The sustainability of rural industry is being threatened by government subsidies and export support programs according to AWB Chairman Trevor Flügge.
Speaking last night at the International Grains Council Conference in London, Mr Flügge said that it was naïve to think that government support can effectively protect the agricultural sector from the inevitable effects of globalisation and rationalisation.
“Throwing money at the problem hasn’t worked in the past and it is not about to work now,” said Mr Flügge. “In fact this approach only makes the problem worse by insulating farmers from market realities and creating little or no incentive for them to improve their farming practices and productivity.
“It must be recognised that globalisation has brought significant advantages to our industry. Multilateral trade negotiations and reforms have delivered significant economic benefits in the form of greater market access and increased economic activity. While things are far from perfect in the agricultural sector, WTO agreements have still worked to create a freer and fairer trading environment.”
Mr Flügge said that in an increasingly globalised market, the success of rural industry would depend on its ability to respond to market forces. “Government needs to focus on fostering industry that can adapt to changes in the global market. The current policy structures make rural industries weak and more vulnerable to change.
“The effects of globalisation on the rural sector need to be recognised and addressed. As an industry we have a great deal to gain from the continued reform of international trade and the economic benefits which flow from it,” he said.
According to Mr Flügge, the OECD figures show that government support levels remain at near record high levels. The US Department of Agriculture themselves have stated that US domestic support mechanisms have led to as additional 4 million hectares of grain being planted in the US each year.
“It’s not hard to work out that over production just results in increased stocks and lower prices, which inevitably lead to further government support, and that’s just not sustainable,” Mr Flügge said.
“The advantages of globalisation can clearly outweigh the disadvantages if they are handled effectively from a policy perspective. The current public discontent with globalisation lies not in the process itself, but in how it is being managed. To date, governments’ response to insulate those affected has contributed to the problem rather than being part of the solution. If there is to be government support, it must come in the form of structural adjustment dealing with the social consequences of this – not simply propping up an ailing system.”
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