State Trading Enterprises

U.S. agricultural interests have made state trading enterprises (STEs) a focus for criticism of other agricultural exporting countries, sch as Canada, Australia, and New Zealand. They argue that exporting monopolies have market power that enables them to undercut the prices of competing U.S. products, and that STEs use profits from protected domestic markets to subsidize into export markets. The issues surrounding STEs are being addressed in the WTO's STE Committee. The information gathered in this committee, as well as in the WTO's Committee on Agriculture and from other sources, will be used as a basis for strengthening disciplines on STEs in the next round of multilateral negotiations which, for agriculture, commence in 1999. The Administration has made transparency in STE operations and discipline of STEs a priority in future work in the WTO.

The New Zealand Dairy Board

The New Zealand Dairy Board (NZDB) is one example of an exporting agricultural STE. The New Zealand Government does not directly intervene in dairy production or prices. However, all export of dairy products manufactured in New Zealand is carried out by the NZDB, a statutory cooperative established under the Dairy Board Act of 1961. Two government appointees sit on the 13 member Board. The NZDB cannot be dissolved except by act of parliament.

Reform legislation was passed under the Dairy Board Amendment Act in August 1996, which clarified ownership and equity issues. The main change is to have the Board's assets (brands, plants, etc.) held by a company formed by statute. The NZDB will remain a cooperative but will be owned by the industry's 15,000 dairy farmers. The shares of the company are owned by private sector interests, whose share holdings are based on their respective milk production in the previous season. The shares are nontransferable, nontradeable, and non voting.

As required under the new legislation, on November 5, 1996, the NZDB adopted a written constitution which covers issues pertaining to shares, meetings, voting at meetings, dissolution of the Board, and dispute resolution. To change the constitution requires 75 percent shareholder approval (through recent mergers, the top two dairy companies have very nearly reached this threshold). The NZDB's role in the acquisition and marketing of products for export remain unchanged. The NZDB can and does license individual companies to export products, but not on a large scale (the products are usually "niche" type products).

Other Producer Boards

Besides the Dairy Board, there are other producer boards in New Zealand. Legislation addressing these boards remains unchanged at present. Changes are being considered to alter powers in the meat and wool structures in the areas of ownership, accountability, and acquisition. Such changes may come this year.