High Time for a Plan B for New Zealand agriculture?

Wed, 02 Mar 2016 14:22:37 +1300

by Hugh Campbell

The signing of the Trans-Pacific Partnership Agreement (TPPA) provides the perfect moment to reflect on whether the long term dream of successive New Zealand governments to usher in a world of free trade in agriculture has taken on a increasingly fantastical quality.

Will there ever be a global free market in food? This has been one of the most persistent questions hovering over global agriculture in the last 40 years. Except in New Zealand, where the dominant political consensus – verging on absolute and unquestioned truth – is that we should persist in pursing a world of free trade in food and that achieving such an outcome is only a matter of further time and effort. This unswerving political commitment to Plan A – agricultural prosperity achieved through market liberalization – by both main parties has had an important side-effect: we’ve never thought about whether we also need a Plan B or, even more pertinently, multiple Plan B's. I suggest that the dream of free trade in global agriculture is increasingly unlikely to happen. The consequences of failure for New Zealand’s Plan A for agriculture are significant and raise some important questions about sustainable futures for New Zealand.

If it is true that trade liberalization in agriculture is no longer likely to happen in any significant way, the first and most obvious casualty is the doctrine of TINA – There Is No Alternative – which has characterized policymaking in New Zealand over the last 30 years of neoliberal politics. Actually, I think that there are many alternatives, including the kinds of experiments, initiatives, and strategies being developed in places like Blueskin Bay. They just haven’t been given any political oxygen in a world where TINA rules our policies in agriculture and food.

By delving back into our agricultural history, we can see just how idiosyncratic this policy cul de sac really is. New Zealand farming was established in the second half of the 19^th century as an essential part of British imperial strategy to create a stable food supply for the burgeoning population of the Industrial Revolution. Our role as 'Britain’s farm in the South Pacific’ tied our external trading activities closely to the demands of the British home market. That relationship would remain unbroken until 1973 when Britain finally entered the European Common Market and we lost our protected access to the British meat and dairy markets.

While New Zealand’s highly protected relationship with the British market for agricultural exports was quite an extreme example of protectionism, it was not out of keeping with the time. In the late 1940s, the General Agreement on Tariffs and Trade (GATT) negotiations were commenced to create greater freedom in world trade. The main parties to the original negotiations all agreed that the compelling problems of global food security after WWII meant that agriculture and food should be exempted from all GATT negotiations. It was thought essential that agricultural trade be retained under the protected control of governments and, in the post-war period, agriculture became one of the most highly protected and subsidized economic sectors in the world economy. In a policy sense, this was considered essential in a world where food security was a highly compelling problem.

When the Uruguay Round of GATT negotiations commenced in 1985, the inclusion of agriculture was a sign of exactly how powerful the trade liberalization movement had become. The Uruguay Round was highly significant. In addition to being the first to include agriculture, it would conclude with the formation of the World Trade Organization (WTO) in 1995. It was also, without doubt, the trade round that most excited New Zealand’s politicians, who saw it as the first step in a seemingly inevitable transition to free trade for our agricultural exports.

How disappointing the subsequent 20 years have been for the acolytes of agricultural free trade. Two successive rounds of World Trade Organization (WTO) negotiations (the Millennium Round and the Doha Round) encountered increasing opposition from emerging, empowered negotiators from the Developing World. These new players considered that the countries of the Global North were somewhat hypocritical in their zealous pursuit of market access for new economic activities in emerging markets while being increasingly tardy in reducing support for their domestic agricultural sectors. Then, the increasingly slow pace of the Doha Round was confronted by the Global Food Crisis of 2008-2011 which witnessed a dramatic spike in world food prices. Faced with the highest real food prices since the 1940s, many Developing World economies began to openly advocate for the right to retain state intervention in domestic markets for staple foods, the return of market interventions, stockpiling, and even tariffs. All of these amplified the reversal of political impetus for agricultural trade liberalization that had seemed so unstoppable at the end of the Uruguay Round in 1995.

New Zealand’s recent success in opening up an important new market in China seems to run counter to this pessimism. However, while the NZ-China Free Trade Agreement does conform to the legal character of a free trade agreement between the two countries, the reality is that the resulting boom in dairy prices reflected New Zealand’s position as the first Western country to gain market access to China. The period of the dairy boom coincides with exactly that period in which our exports were subject to falling tariffs whereas those of our competitors were not. It resembled, above all, New Zealand’s privileged position as Britain’s exclusive imperial supplier of dairy and sheep meat. Those prices are unlikely to ever be seen again. The China boom is over, demand is decreasing, a growing list of competitors like Australia are now also gaining market access, and European countries are dumping their surplus dairy production into China. The implications of the end of the white gold rush are all too obvious for the intensive dairy farming regime in New Zealand.

Which brings us to the TPPA. Given the increasing unlikeliness of the WTO bringing about a change to global trade in agricultural products, the TPPA provided New Zealand negotiators hope of enrolling some large political actors in the programme of creating significant new opportunities for agricultural exports in big consumer markets like Japan, the USA, and Canada – all highly protected agricultural sectors. These high hopes have been comprehensively dashed. Despite the brave spin being put on the outcomes of the TPPA for agricultural exporters, the reality is that the TPPA reflects what every other multilateral free trade negotiation of the last 20 years has demonstrated: countries are just not particularly enthused about opening up domestic food markets to international competition. Concessions by the US and Canadian dairy sectors are minuscule. Any opening of big markets like Japan to beef imports are happening on such a long timeframe as to make them almost totally irrelevant to any short or medium-term economic planning. Our food exporters will celebrate any change to tariff regimes in their target markets. They’ve dutifully lined up to applaud any change at all to the status quo, but the outcome cannot be disguised as anything other the massively underwhelming for New Zealand agriculture.

