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Following New Zealand's Lead

Less than two months ago, President Bush signed a new farm subsidy bill that will cost over $190 billion over the next 10 years. This would seem to be the final nail in the coffin of the efforts begun in 1996 to gradually wean US farmers off subsidies.

Except for purely short-term political reasons, I'm at a loss to understand why Bush signed this bill. I consider myself neither Republican nor Democrat. Nevertheless, when Bush was elected, I thought that no matter what, at least he would impose fiscal discipline and promote free trade. In fact, he has done the exact opposite on multiple occasions -- and managed to spend recklessly and threaten the cause of free trade all at once by signing this bill.

Meanwhile, in the wake of this awful legislation, more and more commentators have noticed the New Zealand model. In 1984, New Zealand's government ended all farm subsidies, with a phase-out period of only one year. What happened next?

Forced to adjust to new economic realities, New Zealand farmers cut costs, diversified their land use, sought non-farm income opportunities and altered production as market signals advised -- for example, by reducing sheep numbers and boosting cattle ranching. Farmers were aided on the cost side as input prices fell, because suppliers could no longer count on subsidies to inflate demand. The striving for greater efficiency also supported environmental protection as marginal land farmed only to collect subsidies was replaced with native bush, and overuse of fertilizers ended when fertilizer subsidies were removed. The Federated Farmers of New Zealand believe their country's experience "thoroughly debunked the myth that the farming sector cannot prosper without government subsidies."
The result of all this was that the value of New Zealand's farm output has risen 40 percent in constant dollars since the 1980s. New Zealand's average increase in farm productivity per year has risen from one percent before reform to six percent since.

While the US radically increases farm subsidies -- and while Europe debates extending its massive Common Agricultural Policy (CAP) to new European Union applicants -- New Zealand motors along, spending nothing on subsidies and enjoying more efficient farming as a result. In a report on French shepherds broadcast on NPR's All Things Considered (available only as RealAudio), commentator Nancy Coons recounted the following comment made by a French shepherd on a sheep drive:

"We must all [drive sheep across southern France] every year, for no other reason than to say, 'We're here. If you continue to buy the lambs shipped in from New Zealand, we won't be here any longer.'"
The irony of this is palpable. Billions of dollars in farm subsidies, and still French shepherds are increasingly unable to keep pace with competitors halfway around the world -- not low-cost Third World producers, nor massively subsidized farmers, but highly efficient, unsubsidized, First World competitors.

For more on this issue, see the Cato Institute's excellent Washington Post editorial here.

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