Return of EU subsidies ‘neo-protectionism’

Return of EU subsidies ‘neo-protectionism’

“The reintroduction of export subsidies for dairy products by the European Union (EU) is deeply unsettling,” says Philip York, economics and commerce spokesperson for Federated Farmers.

This week, the EU is expected to revive ‘temporary subsidies’ to aid its inefficient dairy producers with declining global prices. European producers will receive cash to cover the difference between dairy prices within the EU and prices in export markets. This will effectively subsidise EU dairy exports posing a potential major threat to New Zealand’s leading export earner. Given New Zealand has been subsidy free since 1985, the Federation is deeply troubled by this move as it could be the thin edge of a wider protectionist wedge.

“The Federation endorses the concern expressed by Trade Minister, Tim Groser and the Minister of Agriculture, David Carter. With the inauguration on Wednesday of President Obama, the immediate cessation of these subsidies must become New Zealand’s number one diplomatic priority. The EUs move could create tit-for-tat actions on both sides of the Atlantic and in any agricultural trade war, New Zealand will be a big loser.

“Federated Farmers sees no bigger man-made threat to the economic well being of all New Zealanders than the risk posed by neo-protectionism. Subsidies have a habit of spreading to other food commodities or morphing into tariff barriers. It’s a literal can of worms once opened.

“Back in 1985, experts told New Zealand that our free trade example would be followed by the rest of the world. 24 years later we are still waiting, so you’ll excuse Federated Farmers for being a little cynical about rushing into things like animal identification and emissions trading at the behest of others.

“People need to be reminded that the 1929 Sharemarket Crash didn’t directly create the Great Depression but politicians did. Protectionist legislation, like America’s infamous Smoot-Hawley Tariff Act of 1930, became a template for protectionism copied around the world. Maybe we need to send all Euro MPs and their eurocrats some history books.

“It’s as simple as this. New Zealand produces food with the lowest food miles and carbon footprint and the Europeans can’t. The EU should concentrate on making cars and let countries like New Zealand produce food. If the EU believed its own climate change rhetoric then it would end subsidies tomorrow, not recreate them.

“Given OECD countries spend US$350 billion each year propping up inefficient agriculture, free trade is the only way the world economy will recover. It’s not the 1929 scenario we need to fear but what legislators enacted in the years afterward. With the Europeans backsliding and a new President in the United States, fighting tariffs and non-tariff barriers to trade must become our number one diplomatic priority,” Mr York concluded.

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