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Friday, 24 August, 2001, 13:54 GMT 14:54 UK
European farmers look to New Zealand
Sheep in pen
The outbreak of foot and mouth disease renewed questions about subsidies
With criticism mounting of European agricultural subsidies, the BBC's World Business Report's Doreen Walton looks at the New Zealand market, where subsidies were abolished in the 1980s.

Farmers in Europe receive tens of billions of dollars a year in subsidies, a controversial practice which critics argue protects them from market forces, damages the environment and distorts world trade.

The issue is expected to feature at the next round of talks held by the World Trade Organisation (WTO) in Qatar later this year.

New Zealand is one of a handful of countries which have embarked on free trade for agriculture and some say it should be used as a model for changes in Europe.

When price supports were abolished in the 1980s, New Zealand farmers went through a period of painful and rapid adjustment and many of them had to abandon their businesses.

Robbed of independence?

But Alistair Poulson, chairman of Federated Farmers of New Zealand, says the industry is now more competitive and producers are much better off.

"The subsidy systems around the world rob farmers of their independence. They are at the mercy of policy makers and government," he said.

Mr Poulson believes that the average New Zealand farmer's advice would be to "get off the subsidy gravy train as soon as possible".

This view is held even by some of casualties of the policy switch.

John Watt farmed sheep for 30 years until he was forced to move off his farm following the introduction of subsidies.

"There was always going to be casualties," he said.

However, he believes that the removal of subsidies from New Zealand farmers gave them a broader base, and also won them the respect of the world.

Agricultural Economist Dr Robin Johnson was instrumental in planning the changes in New Zealand.

He believes the route chartered by the country is the most sustainable and economically sensible way forward for farmers now living with the Common Agricultural Policy (CAP).

NZ Agriculture and Trade Minister Jim Sutton
Trade minister Jim Sutton: Other countries should follow New Zealand's example
"Subsidies could be phased out in a reasonable way and some of the money saved could be used to encourage farmers to consolidate, try new ventures or seek new ways of making a living," he said.

He believes governments should have a goal towards a less-subsidised system of agriculture.

But some people argue that it is unfeasible to introduce such dramatic change.

Danger for UK farmers

With the tragedies of Foot and Mouth and BSE, or mad cow disease, in Europe, many say that it is time to look hard at agricultural practices and to reform CAP.

Ben Gill, President of Britain's National Farmers Union, said: "If agricultural price support is removed and we were exposed to world markets, you would see the demise of UK agriculture virtually overnight."

Mr Gill is adamant that the bulk of the UK industry could not produce goods at world prices with the costs imposed on them. "Everybody would eventually be poorer," he added.

New Zealand's Trade and Agriculture Minister Jim Sutton understands the doubts.

"It would be difficult, but given time and a clear view of where they want to go, other countries can phase out subsidies," he said.

He stressed the environmental dangers of distorting natural resources with politically-motivated subsidies.

BBC's Doreen Walton
"New Zealand could be used as a model for change"
See also:

30 Apr 01 | Euro-glossary
Common Agricultural Policy
22 Feb 99 | Greening the Cap
A look back at the CAP
17 Jul 01 | UK Politics
End wasteful subsidies - Beckett
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