Subsidy systems must be abolished

Press, 4 May 1984, Page 8

Subsidy systems must be abolished

Supplementary minimum prices and all other forms of subsidies and frontier protection must be abolished because of the distortions they cause, Mr O. W. Thomas, chairman of the Dairy Section of North Canterbury Federated Farmers, said on Wednesday. There were glimmerings of hope that politicians in Europe and the United States have recognised the unacceptable cost of cushioning their own farmers against more efficient competition, Mr Thomas told his section’s annual conference. “But the New Zealand dairy industry’s cause — indeed the cause of all New Zealand farm exports — will not be helped if an extension of the S.M.P. scheme becomes a weapon in our opponents’ hands,” said Mr Thomas. Faced with confusion in the overseas marketplace, the New Zealand Dairy Board had asked the Government to give dairy farmers an S.M.P. support scheme to tide them over. Farmers argued that an artificially high value of the New Zealand dollar made local industry look more competitive and worked to the disadvantage of farm produce exporters. If present exchange rate policies were maintained, dairy farmers, who in the past had boasted of their unsubsidised efficiency, would present the S.M.P.S to

the rest of the world as an “.adjustment” for a distorted exchange rate rather than subsidies. Mr Thomas described this as a subtle argument, but current experience in Europe and the United States suggested there was little time for such arguments. New Zealand’s trade issues were being used as a lever to obtain other objectives or were discussed as “bottom of the agenda” items. “In any case, how can we expect politicians, who have to worry about their own farmer constituents, to approve access for produce from New Zealand farmers who benefit from such ‘adjustments,’ at the same time as they peel away the subsidies that have encouraged their own farmers to overproduce.” Mr Thomas said it would take another year or two to see whether the glimmerings of hope in Europe and the United States, that politicians had recognised the unacceptable cost of cushioning farmers from more efficient competition, would turn into a fire which would melt the subsidised butter mountains. “Unless this happens, we will have to confront the unsavoury task of scaling down or dismantling the world’s most efficient dairy industry because powerful nations, who use us as bargaining levers or see our problems as items that can • be held over at the bottom of the agenda, make it impossible for us to market our butter in an orderly fashion. “Buttering up these nations requires us to press the cause of market efficiency rather than resort to the farm support policies that have hindered our progress to date,” said Mr Thomas. In the past few weeks, it

was possible that a move throughout the world to sell farm products at market prices might have started, said Mr Thomas. Since 1945, governments had contrived to keep food output down where it was most needed and keep it up where farmers could be doing other things more profitably. This had been achieved, by fixing food prices in rich countries artificially high and prices in poor lands artificially low. Mr Thomas said the prospects for changing this nonsense suddenly looked rosier than it had for decades. In the past month the E.E.C. had cut spending on milk because it was running out of cash; America had persuaded Japan to import more American beef and oranges; and drought-ridden African countries had provided incentives to farmers. This was an opportunity for governments to make sense of their farm policies. They should be guided by the principles that farmers ought to be allowed to reap as much as they can profitably and sell at world market prices. Consumers ought to be allowed to buy food at those prices. This would mean price cuts in Europe and Japan and prices increases in Africa and Latin America, Higher price increases would occur in Latin America and Africa anyway if the current inflationary policies continued. Americans paid world market prices for food, with an average of 17c in every dollar being spent on food, compared with 32c paid by Japanese consumers, who were almost as rich as Americans. Mr Thomas said he was not suggesting that farmers in Japan or Europe should be thrown on the breadline. Giving them deficiency payments or special welfare benefits was the best way of protecting them — paying farmers high prices to produce more food than people can eat is worse. However, all these changes would be wasted if New Zealand did not get its internal economy in order. S.M.P.s and all forms of subsidies were no answer. New Zealand must also become more efficient in the servicing sectors, said Mr Thomas. it was ludicrous that New Zealand could ship butter to the United Kingdom 30 per cent chheaper that it could be freighted to Australia.