Speech by the Minister for Trade the Hon Mark Vaile at the Cairns Group Ministerial Meeting Opening Session. Buenos Aires, Argentina, 28 August 1999

(Check Against Delivery)

On behalf of other Cairns Group members I would like to thank Argentina - and Minister. Di Tella and Secretary Novo, personally - for hosting this Ministerial meeting at such a vital time, as we prepare for the second WTO Ministerial meeting in Seattle and the recommencement of WTO agriculture negotiations.

I'd also like to join them in welcoming Ministers from Bolivia, Costa Rica and Guatemala as observers. We are also pleased to have US Secretary of Agriculture. Glickman to address us today and look forward to fruitful discussions with him and his team.

As the new Australian Minister for Trade 1 feel honoured to be here amongst so many distinguished colleagues. But rest assured, having previously been Australia's Agriculture Minister, 1 have followed Cairns Group deliberations closely. And I share the same enthusiasm and respect as my colleague, Tim Fischer, for the Group and all it stands for.

Commodity prices and subsidisation

If there is one thing common to all Cairns Group members at present, whether developed or developing, it's that our farmers are suffering - Australian farmers are no exception.

In 1998, a combination of poor global economic performance and the continuing Asian financial crisis led to reductions in demand for food and other commodities. As a result, market prices of most agricultural commodities fell sharply - by around 20 to 30 per cent on average -causing a dramatic fall in farm incomes in many countries.

The policy response to these events, particularly in developed countries has been far from impressive. Many OECD countries responded by resorting to additional measures of support and protection. In fact, total OECD support to agriculture was estimated at US$362 billion in 1998, an increase of almost 8 per cent on 1997. This knee-jerk reaction - towards short-tern emergency measures and away from the longer term policy objective of subsidy reduction -has hurt us all.

While prices for commodities such as oil and base metals have bounced back as producers responded to low world prices by reducing supply, production of many agricultural commodities has actually increased and agricultural commodity prices continue to fall.

It is a simple case of supply and demand. World agricultural markets are so distorted by subsidies that there has been no adequate supply-side response. The market simply cannot work. And who bears the brunt of the adjustment burden - members of the Cairns Group, and developing countries generally, who cannot match the Treasuries of the major developed countries.

This vicious circle of subsidisation, over-production and low p prices must stop.

If subsidies were eliminated and world agricultural commodity markets were allowed to work freely, the increases in world prices would be substantial.

For example, preliminary results from a study into the world sugar market currently being undertaken by the Australian Bureau of Agricultural and Resource Economics and US firm, Sparks Companies, indicate removal of all policy interventions in sugar in the US market would result in an improvement in average world sugar prices of between 15 and 30 per cent during the next five years.

Similarly, eliminating the EU intervention price for sugar could add between 5 and 15 per cent to world sugar prices.

These are large price increases in a commodity for which prices are languishing at a 15 year low.

But it is not just better prices at stake. Fundamental reform in the developed world will improve global food security. It will bring greater predictability and stability of prices, allowing the creation and expansion of sustainable agricultural industries in developing countries. Enhanced market access, and better and predictable prices, will stimulate the investment needed to achieve this.

Special and differential treatment and measures to assist rural development of developing countries are very important - and the Group will work to see that they are integral to the negotiations. But it is clear that by far the biggest boost to sustainable development would come through the removal of the massive distortions in agriculture in the industrialised world.

We need to sheet home to those countries, who parade their credentials as "good world citizens"- as aid donors and the like, the sheer unfairness of their regimes and the ongoing damage they cause. We need to turn up the heat - to have them recognise their responsibility for the situation, and to do something much more meaningful to rectify it this time.

These are some of the messages it is crucial we get across to the world, to developing countries, and to our adversaries over the next three months - if we are to achieve the best possible mandate at Seattle.

The Cairns Group's Important Role

A couple of weeks ago I attended a function in Canberra hosted by the Argentine Ambassador to Australia, Mr Nestor Stancanelli. Nestor is no doubt known to many of you. He witnessed the birth of the Cairns Group in 1986 and was active in its work in Geneva through most of the Uruguay Round.

Nestor said that many in Geneva gave the Cairns Group little chance of survival, let alone any chance of actually being a force during the round. Most presumed the Group would last perhaps two years before being bought off by the Europeans - or the Japanese.

Nestor disagreed at the time - he said the Group had a strong raison d'etre, and principle on its side.

And this is true. Cairns Group members, then as now, recognised the injustice inherent in a rules-based world trading system that so heavily discriminated against agriculture. Why should trade in agriculture be on a different footing from other sectors? It simply shouldn't.

Well history has proved Nestor right. As you all know the Cairns Group went on to play a catalytic role in achieving an agreement on agriculture during the Uruguay Round. And 13 years on from the start of the Uruguay Round, the Group is still very much alive and kicking.

There is little doubt that without the Cairns Group there would have been no WTO Agreement on Agriculture - and without solidarity and resolve from governments in all our countries, there would have been no Cairns Group.

The Cairns Group must face the next WTO round with the same level of commitment and the same level of resolve and cohesion. This will not be easy.

The Seattle Ministerial will be no place for the faint hearted. There are clear signs from Europe and North Asia that positions are hardening. Some are looking for a minimalist outcome from Seattle and are threatening to take us backwards or sideways by introducing concepts such as multifunctionality. We face big challenges over the months ahead.

But we should not ignore the very real leverage we have. Cairns Group countries have a very important role in the WTO. We are a] l strong trading countries with interest in open markets. We were individually, and collectively, a crucial element in expanding and strengthening the trading system in the Uruguay Round. We will be equally crucial to the successful launch and carriage of new trade negotiations that go beyond agriculture.

I am confident that a strongly united and active Cairns Group can continue to be a force for change - able to secure an adequate mandate for agriculture and drive it through to far-reaching results.

Co-operation with the United States

As we approach. a new round there is a certain sense of deja vu.

The start of the Uruguay Round coincided with some of the lowest agricultural commodity prices on record - similar to those we are experiencing today. And in many countries there was little appetite for agricultural reform.

Strong political leadership was provided by the United States in the leadup to, and at the launch of, that Round. This allowed for cooperation between us which helped achieve positive objectives and put agriculture at the centre of the subsequent negotiations.

We are looking for a similar level of US ambition and resolve this time around. It was pleasing that the US lodged proposals in Geneva in late July and is now fully engaged in the preparatory process.

In the lead-up to Seattle, the Cairns Group want s to do all that it can to cooperate with the US to ensure an ambitious mandate for reform.

That said, 1 would be less than honest not to acknowledge that the recent approval by the US Senate of an additional emergency farm assistance package, worth some $US 7.65 billion -although not yet law - is a worrying development.

So we will have a full and diverse agenda when we meet with Secretary Glickman later this morning.

Objectives for the Meeting

I look forward to our discussions over the next day and a half. We have much ground to cover, in addition to how we cooperate with the US.

We need also to discuss our strategy in the leadup to the Seattle meeting and a work program for our officials to help achieve a Ministerial declaration at Seattle that will shape the negotiations in a way that meets Cairns Group objectives.

One element I'm particularly interested in pursuing is the potential to gamer support from other players, especially developing countries. The Group has already been active on outreach but I'm convinced there is much more we could do - with good effect - over the coming months.

1 look forward to a productive meeting here in Buenos Aires and to working closely with you all.