Identifier
Created
Classification
Origin
09WELLINGTON122
2009-05-27 06:48:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Wellington
Cable title:
NEW ZEALAND'S FOREIGN MINISTER CRITICIZES US DAIRY
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UNCLAS SECTION 01 OF 02 WELLINGTON 000122
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB/TPP/ATP AMY WINTON; STATE PASS TO
USTR BARBARA WEISEL
E.O. 12958: N/A
TAGS: EAGR ETRD PREL NZ
SUBJECT: NEW ZEALAND'S FOREIGN MINISTER CRITICIZES US DAIRY
SUBSIDY
WELLINGTON 00000122 001.2 OF 002
UNCLAS SECTION 01 OF 02 WELLINGTON 000122
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB/TPP/ATP AMY WINTON; STATE PASS TO
USTR BARBARA WEISEL
E.O. 12958: N/A
TAGS: EAGR ETRD PREL NZ
SUBJECT: NEW ZEALAND'S FOREIGN MINISTER CRITICIZES US DAIRY
SUBSIDY
WELLINGTON 00000122 001.2 OF 002
1. (SBU) In a lunch today with New Zealand Foreign
Minister Murray McCully and Charge, the former opened the
conversation by noting the New Zealand Government,s strong
negative reaction to the recent dairy subsidy announcement
by the USG. McCully remarked that the decision by the EU
and US to promote subsidies is an unhelpful step in the
world economy ) not just for the dairy sector but also for
United States credibility as a free market leader in the
international arena. With the world,s trade discussions
hanging in the balance, now is the time for clear,
long-term strategies rather than short-term policies that
favor domestic constituents, said McCully. New Zealand sees
the United States as the key to moving the world forward on
open markets and free trade; the dairy
subsidy decision undermines USG credibility as a world
leader, believes New Zealand. McCully added that Trade
Minister Tim Groser,s public comments on the issue were at
the positive end of the spectrum of GNZ opinion ) a strong
indication of the depth of rancor within the government
over the USG decision.
2. (SBU) In a separate lunch with Embassy Agriculture
Attache, the President of Federated Farmers presented a
letter for President Obama that begins: &On behalf of the
thousands of New Zealand farmers who have farmed without
subsidy since 1985, can I respectively ask why your
administration has decided to punish New Zealand for the
inefficiency of American Dairy farmers.8 (NOTE: Fed Farmers
is the largest organization representing New Zealand farmers.
END NOTE.)
3. (SBU)The US Dairy Export Incentive Program (DEIP) has
received significant media attention in New Zealand, both
print and electronic, with all the press treatment highly
critical of the U.S. decision. New Zealand Trade Minister
Groser has been interviewed by the press and the subject
came up in Prime Minister John Key's weekly press
conference. Groser characterized DEIP as having
"effectively destroyed the immensely difficult exercise" of
getting the commitment to eliminate export subsidies as
part of the WTO Doha trade talks. Dairy Companies
Association chairman Malcolm Cailey said DEIP showed
"complete disregard" for that goal, and a "lousy signal" to
the global trading system about US intentions. PM Key said
DEIP was "an unhelpful move" that flies in the face of USG
statements arguing against protectionism. GNZ officials
also worry about possible retaliation from the European
Union, which is a much larger exporter than the US and
capable of larger subsidies. The subject of subsidies and
trade protectionism has appeared in op-ed columns, with the
universal opinion being that subsidies undermine free
trade.
4. (SBU) Another theme in the press is the destabilizing
impact of the USG subsidies on international dairy prices
and the negative impact it will have on farm incomes and
the overall New Zealand economy. Dairy products account
for approximately 25 percent of New Zealand's total
merchandise exports and the dairy cooperative Fonterra is
New Zealand's largest company. If dairy prices fall, it
reverberates throughout the entire economy. NZ Federated
Farmers have described the US return to dairy subsidies as
a potential catastrophe for New Zealand, saying that,
because of these subsidies, NZ will get less for its
exports and be substantially poorer. Unlike their US
counterparts, NZ dairy producers are not subsidized and are
more vulnerable to fluctuations in world prices.
5. (SUB) Fonterra has also expressed concern about the
U.S. decision, but their Managing Director for Global
Trade, Kelvin Wickham, told the press that "the bigger
issue for us is the exchange rate." Fonterra is also
surprised that the U.S. tok the decision on subsidies
now. From Fonterra's standpoint, the EU use of export
subsidies was controlled and measured; Fonterra had hoped
that the US would have waited until later in the year when
WELLINGTON 00000122 002.2 OF 002
the markets were more stable to implement any subsidies.
