Food crisis might bring free trade

The growing world shortage of food might achieve what years of diplomacy and lobbying haven’t: a reduction in, perhaps even the elimination of, tariffs on food.

 

UN Secretary General Ban Ki-moon has called for an immediate suspension or elimination of price controls and other trade restrictions in an effort to bring down soaring world food prices.

 

Adam Smith  links to a Financial Times article by World Bank head Robert Zoellick who makes a similar call. His 10 point plan includes a need to boost agricultural supply and research spending; increase investment in agribusiness; and remove subsidies and tariffs on food and bio fuels.

 

New Zealand farmers were dragged into the real world when Roger Douglas removed subsidies on farm produce in 1984. We didn’t like it at the time but that was partly because tariffs remained on imports and the labour market was highly regulated so costs stayed up while prices dropped; and we were also battling high interest rates, high inflation, a high dollar and drought.

 

However, while a few farmers were forced to sell most hung in and eventually adapted to the new order and are more secure because of it. Those downstream weren’t so fortunate. Thousands of jobs were lost on farms, in stock firms, shearing gangs, freezing works, and other businesses which serviced or supplied us or processed what we grew. The lesson from this was clear: the subsidies hadn’t helped producers or consumers, it had just feather-bedded those who take their cut between the farm gate and the kitchen table.

  

A good season for cropping and dairy farmers makes it easy for them to spurn calls for a return to subsidies but even though they’ve had a horror season I’ve yet to hear a single sheep or beef farmer wanting to go back to the bad old days of when politicians controlled our income. 

Many of our trading partners have yet to understand the harm that subsidies do and New Zealand farmers, processors and the wider economy pay the price for that. This lesson is lost on some in New Zealand including the Greens and NZ First; and as David Farrar  points out it is ironic that free trade advocates are with the UN and Oxfam on this issues while the Greens are siding with the US in supporting tariffs and biofuels.

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