Feds deliver WSJ barracking to Obama

Federated Farmers President Don Nicolson has not just delivered a barracking to US President Barack Obama, he’s done it in the Wall Street Journal.

The government has to be diplomatic, but Nicolson pulls no punches in an opinion piece headlined Milking Trade Subsidies.

Less than six months into his new administration, President Barack Obama has already managed to spark a trade war with Mexico over trucking. Protectionist measures like quotas on Chinese tires could be on the cards, too. Now, newly expanded milk subsidies also threaten both America’s reputation and its trade leadership.

Last month the U.S. Secretary of Agriculture, Tom Vilsack, implemented the Dairy Export Incentive Program, or DEIP. Under the program, re-authorized by Congress in last year’s Farm Bill, the U.S. Department of Agriculture pays subsidies — euphemistically described as “bonuses” — to cover the difference between American farmers’ cost of production and prevailing international prices.

While DEIP is legal in the U.S., its implementation is a political decision. In the past, annual dairy export DEIP “bonus” values have ranged from about $20 million up to $140 million. While these are miniscule figures for the U.S., the payments distort the international price of dairy products. The first post-DEIP auction price for whole milk powder, conducted earlier this month, fell by 12% — the biggest price reversal since February.

Nicolson explains the negative impact subsidies have on consumers everywhere.

In the U.S., DEIP means American families pay higher taxes to support subsidized dairy farmers, wiping out any savings they might enjoy from lower dairy prices. As in other countries, subsidies effectively shield farmers from true competition. Higher prices always result, and this price increase is passed straight onto consumers. There’s nothing inherently “fair” about any form of subsidy.

Just as relevant, especially given Mr. Obama’s stated desire to improve America’s image abroad, is how unfair this subsidy is to dairy farmers in countries like mine, New Zealand. We’re the world’s second-largest dairy exporter, after the EU and ahead of the U.S. And we’ve reached that market position without any farm subsidies whatsoever.

Nicolson explains how subsidies were dropped in New Zealand in 1985 and while painful at the time, the agricultural sector is stronger now its standing on its own feet and has bettered productivity growth in every other sector in all but two of the last 27 years.

Now programs like DEIP are punishing us for our hard-won success.

Nicolson is justifiably proud that the WSJ accepted his column.

“Writing a letter to President Barack Obama was one thing. Getting wider attention on this most important issue is another.

“That’s why the Wall Street Journal was the logical choice. It’s the trade paper of American commerce and one of the most respected newspapers in the world. It has genuine gravitas with U.S. policy makers.

“It’s an honour and a bit of a coup really that Federated Farmers has had such a topical piece accepted. The timing is ideal, given it coincides with the Cairns Group meeting being attended by U.S. trade representative, Ron Kirk and the World Trade Organisation’s Director-General, Pascal Lamy.

“New Zealand and its farmers are up against a powerful U.S. dairy lobby that’s only interested in keeping its subsidies. Hopefully this opinion piece will give U.S. policy makers time to pause, think and reconsider what folly it really is. . .

“Federated Farmers is acting proactively to protect farm viability and the returns that New Zealand’s dairy farmers receive. Unless subsidies and protectionism is nipped in the bud, history tells us they’ll expand and morph into other areas. 

This more than justifies the subscription Feds charges its members and any farmer who isn’t a member should sign up because of this.

Feds has leapt gumboot deep into the slugde of growing subsidies and need our support to carry on the fight.

Hat Tip: The Bull Pen

14 Responses to Feds deliver WSJ barracking to Obama

  1. Neil says:

    Well done to Don Nicholson for his letter to the WSJ.Its great to see that the farmers of NZ are true lovers of free trade.
    Maybe some of the Feds should realize that they are not the only ratepasyers in NZ and treat their urban counterparts with a little commonsense. Town and country stand together.


  2. It is great to see the Feds waking up to the damage the ObamaMessiah is doing to our farmers, and ultimately American consumers.
    Now we need to turn our attention to the damage the Messiah is doing to the wider global economy.
    Fostering protectionism, as is does here is just part of it.
    His government is soaking up so much global capital that it is causing interest rates to rose across the world. The result of this was a rise in mortgage rates at some of our banks this week and last week.

    And as the US deficit grows, such upward pressure on global interest rates can only worsen and help prolong the global recession.

    Yet his spendthrift policies are not working, as shown by US dole queues growing far faster than expected.

    Obama is but a knave and buffoon, who knows as little about economics as he does about history and foreign affairs.

    It truly is a tragedy that he is the US president.


  3. Tired Farmer says:

    Neil says “Town and Country stand together”. Anyone who takes the trouble to attend the public meetings of the Gore District Council would tend to think that in the majority of issues, rural views are not entertained.

    Count yourself lucky that you do not have to traverse rural roads if you wish to attend these meetings.


  4. Tired Farmer says:

    Congratulations to Homepaddock,Don Nicolson and Fairfacts Media re this issue.


  5. Tussock says:

    The WSJ piece was excellent. Beats the combined efforts of NZ’s PM, Trade Minister and Minister of Agriculture by a country mile.


