Market Access not Farm Subsidies

Commentary, Agriculture, Robert Sopuck

Brian Chamberlin is a New Zealander with a mission to promote free trade in agriculture, an important topic in light of the subsidy provisions in the new U.S. Farm Bill.

The author of “Farming and Subsidies: Debunking the Myths,” Chamberlin was recently in Manitoba as a guest of the Frontier Centre (see links below for radio interviews and his speaking notes). He was “there” in the mid-1980s’, when New Zealand abandoned all direct farm supports.

In the early part of that decade, New Zealand’s farm economy was in crisis, despite large-scale subsidies. As export-dependent as western Canada, New Zealand was faced with European dumping, high tariffs, protected local industries and a rigid labour market. The Federated Farmers of New Zealand, with Chamberlin as President, convened their annual crisis meeting to decide how much money they needed from government.

It dawned on them that the level of support required would literally “break New Zealand’s bank.” In spite of the importance of agriculture (80% of New Zealand’s exports at the time), even the farmers knew they were asking the impossible. What to do?

The problems in agriculture were bound up with New Zealand’s dismal overalll economy. High deficits, economic subsidies, excess wage settlements and structural rigidities had created an upward inflation spiral. Only deep reforms would work. The farmers prepared a comprehensive economic manifesto in 1982 and, as luck would have it, it was exactly what the in-coming Labour government needed. It became government policy.

Today, New Zealand’s agriculture has become an economic engine as farmers seek out new markets and adapt quickly and efficiently to changing economic conditions and international vagaries. According to Chamberlin, only 800 out of 40,000 commercial farms were lost. Even that number may be exaggerated since some of those would have exited the industry no matter what. The number of sheep plummeted from 90 million to about 50 million but today those 50 million animals produce as much meat as the 90 million did before. Talk about efficiency.

Since three million new Zealanders cannot possibly eat what they produce, agricultural exports are crucial. New Zealand, like Western Canada, needs free and open trade to sustain their level of production. Like true free traders, they welcome imports of farm products, like pork and beef, from other, more efficient countries. Protectionism, tariffs, and trade restrictions spell economic ruin for New Zealand, and they know it.

New Zealand and Canada are members of the “Cairns Group,” a loose association of countries pushing for liberalized agricultural trade. Chamberlin appreciates most of Canada’s free trade positions, but felt that we wanted to have it both ways in our supply-managed sectors. Only part-time free traders one day, Canadians often insist on keeping out imports of dairy and poultry products to “protect” our domestic industry.

This “simultaneous sucking and blowing” obviously harms western Canada, since our region is far more dependent on exports than any other part of the country. These “free-trade chickens” will soon be coming home to roost for Canada as this glaring inconsistency becomes all too clear. We need to get our act together pronto. The disastrous U.S. farm bill makes the “Cairns Group” market-access thrust more important than ever.

Although quick adaptation may seem painful at first glance, the farm economy will be stronger in the long run if we let the market adjust. Let’s buy their cheaper output – to our advantage – and turn to crops we can make money with.

New Zealand’s rural economy is thriving under free market reforms. To illustrate, Chamberlin related a newspaper story about economic opportunities in that country. The article urged young New Zealanders to study agriculture and other rural pursuits because rural areas were where all the new jobs were being created.

Wouldn’t it be wonderful if we could say the same thing here?