Reforming EU Farm Policy: Lessons from New Zealand

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New Zealand is one of the few countries which has embarked on free trade for agriculture.New Zealand farmers were heavily protected by price supports and other measures in the 1970s and early 1980s but protection was greatly reduced in the economic reforms of the mid-1980s. Experience in New Zealand shows that '... agricultural markets do adjust by themselves and that farmers do not bear all the costs of reforms.' Farmers' incomes dropped after the reforms were introduced but farmers then adapted to their new ...
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Overview

New Zealand is one of the few countries which has embarked on free trade for agriculture.New Zealand farmers were heavily protected by price supports and other measures in the 1970s and early 1980s but protection was greatly reduced in the economic reforms of the mid-1980s. Experience in New Zealand shows that '... agricultural markets do adjust by themselves and that farmers do not bear all the costs of reforms.' Farmers' incomes dropped after the reforms were introduced but farmers then adapted to their new environment. Adjustment in product and factor markets took about six years. Farm land prices fell after the reforms but have now returned to '... a normal relationship with product earnings.' New Zealand would like to see similar reforms in countries whose subsidised output competes with its own. It is also concerned about the growth of 'environmental' obstacles to trade. The Common Agricultural Policy is '... damaging to the interests of consumers and taxpayers in the EU' and burdensome to farmers outside the European Union. European Union farm protection has been increasing. The 'nominal tariff equivalent' in the European Union is now 82 percent, compared to one percent in New Zealand. The CAP costs a family of four about £1000 per year. The CAP has encouraged higher output and environmental damage. But farmers' incomes have fallen sharply in recent years. Although past European Union reform efforts have been ineffective, a '... free market agriculture would be perfectly feasible ...'. The New Zealand example should be emulated. This Occasional Paper uses the reforms of agriculture in New Zealand to offer pointers to the reform of the Common Agricultural Policy. New Zealand's agricultural reforms have been some of the most radical and successful anywhere, and suggest a way out of the cycle of waste, inefficiency and corruption that characterize agriculture in Europe.
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Product Details

  • ISBN-13: 9780255364843
  • Publisher: Institute of Economic Affairs
  • Publication date: 1/1/2001
  • Series: Occasional Papers
  • Pages: 84

Table of Contents

Foreword 5
The Authors 9
New Zealand's Agricultural Reforms and their International Implications 11
1 Introduction 11
2 New Zealand's Agricultural Economy 12
3 Agriculture in the New Zealand Economy Before the Reforms of the 1980s 15
4 Economic Reform 1984-97 22
5 Wider Implications for Agricultural Policy in Trading Nations 41
6 Conclusions 54
References 56
Commentary: Lessons for EU Farm Policy 61
Background 61
CAP Objectives and Mechanisms 62
Economic Consequences 64
Incapable of Fundamental Reform 71
Reasons for Failure of the CAP 76
Feasibility and Likelihood of a Free-market Agriculture 78
References 83
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