Export subsidies – they are the American way

It probably lowered Lachlan McKenzie’s blood pressure a tad, and Kiwis up and down the country will shout their approval. But it seems unlikely to accomplish much else.

“It” is the media statement issued today in which McKenzie described President Obama’s Dairy Export Incentive Program (DEIP) as “un-American”.

Abrasive stuff. But will Obama be sufficiently stung into backtracking?


McKenzie went on to say the programme is designed to target major New Zealand markets “and is being driven by envy that sees uneconomic American farmers being propped up by struggling US taxpayers.”

“Subsidies and tariffs is the trade equivalent of crack cocaine and America’s farmers are hooked,” says Lachlan McKenzie, Federated Farmers dairy chairman, in added response to President Obama’s decision to bring the world closer to an all-out trade war.

“To show the challenge New Zealand now faces, the European Union’s export subsidies, reintroduced in January, averaged $1,192 per metric ton on milk powder, $2,158 per metric ton on cheese and $3,873 per metric ton on butter between 2002 and 2004.”

When those subsidies were lifted, we are reminded, the export returns New Zealand farmers received picked up. Conversely, subsidies depress the prices we receive from international markets and the subsidies reintroduced by the EU and the US will slow the expected economic recovery.

New Zealand depends on exports for its economic survival. Hence the subsidies will affect the living standards and livelihoods of all New Zealanders.

“That’s why President Obama’s Dairy Export Incentive Program is underhanded, dangerous and dare I say it, un-American. It invites similar moves from Mexico City to Cairo and that’s the danger. It’s not the size of the subsidy but the way it will invite retaliation.

“Worse, DEIP specifically targets the same markets we export to without subsidy.

“It’s galling America’s compost heap of a dairy lobby blame New Zealand’s subsidy-free because we are so efficient. What ever happened to the free market?

“I’m surprised President Obama is backing inefficient American farmers. Subsidies hit poor American families especially hard. American families pay on average around US$322 extra per year at the checkout just to keep American farmers in the latest pickup truck.

“It’s no surprise then that a majority of Americans want these subsidies abolished.”

Looks like McKenzie was trained at the Robert Mugbe School of International Diplomacy.

If you don’t like what someone does, don’t bugger around trying to open up a dialogue and try persuading them to review their decision. Tell ‘em their policy – or anyone supporting it – is a heap of shite. Or compost.

Then you might consider tossing in some economic advice (although it’s a fair bet Obama has already been given it by his army of economic advisers, but ignored it).

“If the US wishes to balance its budget, it could start by abolishing its Foreign Agricultural Service and making its farmers live in the real world. The United States Foreign Agricultural Service spends nearly one-quarter of New Zealand’s total gross domestic product, or around $30 billion, supporting American farmers.

“Blaming New Zealand for being efficient or the European Union ‘as they started it’, highlights why two wrongs don’t make a right.

But finally, McKenzie has given a hint that maybe there is something to be done on the diplomatic front.

“Federated Farmers will be asking the United State’s Embassy’s chargé d’affaires for a ‘please explain’ and our president, Don Nicolson, will be pushing this hard at the Cairns Group meeting in Indonesia next month,” Mr McKenzie concluded.

Just don’t count on the EU or the US backing down.

It’s clear to see the Feds are pissed off. And so they should be, along with everyone else in this country

The Government is none too pleased as well.

There has been an inglorious unravelling of the steps gained – bit by painfully slow bit – to liberalise world trade in agricultural goods through the World Trade Organisation.

Countries like New Zealand – heavily reliant on its dairy industry – will be hit hard.

But Alf is unconvinced it’s un-American, or that Obama will be embarrassed by the accusation his Adminisration’s farm subsidies are un-American.

To the contrary, it is unabashedly American for Washington to flex its muscle in the world trade arena, and do what it likes within WTO rules. And don’t forget it has already strongly influenced the shaping of those rules so they aren’t too tough on American farmers.

The Americans preach free trade but practice it only when it serves their interests.

Come to think of it, this makes them prize bastards on trade policy matters. If they weren’t so big, Alf would urge The Boss to lean on them just as we lean on Fiji.

Don’t let their leaders or their families come here to watch rugby. That sort of thing.

But the US is much, much bigger than Fiji. And when it comes to realities, accusing its leader of being un-American at least saves on the fuel that would be expended if we made an even more futile gesture and sent a gunboat.

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