  6. Sally says:

    “And treat their urban counterparts with a little commonsense.” Neil you must have this phrase round the wrong way.

    A rural ratepayer lives 40km from its urban servicing town with inflated facilities for a district council with a population of 12,100. We are told that ALL ratepayers, even those 20, 30, 40kms, have EQUAL ACCESS to these fantastic facilities.

    A socialistic policy has been cultivated by Council as it thinks it knows who has the ability to pay because of a property’s capital value. Just because an urban property has a low capital value, does not mean that household, does NOT have the ability to pay.

    Bureaucrats and Councillors have no idea what may be stashed away in ‘hidden’ investments such as shares etc. But they believe it is OK to make ill informed policy on assumptions that farmers’ Capital Values are the indication they have the ability to pay extra for services they rarely use.

    This council treats rural people with contempt, for example:

     Library and aquatic facilities – This rural ratepayer pays 143% MORE than the urban example.

     Parks & Recreation – Rural ratepayers all pay 23% MORE.

     Roading – This rural example pays $3,259.14, where the urban example pays a mere $196.02. That is, rural people pay a massive 1563% MORE.

    The council’s flawed policy that every ratepayer and resident in the district has the opportunity to receive benefits from the towns’ parks and recreation service is a joke! Rural people who do NOT live in town pay 23% more with the bulk of the parks residing in the urban area.

    Even more absurd is that the same policy is not applied to the roading service. All ratepayers have the opportunity to use rural roads.

    When these Gore District Council policies were determined, urban councillors represented 82% of the council.

    It is a bit rich for Neil to talk about “town and country standing together,” when the odds are stacked so blatantly against the outnumbered farming ratepayers.


  7. Tussock says:

    Touchy one, rural roading. Add up the rates paid by farmers on many rural roads, compared to the full cost of that road’s maintenance and capital upgrades, and there is a huge gap. One example I saw would have required farm roading rates (on CV) to treble to meet ‘user pays’ and that was before the 50% LTNZ subsidy. Also, fulltime farms are only a proportion of ‘rural’ ratepayers these days. Lifestyle blocks account for a big part of ‘rural’ rating, and don’t have heavy service vehicles like stock trucks and milk tankers rolling up; these really hammer the local roads. Feds are playing with fire on this one.


  8. Sally says:

    Tussock, My post has nothing to do with the Feds. Roading is a very complex subject but what I am trying to portray is that a council changes a funding policy to suit its urban constituents for one service that is unfair to rural. This upset rural ratepayers because at the same time the policy was being changed, the rural roading budget was cut. This Council has a huge Parks and Recreation budget with rates collected of $1.552M. The total rates collected for roading are $2038M.

    “Add up the rates paid by farmers on many rural roads, compared to the full cost of that road’s maintenance and capital upgrades, and there is a huge gap.” Not sure I follow this.

    In this District many gravel roads are in a shocking state. Four years ago at a public meeting, the local carrier voiced concern that “in ten years time our roads could be of a third world standard”. His concern was that more and more funding was going towards urban non-essential services while at the same time maintenance standards were decreasing.

    Just look at the ramifications for farmers who reside in the Dunedin City Council area, they are being forced to pay huge amounts towards the unsustainable stadium in Dunedin. How that contributes to their business is beyond belief.


  9. Tussock says:

    Sally – There must be some confusion here, or maybe a decimal point misplaced. Surely a parks and rec budget of $1.5m(?) is peanuts beside a roading budget of $2 billion? Farmers lucky enough to come under Dunedin City will have lower roading rates than neighbouring districts, as the big rates take from urban DC areas will subsidize the DC rural roads. Also, there are national standards for road maintenance. It would be surprising if DC is far off par with its gravel roads, though complaints are a hardy annual.


  10. Sally says:

    Sorry about the confusion, yes there is a decimal point missing should be $2.038M.


  11. Tussock says:

    Annual roading budget $2m, parks and rec $1.5m? Which council is this? Does not sound like Dunedin City.


  12. Sally says:

    Tussock, This is what I wrote when I forgot the decimal point. “This Council has a huge Parks and Recreation budget with rates collected of $1.552M. The total rates collected for roading are $2038M.” (correction $2.038M).I was writing about the rates collected.

    The Council is Gore with a population of 12,100.


  13. Sally says:

    Tussock, your comment
    “as the big rates take from urban DC areas will subsidize the DC rural roads.”

    I would interested for you to show me the DCC policy to back up this statement.


  14. Tussock says:

    Sally – For $2m over 12k people, Gore District must have one of the lowest roads budgets in the country – per head, per km, or whatever. Small area and flattish topography probably help, but are you sure of that figure?

    For serious rural roading costs, take a look at some NI DCo’s like Waitomo or South Wairarapa. Re DCC – unless it seperates rural from urban roads and rates accordingly, it creams off the suburban streets with good rate takes and light traffic, and plugs cash into rural roads with lower rate takes and heavy axle loadings. Great idea, but best kept quiet about! Roading is usually the single biggest cost for rural councils, but they all have their own problems and policies, so comparisons difficult.

    Maybe this post should move up into the Rodney Hide debate. Will be interesting to hear exactly what he has in mind, and how the various councils react.


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