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