New Zealand ends farm subsidies: dairy output quintuples wool industry more efficient

[Bradley in DC]

http://www.nytimes.com/2007/08/02/bu...in&oref=slogin

. . . Dairy farming in New Zealand was not always this sophisticated. But ever since a liberal but free-market government swept to power in 1984 and essentially canceled handouts to farmers — something that just about every other government in an advanced industrial nation has considered both politically and economically impossible — agriculture here has never been the same.

The farming community was devastated — but not for long. Today, agriculture remains the lifeblood of New Zealand’s economy. There are still more sheep and cows here than people, their meat, milk and wool providing the country with its biggest source of export earnings. Most farms are still owned by families, but their incomes have recovered and output has soared. . .

. . . New Zealand’s farmers are not the only ones convinced that eliminating subsidies, or at least sharply cutting them, is a good idea. As negotiators struggle to revive the failing global trade talks and Congress moves ahead on a new farm bill in the United States, New Zealand and Australia — which also cut subsidies but not as drastically — are being extolled by economists and advocates for poor countries as models for Americans and Europeans to follow.

“They went cold turkey and in the process it was very rough on their farming economy,” said Ray Goldberg, a retired professor of agriculture and business at Harvard Business School. “But they came out healthier and stronger. They proved it could be done.”

Traditional subsidies, economists contend, generally encourage inefficient farmers to grow unprofitable crops far beyond what consumers actually need, secure in the knowledge that the government will help protect them from loss. And they make it much harder for farmers in poor countries to compete on a level playing field against coddled farmers in the West. Removing subsidies, the argument goes, liberates the best farmers anywhere in the world to produce what people really want.

“When you’re not going to get paid for what the market doesn’t want, you have to get off your backside and find out what they want,” said Charlie Pedersen, who, when he is not raising sheep and beef cattle on his farm north of the capital, Wellington, is president of Federated Farmers of New Zealand.

Just how much the United States can learn from New Zealand is debatable: this country is small and its subsidies and tariffs were a relatively recent indulgence. And unlike the United States, where most farm output is consumed domestically, almost all of New Zealand’s milk, meat and wool is sold abroad. . .

[Badger Paul]

They get it. I wish other Republicans and Democrats did as well.