The US move to re-introduce subsidies to 92,000 tons of dairy exports including milk powder, butter and cheese has been decried by both major dairy producing nations New Zealand and Australia. Prime Minister of New Zealand, John Key stated the US decision would prolong the global recession since during the Great Depression in 1930 several countries took similar protectionist measures that in turn deepened the crisis for long.
The US action comes after the EU re-introduced its export subsidy program in early this year. Many industry observers felt these moves would only trigger more protectionist measures from countries those are affected by this action. Though these declared subsidies are within the WTO limits there would be political pressure within the affected countries to retaliate and prompt them to reverse their decision.
Trade Minister Simon Crean and Agriculture Minister Tony Burke of Australia in a joint statement said that they would try to garner support from other countries to pressurize the US to reverse its decision at the Cairns Group Ministerial meeting in Bali in early next month. The Cairns Group is a coalition of 19 agricultural exporting nations which account for over 25 percent of the global agricultural exports that aims to liberalise trade in the respective sector.
New Zealand Trade Minister Tim Groser said dairy farmers the world over were under pressure, but the US move was a short-sighted response while the international dairy market had recently been showing signs of stabilising. New Zealand is the largest dairy merchandise export earner and second largest meat export earner with nearly 24 and 12 percent share respectively in total goods exported. The price advantage enjoyed by New Zealand dairy products will get diluted in the global market with the re-introduction of US handout to its dairy exports.
Nonetheless, the president of the Australian National Farmers’ Federation (NFF) David Crombie warned the US handout would only shore up domestic jobs in the short-term but undermines the possibilities of faster global economic recovery. Similarly, Fonterra, the world’s largest dairy exporter echoed the sentiments of the NFF, contending that the US decision had the potential to damage a world dairy market which remained fragile.