Reaganomics and the New Zealand agricultural sector

Abstract

The U.S.A. is an important force in world economic activity and agricultural trade. Developments in the United States impact on New Zealand farmers on both the demand and supply side. The net effect of Reaganomics depends to what degree world agricultural demand is stimulated through U.S. macroeconomic policy versus being offset through increased commodity supplies and competition for export markets from specific support for the US agricultural sector. This paper initially reviews Reaganomics and the current macroeconomics and agricultural environment in the United States. It is generally a truism that U.S. policy, as with most governments, is developed with domestic priorities taking precedence. The implications are that while international relationships are very important and there are strong ties between the U.S.A. and New Zealand, it is the political and social pressures within the U.S.A. that predominate in the development of national macroeconomic policy and agricultural legislation. It is later argued that: (i) U.S. agricultural policy and U.S. macroeconomic policy may be of about equal importance in terms of direct implications for New Zealand farmers; (ii) the fundamentals of commodity markets are still the primary factors influencing grower returns and profits for farmers in both New Zealand and the U.S.A.; (iii) less support in real terms is provided under most U.S. agricultural programs than was the case five years ago; (iv) there is the strong possibility that protectionism and predatory export policies may increase in the U.S. and around the world; and (v) the U.S. is heading toward economic recovery.