European Progress

Breathing the Free Air

At this blog, we are all free-traders.  If Johnny Appleseed wants to sell his apples to customers in the Orange Free State, the respective states have no warrant to interfere with the property rights of Johnny nor his customers.  Secondly, free trade has a long history of demonstrating that, whilst economic dislocation might initially occur, in the longer term the population of poorer countries benefit from the opportunity to export to wealthier nations.  Free trade is one of the most effective modes of "foreign aid" ever seen--much more effective than dumping lashings of money upon less developed countries in some top-down, bureaucratic, government driven "we know best" model. Thirdly, free mutual trade is one of the most effective inoculations against the deadly virus of nationalism. 

To this end, we are heartened that finally the European Common Agricultural Policy ("CAP") is having its last rites read.  This from the NZ Herald:

Big changes lie ahead for the international dairy trade when the European Union (EU) dismantles its 30-year-old quota system next year.  Quotas, introduced in 1984 to tackle overproduction, are due to come off next April, which will mean each of the 28 EU member states will be free to produce as much dairy product as they want.

As a result, Fonterra expects EU dairy production to increase by 1.5 to 2 per cent over time, but the co-operative's chief financial officer Lukas Paravicini said it was a welcome move.  "We obviously welcome free trade agreements and free trade in general. Therefore we support the elimination of quotas," said Paravicini, who joined Fonterra last year after 22 years with Nestle.

Please note: the CAP is being dismantled because it has not worked.  It has been successful, however, in wasting a huge amount of tax payers' money, creating a wealthy redundant farmer class who were paid for doing nothing (that is, not producing).  It has also had stellar success in generating inefficient economic dislocations in Europe.

When countries liberalise their economies and remove impediments to citizens trading with the rest of the world a virtuous circle often emerges.  The economies exposed to competitive imports under de-regulation become ardent supporters of moves to encourage other nations to remove their respective restrictions on imports. Moreover, the quality their own decisions about the allocation of scarce capital become vastly improved--leading to greater wealth and economic prosperity at home. 

Agriculture,however, is usually the last sector to be thus deregulated, which is a great shame since the economies of most poorer countries rely upon agricultural production as a critical core of their economies.  The moves by the EU to liberalise and de-regulate the region's agricultural industries will help build momentum to include agriculture in free trade agreements around the world.  Ultimately that will be a boon to poorer nations.  It is one of the most effective modes of international aid.