Monday, June 11, 2018

Backstabbing Over Cows

What is it with cows?  I mean their flatulence does add to global warming, but they seem so benign, chewing their cud while producing milk and meat.  Why is it that national leaders get into fits of backstabbing over them, or especially over all that milk they produce?

Well, of course, that is it; they produce a lot of it, and a variety of products come from the milk, which sometimes markets do  not want as much of as some of the other products. This is probably the main reason that in international trade agreements, where highly protected and subsidized agriculture is always a difficult topic, dairy products are often at the top of the list.  For years, the predecessor of the EU, the EEC had "butter mountains" from all the excess butter governments bought to stabilize the market and keep the Danes and the  French from stabbing each other in the back too viciously.  The US also  had a butter mountain problem for a long time, much of it stored in Madison, Wisconsin where it caught fire back in 1991 and burned for 8 days.  Yes, we must protect those Wisconsin Dairy State cows as Trum is struggling to dop!

Back in 1972, when I was a grad student at U of Wisconsin, then Wisconsin Senator William Proxmire thought briefly of running for president (he didn't in the end) and showed up at the econ department one time to give a speech.  For those who do not know, he was very popular and although a Dem had a bipartisan appeal.  A major part of this was a reputation he had for being very clean and not taking money from special interests.  He had an image of saving taxpayers money as he handed out "golden fleece" awards to people or entities he determined were wasting public funds.  So, of course, in his speech "The Prox" went on and on about all his money saving efforts.  At the end one prof asked him, "Senator Proxmire, if you are so much for efficiency and saving money, why do you support dairy import quotas?"  To this The Prox just smiled and said, "Well, after all, I am the senior senator from the state of Wisconsin."

As it has been in Europe, so between the US and Canada since NAFTA a handful of commodities have off and on been the center of trade disputes, with restrictions holding on both sides.  Lumber and dairy have probably been at the top of the list, althought technically dairy is outside of the NAFTA.  As it is, both sides have heavily subsidized and protected dairy in various ways.  Nevertheless, based on rising exports of ultrafiltered milk that can be used to make yogurt and cheese from the US to  Canada, the US has managed to build up a $400 million annual surplus in dairy products trade.  Last year the Canadians reacted to that and engaged in a reclassification of that type of milk and made changes in their internal pricing, which has led to a decline of exports of this product from both New York, home of Senate Dem leader Schumer, and from Wisconsin, home of House Speaker Ryan.  Ah ha, even thought the US dairy trade surplus remains substantial, this is clearly a stab in the back!

So now Canada is the worst enemy of the US and its leader deserves to go to hell, although the now heart-attack-stricken Lawrence Kudlow suggested that perhaps Trump engaged in his tough rhetoric and refusal to sign the G-7 communique after he left to show Kim Jong-In he is a tough guy, able to beat up on the oh so polite Trudeau who refused to buckle while protecting his cows.  Oh, once again those apparently benign beasts have shown us how truly dangerous they are, weapons of mass destruction for sure.

Barkley Rosser

6 comments:

ProGrowthLiberal said...

"the US has managed to build up a $00 million annual surplus in dairy products trade."

An interesting line that I suspect needs a wee edit.

rosserjb@jmu.edu said...

Oh, thanks for catching that, pgl. The number should be $400 million. Will fix.

rosserjb@jmu.edu said...

pgl,

Just saw on Econbrowser you citing numbers showing a lower surplus, although your numbers there include eggs, which I do not know how they are hatching in all this. In any case, my figure is a few years ago, and supposedly it has gone down, but still pretty positive. Trump just does not have a leg to stand on, going after the Canadians so ferociously on the trade issue, even if they have recently been kind of naughty regarding cows.

Peter T said...

Agriculture is one of those areas where simple supply and demand models break down. There are large externalities (environmental, labour, sustainability, human demographic), start-up/wind-down are outside the usual time horizons of markets and power imbalances are rife. Dairy happens to be one area where all these are really visible in the short term, which is why almost all sensible countries have supply management, subsidy or other arrangements in place. Else they get stuck with external costs and wild swings from oversupply to shortage.

Peter Dorman said...

Historically, cows are much more benign than sheep, despite the latter's warm and fuzzy reputation. A saying about the first enclosure in Scotland: "Once people ate the sheep, now sheep eat the people."

Thornton Hall said...

The Prox’s answer was perfect. The problems of today stem from the ideology frame used by the media, and much of academia, to misunderstand politics.

An example: Rand Paul gets called “principled” in this frame. In reality he is both crazy and stupid.