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War Economy

Subsidised Agriculture and Dumped Surpluses

Subsidised Agriculture and Dumped Surpluses

New Zealand finished the war with an assured market in Britain for her meat and dairy produce. There was no such assurance for wool, but the huge surpluses which had accumulated during the war were disposed of, by 1952, with surprisingly little difficulty.2

The assurance of unrestricted duty-free entry into the British market was not the perfect guarantee it may have seemed.

After the war there was an increasing tendency for industrial countries to subsidise their agriculture. Policies of protectionism, national security and income-support all influenced governments in this direction,3 but, in particular, food shortages in many European countries during World War II were a powerful influence strengthening the desire for self-sufficiency in agriculture. New support programmes emerged; existing programmes were intensified. Consequently, European countries sold agricultural products on their domestic markets at high prices, and the surpluses from subsidised farming tended to be dumped on the British market at much lower prices, seriously impairing the value of this market to New Zealand. Moreover, British agriculture also was being heavily subsidised, pushing up domestic production.

Alternative markets were sought; but the United States, too, was subsidising her agriculture. High retail prices restricted local consumption there, and huge stocks of surplus dairy produce, much of it sold abroad at subsidised prices, tended to restrict the expansion of normal world trade.

The United States did take some care not to cause direct damage to existing commercial markets,4 but a significant indirect effect on them was inevitable.

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In 1958 prices of dairy produce in Britain reached their lowest point since 1946. New Zealand, as an economic producer of dairy produce, was being placed at a serious disadvantage by dumpers of subsidised produce. Searching desperately for new markets for her farm produce, New Zealand felt the need to enter into trade negotiations with other countries. The 20 per cent preference she was giving to many British imports, under the Ottawa agreement, restricted her ability to make reciprocal concessions to other countries which would accept her farm products. In 1959 a revised trade agreement with Britain gave New Zealand greater freedom to vary margins of preference. Actually, very little use has been made of this freedom.

By the end of 1957, most of New Zealand's meat and dairy produce exports to Britain were assured of duty-free and quota-free entry until 1967.1 The 1959 agreement left these arrangements unchanged.

However, in 1961, New Zealand's anxiety about the dumping of European surplus butter on the United Kingdom market led her to agree to a system of quotas, and these have since been maintained with variations according to the stocks and prospective supplies. New Zealand's quota has not been restrictive, but there has on occasions been a feeling that other quotas may have let in rather too much dumped butter, in the interests of keeping the price of butter low on the United Kingdom market.

2 Reference has been made in Chapter 19 to the British agreement to purchase New Zealand's surplus of dairy products and meat until 1948, and to the special arrangements made to dispose of the huge stocks of wool which had accumulated during the war.

3 These three influences are mentioned by P. Lamartine Yates (Food, Land and Manpower in Western Europe, pp. 256–8), but the particular emphasis given in this paragraph is not his.

4 The 1961 Economic White Paper at p. 13, said: ‘However, the practice of prior consultation which the United States observes, and the efforts it makes to avoid harming the trade of third countries, have helped to safeguard normal trade from some of the disruptive effects of surplus disposal operations.’

1 Quota-free entry for meat was assured by an undertaking in 1952, and for dairy produce by an undertaking in 1957.