Why does Americas incredibly productive agricultural sector need subsidies from taxpayers? Would ending subsidies dry up the food supply? Of course not. And the story of what happened in New Zealand when that country cut off subsidies provides all the assurances any subsidy proponent could need.
In 1984, New Zealand’s Labour government ended all farm subsidies, which then consisted of 30 separate production payments and export incentives a striking action given that New Zealand was five times more dependent on farming than the U.S. economy.
A report last year from the country’s main farmers’ group, the Federated Farmers of New Zealand, documents what happened:
New Zealand’s farmers have competed successfully in world markets against subsidised producers in much of the rest of the world.
Agricultural subsidies account for just 1 percent of farm production in New Zealand and consist mainly of scientific research funding. That compares to 22 percent of the value of farm production in America.
The Organisation for Economic Cooperation and Development (OECD) confirms that New Zealand has the least subsidised farm sector among the industrialised countries and concludes that its reforms “resulted in a dramatic reduction in ‘market distortions.'”
Source: Chris Edwards and Tad DeHaven (both of the Cato Institute), Save the Farms End the Subsidies, Washington Post, March 3, 2002.
For text http://www.washingtonpost.com/wp-dyn/articles/A26511-2002Mar1.html
For more on Agriculture http://www.ncpa.org/iss/bud
RSA Comment:
South Africa has removed a large proportion of the distortions that previously existed in its farming sector and our agricultural sector has consequently become much more efficient and competitive. The very large subsidies that are paid by American and European taxpayers, distort agricultural production with the result that subsidised farmers do not optimally employ their land and capital. Naturally, the lower-cost developing economies lose some of their comparative advantage in agricultural production due to the existence of the subsidies. However, the existence of the distortions does not justify the imposition of tariff protection and higher food costs on low-income local consumers.
Eustace Davie, Director, FMF.
FMF Policy Bulletin\12 March 2002
