THE PRESS SATURDAY, FEBRUARY 1, 1986. Dairy products sale

Press, 1 February 1986, Page 18

THE PRESS SATURDAY, FEBRUARY 1, 1986. Dairy products sale

The sale of 10,000 tonnes of non-fat dry milk to Mexico by the United States is a commercial sale. The price, although very low, is still above the minimum price set by the General Agreement on Tariffs and Trade. New Zealand was not informed of the sale, and would not expect to have been officially informed.

Under G.A.T.T. rules the United States, or any other country that makes dairy products available as aid, is required to advise New Zealand and other dairy exporters beforehand. The sale to Mexico, however, is simply a sale by one of New Zealand's competitors. A further sale is likely this year, but the prices are expected to be higher. The sale is a fact of commercial life; but it is also a reminder of the smallness of the international dairy market and of the production of large surpluses in a number of countries, particularly those in the European Economic Community and the United States. While the international surpluses continue, the price of one of New Zealand’s major exports will fluctuate substantially. The whole International dairy trade represents less than 5 per cent of world dairy production. Most of the world's markets for dairy products are behind protective trade barriers. Of New Zealand’s export trade, dairy products are more strongly resisted by trade barriers and have less of a free market than any other item.

The Dairy Board is optimistic that the international market will come out of its present troughas the Northern Hemisphere surpluses are contained and reduced. The United States has reduced its butter stocks from 180,000 tonnes twoyears ago to 70,000 tonnes today. That still represents a large surplus of butter in relation to the market. After the Mexican sale, the United States Secretary of Agriculture, Mr John Block, said that on January 10 the Commodity Credit Corporation, which negotiated the Mexican sale, had 419,350 tonnes of uncommitted nonfat dry milk stock. If the sale of 10,000 tonnes can cause problems to New Zealand, it is clear that there are many more problems ahead.

The Dairy Board may be proved right that the international market has good prospects. That cannot, however, be anything but a long-term assessment When, it also considered that the E.E.C. has a stockpile of more than 1 million tonnes of butter, the prospect seems even longer term. The problem is not simply one of large amounts of dairy products seeking non-expanding markets, but also the depressing effect on prices when it is known that so much dairy surplus is waiting to be sold. The United States has been increasing its disposals of surplus dairy products, but there is no evidence that it has done so in a manner intended to, injure New Zealand’s trade. The United States has openly said that it had the surplus and intended to get rid of some of ft There has not been one instance in which the United States has specifically targeted a market in a manner intended to harm New Zealand,

New Zealand, of course, would like to sell more milk powder to Mexico; so wouldthe United States, which has also sold to Mexico previously. In the dairy trade, in which New Zealand is more vulnerable than in any other trade, there has been no sign that the United States is acting against New Zealand interests over the nuclear ships issue.

The United States Administration has said it will not take trade reprisals against New Zealand. The leader of the French Opposition, Mr Jacques Chirac, of the Rassemblement pour la Republique, has said that France should take trade action against New Zealand because New Zealand continues to imprison the two agents caught after the sinking of the Rainbow Warrior. The R.P.R. may soon be in a stronger position in France because of the March Parliamentary elections.

The Dairy Board, however, believes that if France takes any trade action against New Zealand it will not be against dairy products. This may prove to be over-optimistic, but the Dairy Board has kept its hopes up about the future of the dairy industry when others doubted, and, on the essentials at least, has been proved correct. ■