Dairy Board’s difficulties

Press, 7 March 1984, Page 12

Dairy Board’s difficulties

The arguments raised by Mr J. T. Graham, chairman of the Dairy Board, in favour of increased financial support for the dairy industry in New Zealand appear to be based on dubious premises. “European and U.S. subsidisation is meant by them to cover their short-term problems,” he said. “Some of these countries are willing to accept the long-term near-demise of this industry, if that is the price of a European or American political solution. There are others who stand with us—but we need the New Zealand community’s backing until common sense prevails,” Mr Graham told the New Zealand Dairy Company ward conference in Hamilton. If Mr Graham is saying that the New Zealand dairy industry should be supported because American and European subsidies will disappear eventually, this is dangerous thinking. There is little evidence that subsidies will disappear in the United States or Europe. An optimist might believe that moves in train in the United States could mean that a surplus bf dairy products will not be produced there for much longer. It would need more than optimism to be convinced that this is the likely outcome of moves in Europe. It could be argued that the subsidisation of the dairy industry in Western Europe is the European Economic Community’s long-term solution to the problem of how best to discourage the movement of population from the countryside to the cities. , . There may be other good reasons for subsidising the New Zealand dairy industry; but the suggestion that common sense will prevail among dairy producers abroad cannot be accepted with any confidence. The Dairy Board, and New Zealand as a whole, have a strong case to justify this country’s defence of its dairy exports. The West Europeans, especially, are transferring money from one part of their economy to another through subsidies to farmers. The wealth that enables them to do

this leads to a reduction in New Zealand’s markets, both within the E.E.C. and in other dairy importing countries. But New Zealand dairy farmers would be misleading themselves if that action by E.E.C. governments is regarded as temporary. The other doubtful premise put forward by Mr Graham is that of each dairy farmer in New Zealand subsidising butter sales in this country by an average of more than $lOOO a year. The claim has been made because the butter sold on the local market fetches less than butter sold abroad. The flaw in this argument is that there would have to be a larger market available abroad before more New Zealand butter could be sold overseas. The Dairy Board is showing every sign of trying to promote the sale of dairy products in New Zealand, as well as abroad. It cannot do this and also argue that sales to the local market are at the expense of increased exports that could be sold at higher prices. The Dairy Board is right to emphasise that New Zealand is the most efficient producer of dairy products in the world, but this is not necessarily relevant in dealing with rival producers. It is also fair that there should be support in New Zealand for the industry in bad times—if those times are temporary. Years of economic production should not be put at risk for the sake of a short period of financial support. New Zealand has few remaining sources of large amounts of money that can be transferred from one sector of the economy to another as additional agricultural subsidies. In this it differs from Western Europe, for instance, where a huge and profitable industrial base can be taxed to support the agricultural sector. New Zealand needs to devise its own response to the crisis posed by the world surplus of dairy products. Wishful thinking, or imitation of the policies of E.E.C. countries, are not necessarily in the best long-term interests of New Zealand dairy farmers, or the country.