Sunday, June 26, 2011

Bob Katter's Nirvana

An excellent Op-Ed by Steven Rattner in the NY Times on the implications of ethanol subsidies as a public policy. In the US this means corn. Rattner outlines the damage caused by politics to promote ethanol and corn through Guvmint subsidies. (HT Greg Mankiw)

"FEELING the need for an example of government policy run amok? Look no further than the box of cornflakes on your kitchen shelf. In its myriad corn-related interventions, Washington has managed simultaneously to help drive up food prices and add tens of billions of dollars to the deficit, while arguably increasing energy use and harming the environment."

The gargantuan US Farm Bill provides all sorts of support subsidies including for not growing things: "corn growers receive “direct payments” — $1.75 billion in 2010 — whether they grow corn or not." Those with a literary inclination may recall the passage from Joseph Heller's Catch 22 where Major-Major's father was paid for not growing alfalfa and became an expert consulted by other farmers on how to profitably not grow alfalfa. Catch 22 was published in 1955 so not much has changed really.

It seems however from Rattner's Op-Ed that rising food prices and the US budget predicament may finally be drawing some critical attention to such subsidies. The US Farm Bill is also a mutually competitive reponse with the EU Common Agricultural Policy (CAP) which takes up 42% of the EU budget.

The French in particular have vigorously opposed any attempt to include agriculture in global trade reform. The advocates for such reform have been led by our very own eponymously named Cairns Group of agricultural exporting nations.

The Productivity Commission has just released their latest Trade and Assistance Review of all Guvmint industry assistance in Australia including agriculture.

Update: The first-ever official meeting of Ministers of Agriculture from G20 countries is being held in Paris on June 22-23

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