THE PRESS TUESDAY. MAY 12. 1981. Dumping of U.S. butter

Press, 12 May 1981, Page 16

THE PRESS TUESDAY. MAY 12. 1981. Dumping of U.S. butter

the world b riV X 1S f S that ’ in many areas of rmlkfhPv 7 farmerS Can produce more the UnS encouraged to do so. Both FonnnrJ? n States and the European Sh L? mrnUnity have dairy schemes "inch encourage grossly the overtbatdUChn?h ° f The result has been Common? M Eur °P ean Economic , Community and the United States have had th^ ir dairy From time to S Euro .P ean Economic Community f aS u o , d so ™ e lf its dair Y produce at prices far below the costs of production for which me farmers have been paid by way of subsidy. New Zealand has opposed such sales vigorously in the past because of the disruptive effect that such subsidised sales " av . e ? n the world mar kets. Hitherto the united States has refrained from attempting to dump its surplus production on world markets. Pressure is building up in the United States to get the country to start dumping some of its surplus. Milk production in the United States has increased dramatically recently. Between 1972 and 1976 the average production was 53.2 million tonnes. Last season it rose to 58.25 million tonnes and tne forecast for the 1981 season is 59.6 million tonnes. Butter production averaged44B,ooo tonnes from 1972 to 1976; it dropped slightly in 1979 to 447,000 tonnes and rose steeply to 518,000 tonnes in 1980; the forecast for 1981 is 570,000 tonnes. The difficulty has come over stocks held at the end of the season. From 1972 to 1976 only 25,000 tonnes of butter were held; in 1980 138,000 tonnes were held and the forecast for the present season is a huge surplus of 247,000 tonnes — more than New Zealand’s total annual exports of butter. The United States has imported only token amounts — about 1000 tonnes a year, of which New ? Zealand supplies 152 tonnes. American exports have been limited to 2000 tonnes a j year. The problem that vastly increased exports of butter from the United States would bring New Zealand lies both in supply and price. The United States is likely to sell its surplus butter to countries which New Zealand might have supplied. Assurances from the United States that this is unlikely to happen cannot be taken

as the last word on the subject: part of the American plan appears to be to turn the supplies over to private firms, which would doubtless resent any interference from the American Government about where they should sell the butter. Almost certainly the United States butter supplies would start to penetrate markets which the traditional butter exporters consider their own. If this were all a matter of free competition it would not be so important; in fact the butter supplied by the United States would be heavily subsidised by the American taxpayer. New Zealand, which supplies about a third of the world dairy export trade, already has to cope- with the subsidies paid through the Common Agricultural Policy in Europe. If the United States pushed ahead with its proposals, New Zealand would have to face competition subsidised by two of the strongest economies in the world. If the United States dumps butter, it will also strengthen the hands of the countries that already engage in dumping. If a great deal more butter were available on the world market, the price of butter would almost certainly drop. The question of what can be done about the whole problem is not easy to solve. New Zealand’s trade would fare better if various countries adopted schemes to support the incomes of farmers rather than paying high prices for the goods produced. This would remove the incentives to farmers in Europe or in the United States to produce more than the market can absorb. The cost of support should be less than the cost of subsidies; taxpayers would be better off, even if, as consumers, they paid more for butter.

American businesses have been looking questioningly at export incentives in New Zealand; this country has cause to look back with disapproval at subsidised, dumped exports. The dumping of manufactured goods on international markets is discouraged in various ways; that no similar mechanism has been developed for agricultural produce is part of the unfair discrimination between industrial trade and agricultural trade sanctioned by the world trading community.