Published on Tuesday, September 23, 2003 by the St Paul Pioneer Press (Minnesota)
Farm Subsidies Rightly Inspire Third World Trade Revolt
by Brian Halweil
In the real world, an ear of corn isn't always just an ear of corn. Food is wrapped up in culture, ethnic pride, cuisine and national security.
Everyone present at the global trade negotiations in Cancun, Mexico, earlier this month understood this — though delegates from the United States, Europe and Japan pretended not to. As a result, a block of participants from Africa, Asia and Latin America walked out and the talks disintegrated.
Suddenly, the flotilla of farmers, environmentalists, consumer advocates and workers protesting outside the fenced-off convention center shared a common enemy with the Third World delegates inside who were arguing that global rules on agricultural trade were crippling their impoverished farm economies.
In the aftermath, trade experts warned that the world may lack the stomach for further market-opening measures and that the global economic slowdown would continue. But the collapse in Cancun should spur some creative thinking.
Current trade agreements prevent developing nations from favoring their own farmers and homegrown produce. Worse, the same agreements allow First World governments to subsidize their own farmers — to the tune of $300 billion a year.
These subsidies allow wealthy nations to sell farm commodities on world markets at well below the cost of production. (In a nutshell, if it costs a farmer $3 to grow a bushel of corn, but the market is paying $2 a bushel, the government pays the farmer an extra buck, allowing the farmer to sell the crop for less than he otherwise could.) This is called dumping, and it's flatly illegal under international trade rules.
Both the United States and the European Union are notorious for dumping agricultural products.
Mexico provides a stark example. The country that hosted the Cancun talks also provided a large portion of the protesters: its own displaced farmers. Under the North American Free Trade Agreement and other trade rules, Mexico has been encouraged, even forced, to rely increasingly on cheap U.S. corn.
How could that be? Mexico's lower labor and living costs should give local growers a competitive edge. But Uncle Sam has his thumb on the scales in the form of $10 billion in annual subsidies that enable American corn growers to sell corn at $2.20 per bushel — about 25 percent below production costs.
The result: Mexico now imports more than a quarter of its corn from the United States. That represents a nearly four-fold surge since NAFTA took effect nine years ago. Over the same period, inflation-adjusted prices for Mexican corn have plummeted by more than 70 percent, prompting millions of local growers to abandon their farms and seek work in nearby cities or the United States.
Thus, when Third World representatives at Cancun demanded that wealthy nations eliminate their agricultural subsidies, it wasn't simply to gain access to the world's most affluent markets, where food imports now look artificially expensive. They wanted to give farmers in Africa, Asia and Latin America a fighting chance in their own domestic markets.
Why does this argument seem so unpalatable? The United States and Europe developed their farm subsidies half a century ago to provide a safety net for their farmers. But the subsidies have had the perverse effect of favoring the largest producers and helping to drive smaller farmers out of business in both the United States and Europe. These subsidies also deny poorer nations the kind of farmer-led growth and food security that was considered so critical to recovery in post-war America and Europe.
This is not to argue that every locale should produce all of its food. Food trade is natural and beneficial. But nations that increase their self-reliance can buffer themselves against the whims of foreign markets, while creating local jobs and income.
The persistence of the subsidies testifies to the awesome influence of the interest groups that clearly benefit: the largest farmers and international food processors and brokers such as Archer Daniels Midland and Cargill. Yet subsidies need not stick in our craw forever. Creative governments can restructure their farm-support programs to reduce the burden on taxpayers and improve the environmental performance of farms, without crippling producers in undeveloped nations.
A few innovative nations in Europe already are shifting subsidies away from paying farmers to produce specific commodities toward rewarding farmers for meeting ecological goals: rotating crops, reducing pesticide use and creating on-farm refuges for wildlife. This shift spreads farm payments more equitably and boosts struggling rural economies without distorting international markets. And taxpayers — who now provide half of farm income in wealthy nations — should be happy to know that their money isn't going to fatten agribusiness.
Still, these measures are minor and slow to arrive, even in Europe. And they are all but absent in the United States. (Early drafts of last year's farm bill included some new "conservation payments," but Congress chopped most of them out of the final draft and hasn't funded all the ones that remain.)
Global trade in food isn't going to vanish if Third World countries become more self-sufficient. Since 1961, the value of food shipped between countries has tripled, while the tonnage has grown four-fold.
As long as wealthy nations remain mired in the Dark Ages of farm policy, however, international trade talks are bound to stall, and the world will never share the benefits that greater trade is supposed to bring.
Brian Halweil is a senior researcher for food policy at the Worldwatch Institute.
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