Editorial
How now subsidised cow?
US and EU subsidies for dairy products are likely to only prolong the recession.
When National MP Shane Ardern drove Myrtle-the-tractor part-way up Parliament’s front steps in 2003, protesting at the proposed agricultural emissions research levy, it made headline news. But by European standards, Ardern was an amateur.
French and German farmers, in particular, have been at it again this week, blockading cheese factories, scuffling with police and even taking a cow to the European Commission in Brussels to protest over what they think is their birthright: guaranteed prices for their produce to ensure the chill winds of the international marketplace never come whistling under their farmhouse doors.
In New Zealand, the dairy farmers’ payout is always big news. Farmers are seen as “lucky bastards” when the payout is high and, perhaps unfairly, as lucky bastards who will have to tighten their belts when the payout falls. Certainly, New Zealanders see their farmers for what they are – people running small and medium-sized businesses whose income is dependent on their own efficiency and on the price they can get for their products overseas. There is debate about whether farmers are subsidised through water use and environmental damage, but taxpayer-top-ups for the prices farmers receive are long gone.
Yet in Europe, where each cow may attract its own weight in paperwork, it’s the farmers themselves that are milking the system. And so, as the global recession knocks back the price consumers are willing to pay for dairy products, European farmers are demanding the European Union increase its subsidies to make up the difference. And the EU, like a dog to heel, is complying.
A week ago the United States announced it, too, would r-einstate export subsidies – boosting the price to American farmers for 92,000 tonnes of export dairy products. The US partially blamed the EU for its decision, but the EU said it was not its fault.
This is all tediously familiar, especially to the agricultural exporting nations of the Cairns Group, many of them much poorer than New Zealand and Australia and whose voices struggle to be heard over the clamour made by other countries’ farmers.
In this week’s issue, American futurist George Friedman suggests New Zealand has not been paying enough attention to its friends and so, when the chips are down, the US administration has no reason to stand up for New Zealand’s interests against those of domestic producers.
But by succumbing to domestic pressure in this way, governments make their own exhortations against protectionism into nothing more than hollow and hypocritical blather.
In the EU, nearly 60% of all legislation is to do with farming. The Common Agriculture Policy, the umbrella under which European subsidies fall like manna from the state, costs €50 billion a year – 40% of the entire annual budget of the EU. It is a phenomenally expensive exercise in protecting European farmers, ensuring that their inefficient methods of production continue, that consumers pay more than they should, and that much more efficient producers, like New Zealand, are kept out of markets.
Although this is nothing new, it is particularly aggravating coming in the midst of a global recession. This is when each country should be able to rely on what it does best to help itself – and ultimately the world – get out of the economic mire. But subsidies make that impossible, because they unfairly distort markets. Nowadays, when all governments have a sophisticated grasp of markets and economics, there is no justification beyond political expediency for deploying subsidies. If none were offered, some of the farmers would sell up, thereby reducing supply and helping markets find their own natural equilibrium.
New Zealand and the Cairns Group need to protest as vociferously as they can to everyone who will listen, and even to those who will not. Prime Minister John Key said he raised the issue of protectionism with US President Barack Obama in their recent phone call. Key and all his administration need to keep at it. And if that does not work, perhaps Myrtle needs to be brought out of retirement, not up the steps of Parliament, but leading the charge in Washington and in Brussels where the case against hypocrisy desperately needs to gain traction.
