Wool crisis

The wool crisis was the name given to events primarily in 1990 that drastically affected the economy of both Australia and New Zealand, to the extent where they were forced to slaughter up to 1/3rd of their sheep due to subsidies paid by the US government to Thailand and other allied countries. It was such a serious event that it led to New Zealand breaking out of the ANZUS alliance (Australia, New Zealand and USA), and demanding that all of the US armed forces leave New Zealand. In spite of it forcing both Australia and New Zealand into nationwide economic hardships, indeed into recessions, Australia remained allied with USA, and went so far as to being the first country to join with USA in their 1992 invasion of Iraq, against public opinion. The wool crisis has been used as an example by historians to suggest that USA would not support Australia and New Zealand were they invaded by, for example, Indonesia.

Australia has 170 million sheep, compared to a human population of 22 million people. New Zealand has 90 million sheep, compared to a human population of 3 million people. Australia has more sheep than any other country on earth, while New Zealand, which has the second largest amount of sheep, has more sheep per person. Combined they make up over 90% of the world's wool supplies, having a virtual monopoly of the market. Spain produces most merino wool, but even that makes up a tiny minority of the world market. Wool is in many ways the main aspect of the economy for both Australia and New Zealand.

USA has a variety of different complex economic agreements with countries which they are allied with. In 1990, as a part of their economic agreement with Thailand, they agreed to pay a subsidy on Thai wool sales. While Thai wool was inferior to Australian and New Zealand wool and was sold at a higher price because there was not as much of it, the US government agreed to pay a subsidy, paying a large proportion of the cost of the wool, so that the Thai wool could be sold at a much cheaper price than the Australian and New Zealand wool.

The argument used by the US in this was that in their words the Australian and New Zealand wool suppliers were bullies, with an unfair monopoly of the market that had unfairly raised the price of wool in the world market and had bullied out all competing markets, thus impoverishing Thailand and any other country that tried to sell wool. The US government claimed that they were levelling the playing field.

The end result is that world consumers bought the cheaper Thai wool. Each time that the Australian and New Zealand suppliers tried to lower their prices, the Thai wool was lowered further.

Wool stockpiles were created in both Australia and New Zealand that covered enormous warehouses. Ultimately, they couldn't justify keeping the sheep for wool, so they were slaughtered. An estimated 70 million sheep were killed in Australia and New Zealand because they could not sell their wool. It sent the overall Australian and New Zealand economies into recession, a recession that lasted for over 5 years. It impoverished both nations.

Eventually, the US stopped subsidising the wool, but not due to pressure from Australia and New Zealand. Rather, they stopped because they then declared that Thai wool now had their fair share of the market and could operate independently.

Australia and New Zealand had, since 1950 and before that, been some of the closest allies with USA, through the ANZUS alliance. Any time that USA had any need for military aid, or aid of any kind at all, both nations jumped to help.

New Zealand's government at least felt betrayed by this, and backed out of the alliance, although in the 2000s they partially re-entered a new, albeit lesser, alliance.

Whilst polls in Australia almost unanimously stated that Australia should do the same, the Australian government did not break the alliance, and instead went to war with Iraq for USA, which ultimately was the main thing that justified that war, which they did against public opinion.

Any time now that people say: "Hey USA will help us if we have any problem with Indonesia, or China, or terrorists, or anything else", people point to the wool crisis. It proves, or at least highly suggests, that USA will not help Australia at all, and that the alliance is purely one way.