Several of our noisier free trade advocates have appeared in the media arguing that this is just another incremental step towards the eventual surrender of world markets to New Zealand’s particular version of global reality. The true situation we are facing, however, is that this looks nothing like a breakthrough moment for liberalization in agriculture. It looks much more like a token gesture to a passing political fancy that has now little chance of realization – a bit like the embracing of Esperanto as a global language in the 1970s, or the quaintness of hearing both English and French spoken at official Olympic events as a symbol of the lofty (and now rather tainted) goals of the early Olympic movement. The political game has moved on. The major players are now much more engaged with the global elaboration of pharmaceutical IP rights, new information and communications technology, and media investment rules and disputes resolution procedures. All of these have significant implications for the wider New Zealand economy, but bring little to excite or encourage the massive agricultural export industries that provide most of our export income. Rather, just as agriculture was the last economic sector brought into trade liberalization negotiations in the 1980s, it also looks like it is the first to be left out. The GATT Uruguay Round will, at this point, go down in history as the one and only multilateral negotiation that achieved even partial success in shifting agriculture from being predominantly a protected domestic sector of major economies to being an arena subject to global free trade.

This shift has some hefty implications for New Zealand. Leaving aside the debates about the actual changes that will come about with the TPPA (which are well canvassed elsewhere), I want to concentrate on the implications of New Zealand’s failure to achieve its ‘Plan A’ for agricultural development. Four things come immediately to mind:

1) We’ve been so focused on achieving better prices for agricultural exports through tariff reduction in our target markets that we have not been questioning what foods we export, what qualities they have, and how those tangible qualities actually create export value. If trade liberalization is no longer going to appear like the tooth fairy to drop a few extra dollars in the glass beside each farmer’s bedside, then we have to think about how we actually create value in agriculture. Some interesting lessons might be drawn from our stellar kiwifruit export sector which has positioned itself as the producer of the world’s highest quality kiwifruit and implemented a wide-ranging programme of environmental quality management. Its greatest market successes – in Europe, the USA and Japan – are, interestingly, in exactly those markets where older style exporters have being trying to unsuccessfully batter their way through tariff barriers.

2) Plan A was entirely focused on exports as a driver of value-creation in New Zealand food production. Doing so seemed obvious in a country like New Zealand which exports over 90% of the food it produces, but that other 10% is actually very important. Food production for domestic consumption is where resilient, creative, embedded food futures are nurtured. Plan B needs to be able to see the global and the local and recognize that in the 21^st century we can’t rely on the global alone. This is where initiatives in places like Blueskin Bay start to take on a different complexion. Things that seem, at times, trivial or small-scale and hopelessly marginalized from the national policy conversation suddenly start to look much more interesting in a world where Plan A has failed.

3) Plan A was trying to address deficits in global food markets at a time when markets were actually awash with cheap, industrial foods. It was the wrong strategy for the wrong problem. Now that the Global Food Crisis has rekindled political concern about the security of food arrangements, there are actually opportunities for New Zealand that deserve our political attention. Large food deficit countries like China actually do need food. Bilateral negotiations between New Zealand and countries like China have the potential for some pragmatic assessment of food security concerns and New Zealand’s actual role in feeding some parts of the world. We need not cloak such discussions under the ideological rhetoric that the only 'pure' food is food sold free of regulatory encumbrance.

4) Sustainability: in a country that has progressively intensified its production base without too much national policy attention to environmental outcomes, rural economies, or support for high-quality strategies for food production, the promise of future liberalization of agricultural trade sent a message that we could just stay the course. We could persist on this trajectory and, in time, liberalization would see that the economic challenges of agriculture would come right. What the 20 years since the conclusion of the Uruguay Round have shown is that global agriculture is subject to some unexpected shocks, new concerns, increasing environmental fragility, and growing consumer awareness. The highest value segment of the global food market is comprised of consumers who won’t just buy any old food.

Plan A was based on a future promise that told us to stay the course. Things will come right once our trade negotiators have prevailed. This is now not going to happen. We will have some small successes in opening up new markets, but the big step change promised since the Uruguay Round now won’t happen. We need a Plan B that can actually address the problems, shocks, surprises that are starting to overwhelm us here and now.

Actually, we need multiple Plan B’s. One of the most hypnotic and seductive aspects of the liberalization plan was that it presented governments and policymakers with a ‘one size fits all’ answer to any policy problem. It would be a dire mistake to respond to the monolithic quality of Plan A by suggesting that there is a fully formed one size fits all Plan B just waiting to be implemented. Achieve resilient transitions to a more sustainable future will require many solutions of varying size fitted to problems of varying scale. We will need to draw on the reservoir of marginalized and neglected alternatives that sit outside Plan A. We will need to know as much as we can about small-scale food provisioning, medium-scale networks of food production and consumption, and the relationship between food systems and energy systems. We will need to pay attention to how specific communities and localities are trying to create their own Plan B's in fitting these things together into credible transition pathways. In order to do so, we must first recognize that Plan A no longer provides a full or sufficient answer to the challenges of agriculture and food in the 21^st century.