Twenty-nine countries protest reintroduction of US Dairy Export Subsidies

Twenty-nine countries at the World Trade Organization criticized the United States on Wednesday for reintroducing export subsidies on US dairy products, calling the handouts a dangerous retreat into protectionism and warning of “subsidy wars."

Brazil, speaking on behalf of 23 developing countries, told a WTO meeting that Washington was promoting a "murky protectionism" that weakens the global trading system at a time when global commerce is already shrinking at a record pace.

Australia, on behalf of agricultural exporting countries, said the announcement Saturday by US Agriculture Secretary Tom Vilsack of subsidies for 91.000 tonnes of mainly powdered milk, butter and cheese was unfair to countries trading fairly, and potentially damaging to global economy's recovery.

The subsidy decision under the US Dairy Export Incentive Program follows a similar move by the European Union in January.

[Source] -- MercoPress

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I would like to take a moment to reflect on a old post I wrote a little under a year ago, on June 19, 2008. It is one third about Southern Copper Peru (PCU), one third about sky rocketing commodity prices, and one third about a intense protest I witnessed in Tarapoto, Peru in 2002. I was in Tarapoto during a family trip to the region to visit my maternal grandfathers home town of Rioja. I may be a bit biased but the province of San Martín is a beautiful region of Peru I highly recommend people visiting Peru check out.

I'm going to reflect specifically on the third topic—the protest. If would like you can click here to read my entire post from 6/19/2008.

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In 2002 I was visiting Tarapoto, Peru. The city is located in the Peruvian province of San Martin, Peru. Rice workers had paralyzed the region because US subsidies had made locally produced rice more expensive than imported rice from the US--which ironically was also widely available in this region of Peru which a large amount of rice.

Tarapoto, Peru

By my fourth day in the city protesters had taken over the town square and blocked the roads to my grandpas home town of Rioja. As a tourist who was fortunate to have family in the city I was able to to get back to Lima before the city was forced to shut down. My family and I were woken up at 6am one morning and quickly informed by my grandpa's brothers we needed rush through the back roads of the jungle and get to the airport as soon as possible. Once we arrived at the airport we were rushing into a back office with other tourists holding US, Canadian and European passports, until a flight could take us all to Lima... all the while protesters attempted to rush the airport gates.

It is ironic food prices are now so high, Tarapoto's Rice industry is now growing rice and actually making a profit, although US subsidies still aren't help the overall market. The fact and main point I am attempting to get across is that all it took for protesters to paralyze the region was to create a blockade one highway--leaving the city isolated.

Click here to view a excerpt from the only link to an English language article I was able to find that still had an active link.

If you can read Spanish, I have found two articles. The first article describes how the situation unfolded. The second article explains the accord which was eventually reached by the protesters and the government.

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Benito's conclusion... The United States needs to re-think their protectionist policies, especially when it comes to such goods as cotton, food and other agricultural commodities. Easier said than done, but no less a necessary change that needs to happen sooner than later.

Newswire -- Testing out mobile posting (Go blackberry)

"Argentina’s 2008/09 crop exports forecasted to drop 56%"

Argentina’s cereals and oil seeds exports are forecasted to drop to 13.8 billion US dollars in this 2008/09 crop which means 56% less compared to the 31.9 billion of the 2007/08 crop according to a paper from the Argentine Agrarian Federation, FAA.

Mercopress


"China and India post manufacturing gains"

Surveys of industry executives registered positive results for the first time in months in April, offering evidence the global economy may be through the worst of its sharpest slump in six decades.

FT - Asia Pacific


"China becomes main destination of Brazilian exports ahead of US"

China has become the main purchaser of Brazilian exports during the first quarter of this year displacing United States which held the position undisputed for decades, according to reports in the Sao Paulo press based on the latest statistics.

MercoPress


"China denies anti-Mexican discrimination"

Foreign ministry insists confinement of scores of Mexican nationals over fears of the H1N1 flu are correct procedure, not bigotry.

FT - Americas


"Japan in $100bn aid offer to neighbours"

Japan offered $100bn yesterday in financial help to Asian states hit by the financial crisis in a move aimed at shoring up its regional economic leadership, despite...

FT - Asia Pacific

FDI into China declines for the 6th month straight

Not good news on the heels of already mixed messages emerging from the stimulus passed a few months back.

Even if China's stimulus can get the domestic economy going, it alone will not be enough to bring it out of recession... no less help the global economy economy get back on its feet as many hope.


According to this Bloomberg article:

FDI has dropped 9.5% to $8.4 billion from a year earlier.

Month wise, February FDI dropped 15.8% in February.

Consumer spending fell 20.6% percent to $21.8 billion.


“Foreign direct investment will continue to drop in the coming months as multinationals face a continued credit crunch and a deeper world recession,” said Lu Zhengwei, a Shanghai- based economists at Industrial Bank Co. “Investors will remain cautious until the world economy and consumer demand recover.”

China’s government said last month it will simplify approvals for overseas capital entering the nation by giving local governments more authority to approve such spending.


In response the Chinese government is planning:

To continue providing liquidity to ensure loan growth in order to keep demand flowing (click here to read more about China's surging loans)

Rural-sales programs through the provision of billion yuan ($2.9 billion) in subsidies for rural consumers buying electronics, home appliances, cell phones and other commodities. The government hopes this will allow the economy to tap into a very unexploited consumer market, numbering hundreds of millions of people.

If China could get the rural economy going it would be a great move for macro economy in the long term. When I was studying rural economics a continuous theme presented by the government was their hope the rural areas of China would develop in response to migrants sending money home and bringing a sophisticated mentality back when they visit or move home.

China is also counting on its rural population of 350-600 million to enter the mainstream economy.

Buy goods and services. Pay taxes to build their own new roads and schools. Rent empty apartments. Save their money in Chinese banks. Buy Chinese stocks. Basically to help in increasing China's GDP and overall level of development..