Monday, May 25, 2009


Is the US under Obama returning to outdated export protection subsidies...

First published at Qassia:

During the the 1980's and 90's the New Zealand economy underwent many fundamental changes during the changeover to market economics. Part of the process was the gradual reduction and eventual abolition of tariffs and export subsidies. This created much stress and economic hardship for New Zealanders. But the realisation that this was a process all economies were undergoing in the pursuit of a level economic playing field made the exercise more palliative.

But the announcement that the European Union and the United States were allegedly involving themselves in what could be termed another 'trade war' wasn't received too well by the New Zealand Government who fear NZ could become caught in a crossfire between the two economic superpowers, and could destroy hard earned progress in international trade talks, and put Kiwis standard of living at risk.

The NZ Trade Minister,Tim Groser, went close to slating the US for adopting new export subsidies for exporting dairy farmers, something described as the "most hated of all trade policy instruments".

The US move is a 'tit for tat' response to the EU action in January, a rather juvenile act in the 21st century one would suggest.

Mr Groser said the US action effectively destroyed the immensely difficult exercise of getting the commitment to eliminate export subsidies as part of the World Trade Organisation's Doha trade talks, begun in 2001. "The US and EU have gone back to sucking on that particular teat again". he said.

The US Dairy Export Incentive Program will pay exporters cash bonuses, enabling them to sell at lower prices to be more competitive. A return to the future, one could well say!

New Zealand, a nation of only 4.3 million people earns more than $6.3 billion in dairy exports annually, and were vulnerable to price levels and the potential damage if the situation escalated. The damage would not only affect NZ farmers, but the country as a whole - New Zealand's standard of living could deteriorate. It is potentially an extremely difficult situation. This would not be a positive signal to the rest of the world during the most severe economic contraction since the 1930's. Trade protection and retaliation is considered as being part of the Ark. Hopefully commonsense will prevail in both the US and EU.

Not a great signal from President Obama and the US Government at a time it seeks increased military support for its Afghanistan campaign against the Taleban?

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