable multilateral
trading system on the one hand, and acting for the protection
of the environment on the other."
Any discussion on the likely effects of trade
liberalisation on the environment must start first with an audit
of existing practices. In most countries the agricultural sector
is still characterised by significant market regulation and intervention
by the Government. Such an approach, especially when linked to
production, frequently has negative effects on the environment.
Policies aimed at supporting commodity prices (such as minimum
guaranteed prices, import barriers and export subsidies) encourage
farmers to produce more than they would otherwise. Excessive production,
in turn, may cause unforeseen and unnecessary environmental degradation
and depletion of the natural resource base. The European fishery,
which has been severely depleted in recent years, would appear
a good example of the negative environmental impact resulting
from high subsidies which have caused over-production. Nitrate
levels in ground water due to over-stocking provides an example
from the agricultural sector.
In this context, New Zealand considers that
trade liberalisation will assist, not undermine, environmental
protection. A feature common to both sustainable development and
growth in international trade is the pursuit of efficiency. An
activity is efficient if it uses the minimum amount of resources
to achieve a given output, or alternatively, achieves maximum
output from a given amount of resources. Applied in a broad context,
efficiency helps to allocate scarce resources, such as raw materials
and energy, and limits the demands placed on the regenerative
capacity of the environment. Efficient use of resources, however,
requires that the prices paid by producers for inputs and by consumers
for final goods and services accurately reflect their true economic
costs. This of course does not currently occur in many countries,
owing to price-distorting subsidies and trade barriers. It would
clearly be more beneficial to the environment for these support
mechanisms to be eliminated than to be maintained. Also, by reducing
incomes of developing countries, trade barriers can increase environmental
problems in those countries.
Trade liberalisation does not mean reliance
on market disciplines alone to ensure and manage sustainable development.
Government regulation is usually also required to secure environmental
protection. In New Zealand, for example, we have strict resource
management laws to ensure that the environment is not adversely
affected by domestic production. Countries are clearly free to
establish their own environmental regulations and product standards,
provided they are justified on scientific grounds and are neither
discriminatory nor trade restrictive. Internationally, there are
common global efforts under Multilateral Environmental Agreements
(MEAs), such as that on Climate Change and the Montreal Protocol.
Working to achieve improved environmental protection through such
instruments is preferable to countries taking unilateral action
against those they consider do not measure up to their own environmental
standards. To depart from sound science would risk the imposition
of protectionist barriers, undermining the many positives that
trade can bring to sustainable development.
CONCLUSION
The New Zealand Government is full committed
to significant liberalisation of international agricultural trade
at the next WTO Round. This would bring considerable economic
benefits to exporting countries like Britain as trade distorting
subsidies are removed and new or expanded markets are developed.
In doing so, we do not accept that vigorous national standards
covering "non-trade" concerns, such as animal welfare,
consumer concerns and environmental protection, will be sacrificed
on the altar of free trade. Countries are free to adopt whatever
standards they consider appropriate, provided the standards are
non-discriminatory, transparent and based on sound scientific
analysis. These preconditions are simple safeguards, and would
not appear to be unduly burdensome on any country or inconsistent
with maintaining very high standards in any area of social concern.
5 November 1999
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