US Export Subsidies Decision Was Always Likely
June 26th, 2009
Massey University Agricultural trade policy specialist Professor Allan Rae says the US decision to reintroduce export subsidies on dairy products is disappointing and could prompt the EU to further increase its subsidies. But the US move, prompted by falling dairy prices, was foreshadowed in last year’s Farm Bill, which outlined plans to use dairy export subsidies to the maximum consistent with WTO obligations.
Professor Rae says neither the US nor the EU has found it necessary to subsidise dairy exports in recent years due to very high world prices, which have now fallen markedly. And the US move leaves NZ with little wriggle room. As long as the subsidies in total remain below the levels agreed by the US in the Uruguay Round of the General Agreement on Tariffs and Trade their actions are WTO-consistent.
The main concern for NZ is the European reaction - already militant farmers across western Europe have been protesting in the streets demanding a return of their own subsidies. The task for our Govt is to make sure NZ is not sorely hurt by these latest shots in what could be a damaging tit-for-tat trade war.
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