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The Truth about Trade

RSS By: Dean Kleckner, AgWeb.com

Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.

How the Butter Tariff Grinch Almost Stole Christmas in Norway

Dec 22, 2011
By Carol Keiser:  Belleair, FL
 
As we celebrate the Christmas holiday, I’m thankful for faith, family, and rich traditions.  And this year, I’m tempted to add the fact that I don’t live in Norway to my list--a country that suddenly has found itself without butter.
 
Over the next few days, butter is not an option for me. At my daughter’s home, we’ll bake sugar cookies with a lot of it. When the cookies come out of the oven, my seven grandchildren will form an assembly line and decorate them with icing, sprinkles and giggles.
 
It’s one of our family’s Christmas traditions.
 
We’re hardly alone. Around the world, millions of others have their own rituals involving Christmas and food – including cookies. Many of them will use good, wholesome butter.
 
But not in Norway, where people find themselves trapped in an awful predicament at precisely the wrong time.
 
During the Cold War, the Soviet Union used to have bread lines. This month, Norway has witnessed the birth of butter lines. According to some reports, desperate Norwegians have paid as much as $500 for a pound of butter.
 
Norway’s butter shortage is an entirely man-made political problem. There’s no sensible reason why Norwegians, who enjoy one of the world’s highest per-capita GDPs, ought to run out of something as basic as butter.
 
The rest of us should learn from Norway’s mistake--and get behind trade policies that will allow us not only to bake delicious cookies at Christmas, but to maintain our food security year round.  Especially when we are talking about the availability of food staples.
 
Norwegians lack butter right now because their government uses tariffs as steep as a fjord’s cliffs to keep people from importing it.
 
In a normal year, high tariffs would lead merely to artificially inflated consumer prices. This summer, however, it rained a lot in Norway, hurting the quality of animal feed and leading to poor production on dairy farms. Meanwhile, many Norwegians are choosing low-carb, fat-rich diets. So Norway’s demand for butter is high, but right now its supply is low.
 
The current shortfalls are the result. They’re expected to last into next month.
 
The rational solution would be to buy butter from foreign producers. This is what many ordinary consumers have done; turning to supermarkets in Sweden, where butter is plentiful and grocers love the extra business. There are even reports of butter smuggling: A Russian man was arrested as he tried to sneak 200 pounds of butter into Norway.
 
The United States has the DEA, also known as the Drug Enforcement Agency. Does Norway need a BEA?
 
In fairness, it must be said that Norway’s conundrum isn’t a case of ordinary protectionism. Norway imposes high tariffs to prop up the Norwegian dairy industry--and not for entirely bad motives, as Matthew Yglesias observes in an article for Slate. Much of the country’s wealth comes from oil, which generates a high-value currency and the possibility that high-octane purchasing power will create a flood of imports that destroys the domestic production of just about everything except North Sea oil drilling.
 
Even so, Oslo seems to understand that its butter tariffs have become a big problem. It has sliced them by 80 percent and promised to keep them at this level at least until March.
 
A nation that takes pride in awarding the Nobel Prize in Economic Sciences each year probably should realize that meddling in markets invites serious risks. Protectionism of any sort always comes with a steep price.
 
Norway’s population is less than 5 million. Maryland and Minnesota have more people. A country so small can’t produce everything it needs and also maintain a high standard of living. This is especially true when the country is cold, limiting its agricultural potential.
 
Even if Oslo were to eliminate its butter tariff, the United States probably wouldn’t take over the Norwegian butter market. Denmark is a big dairy producer. It’s closer, too. However, we can all profit from Norway’s butter fiasco by learning the right lesson: High tariffs created shortages and low tariffs create abundance, as we buy and sell goods and services across borders.
 
My wish for you as you gather with family and friends is that the foods important to you and yours are available this holiday season and the New Year.  Food Security is a priceless gift. Lawmakers and other public officials who prefer trade restrictions to free-trade agreements deserve one thing for Christmas this year: coal in their stockings.
 

Carol Keiser owns and operates cattle feeding operations in Kansas, Nebraska and Illinois.  She is a Truth About Trade & Technology board member.   www.truthabouttrade.org 

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