Fonterra also believes that the subsidies will not help US
dairy producers that much.
6.(SBU) COMMENT: Because agriculture and trade are so
important
to the New Zealand economy, these issues are often at the
heart of the US-NZ bilateral relationship. The issue of
subsidies is unlikely to disappear anytime soon,
particularly if world dairy prices start coming down.
KEEGAN
SENSITIVE
SIPDIS
STATE FOR EAP/ANP AND EEB/TPP/ATP AMY WINTON; STATE PASS TO
USTR BARBARA WEISEL
E.O. 12958: N/A
TAGS: EAGR ETRD PREL NZ
SUBJECT: NEW ZEALAND'S FOREIGN MINISTER CRITICIZES US DAIRY
SUBSIDY
WELLINGTON 00000122 001.2 OF 002
1. (SBU) In a lunch today with New Zealand Foreign
Minister Murray McCully and Charge, the former opened the
conversation by noting the New Zealand Government,s strong
negative reaction to the recent dairy subsidy announcement
by the USG. McCully remarked that the decision by the EU
and US to promote subsidies is an unhelpful step in the
world economy ) not just for the dairy sector but also for
United States credibility as a free market leader in the
international arena. With the world,s trade discussions
hanging in the balance, now is the time for clear,
long-term strategies rather than short-term policies that
favor domestic constituents, said McCully. New Zealand sees
the United States as the key to moving the world forward on
open markets and free trade; the dairy
subsidy decision undermines USG credibility as a world
leader, believes New Zealand. McCully added that Trade
Minister Tim Groser,s public comments on the issue were at
the positive end of the spectrum of GNZ opinion ) a strong
indication of the depth of rancor within the government
over the USG decision.
2. (SBU) In a separate lunch with Embassy Agriculture
Attache, the President of Federated Farmers presented a
letter for President Obama that begins: &On behalf of the
thousands of New Zealand farmers who have farmed without
subsidy since 1985, can I respectively ask why your
administration has decided to punish New Zealand for the
inefficiency of American Dairy farmers.8 (NOTE: Fed Farmers
is the largest organization representing New Zealand farmers.
END NOTE.)
3. (SBU)The US Dairy Export Incentive Program (DEIP) has
received significant media attention in New Zealand, both
print and electronic, with all the press treatment highly
critical of the U.S. decision. New Zealand Trade Minister
Groser has been interviewed by the press and the subject
came up in Prime Minister John Key's weekly press
conference. Groser characterized DEIP as having
"effectively destroyed the immensely difficult exercise" of
getting the commitment to eliminate export subsidies as
part of the WTO Doha trade talks. Dairy Companies
Association chairman Malcolm Cailey said DEIP showed
"complete disregard" for that goal, and a "lousy signal" to
the global trading system about US intentions. PM Key said
DEIP was "an unhelpful move" that flies in the face of USG
statements arguing against protectionism. GNZ officials
also worry about possible retaliation from the European
Union, which is a much larger exporter than the US and
capable of larger subsidies. The subject of subsidies and
trade protectionism has appeared in op-ed columns, with the
universal opinion being that subsidies undermine free
trade.
4. (SBU) Another theme in the press is the destabilizing
impact of the USG subsidies on international dairy prices
and the negative impact it will have on farm incomes and
the overall New Zealand economy. Dairy products account
for approximately 25 percent of New Zealand's total
merchandise exports and the dairy cooperative Fonterra is
New Zealand's largest company. If dairy prices fall, it
reverberates throughout the entire economy. NZ Federated
Farmers have described the US return to dairy subsidies as
a potential catastrophe for New Zealand, saying that,
because of these subsidies, NZ will get less for its
exports and be substantially poorer. Unlike their US
counterparts, NZ dairy producers are not subsidized and are
more vulnerable to fluctuations in world prices.
5. (SUB) Fonterra has also expressed concern about the
U.S. decision, but their Managing Director for Global
Trade, Kelvin Wickham, told the press that "the bigger
issue for us is the exchange rate." Fonterra is also
surprised that the U.S. tok the decision on subsidies
now. From Fonterra's standpoint, the EU use of export
subsidies was controlled and measured; Fonterra had hoped
that the US would have waited until later in the year when
WELLINGTON 00000122 002.2 OF 002
the markets were more stable to implement any subsidies.
Fonterra also believes that the subsidies will not help US
dairy producers that much.
6.(SBU) COMMENT: Because agriculture and trade are so
important
to the New Zealand economy, these issues are often at the
heart of the US-NZ bilateral relationship. The issue of
subsidies is unlikely to disappear anytime soon,
particularly if world dairy prices start coming down.
KEEGAN