Cullen takes swing at US policy

Finance Minister Michael Cullen has come out swinging against Washington's weak dollar policy and rich nations' agricultural subsidies.

Speaking at the joint International Monetary Fund/World Bank annual meeting in Dubai, Dr Cullen said weakness in the United States currency threatened to dampen activity in New Zealand's local economy.

"We have somewhat confusing signals out of the US on these [currency] matters ... and where is it going to leave the little small mouse running around the corner, which is the New Zealand dollar," he said.

Although US Treasury Secretary John Snow said the US retained a strong dollar policy, a call on Saturday by the Group of Seven leading industrial nations for greater foreign-exchange flexibility triggered falls in the US unit.

Moreover, Dr Cullen said the US economy was not that responsive to exchange rate movements because it was less-reliant on exports than other nations.

"When you look around and see who is getting clobbered [by the weak US dollar] it's really the Europeans, the Aussies and us."

When later addressing governors and delegates, Dr Cullen said the need for increased aid for developing countries would be reduced by the removal of richer nation's agricultural subsidies.

He said there had been calls for an increase of aid of some US$16 billion ($26.9 billion).

"This is only 4 to 5 per cent of the total spent on agricultural subsidies by the world's richest countries," he said. "As the finance minister of a small developed nation substantially dependent on unsubsidised agricultural exports, I find it hard to argue that my country should greatly increase aid while we, along with the world's developing nations, face unconscionable subsidies, along with tariff and non-tariff barriers to agricultural trade.

"Demolition of these rotten structures will increase the incomes of poorer nations and free up resources in the richer ones to increase aid."

Dr Cullen said the coming year would reveal whether "the fine words we utter at these conferences about trade liberalisation are meant, and will be translated into substantial progress, or whether they are merely the cover for the continuation of distortionary and unfair trade policies, which ironically, reduce total welfare in both the developed and the developing nations".

He said as a proponent of economic, social and environmentally sustainable development, New Zealand's "sense of frustration was mounting".

- NZPA