Export Subsidies

“U.S. Move to Subsidize Dairy Exports to Asia Angers Australia” (Feb. 2) was welcome. While Australia takes the high moral ground in opposing export subsidies in general, our frustration comes largely from the application of subsidies where they are unwarranted, that is, where there is little European competition, or cause unnecessary market disruption. Both conditions apply in this case.

We don’t have any difficulty with U.S. competition in the region’s growing markets for dairy products. It is a natural market for West Coast dairy producers. However, Canberra and the Australian industry are annoyed by deep subsidies that make it harder for internationally competitive industries such as those in Australia, New Zealand and California to compete in the long term.

The current subsidies push prices at least $100 per ton for nonfat milk powder, the major commodity product in the market, below what is necessary. The irony is, the $100 benefit goes largely to one or other of the European traders who control the market either through ownership of brands in the market or as suppliers to local packers. I suppose the above is made intelligible by Washington’s announcement that they are offering subsidized wheat to Beijing at a time they stand on the edge of a trade war over intellectual property. None of the accepted norms of rational economic behavior apply to exports when farmers are involved.

ROB O’DONOVAN

Australian Consulate-General

Los Angeles