The Hypocrisy of Farm Subsidies

When Mexican corn farmers tramp through their fields behind donkey-drawn plows, they have one goal: to eke out a living. Increasingly, however, they find themselves saddled with mountains of unsold produce because farmers in Kansas and Nebraska sell their own corn in Mexico at prices well below those of the Mexicans. This is not primarily due to higher efficiency. The Americans’ real advantage comes from huge taxpayer-provided subsidies that allow them to sell overseas at 20 percent below the actual cost of production. In other words, we subsidize our farmers so heavily that they can undersell poor competitors abroad. And just to make sure, we have tariff barriers in place that make it extremely hard for many third world farmers to sell in the United States. The same is true for their efforts to sell in Europe and Japan. The world’s farming system is rigged in favor of the rich.

There is an old saying: Give a man a fish, and you feed him for a day. Teach him how to fish, and you feed him for a lifetime. Mention “agricultural subsidies” or “trade policy” to most people and watch eyes glaze over. But those issues go to the very heart of what is keeping the underdeveloped world underdeveloped. The 50 percent increase in foreign aid that the Bush administration has admirably promised for the next few years pales in comparison with what reduced farm subsidies would mean to help fight world poverty. In the case of the earth’s poorest — some three billion people living on less than $2 a day apiece — we in the West blithely toss them the equivalent of a few fish but consistently fail to let them fish for themselves.

A healthy, export-oriented farm sector, based on the cheap land and labor that many poor countries have in abundance, ought to be the first step on the ladder of economic development. But across Africa, South Asia and Latin America, that path out of poverty has been perversely blocked by the subsidies the United States, Europe, Japan and other rich countries pay their most affluent farmers and agricultural businesses. The developed world pays out more than $300 billion a year in farm subsidies, seven times what it gives in development aid.

These production incentives create oversupplies of crops like sugar and cotton, which are then dumped on world markets, squeezing tropical producers. Subsidies also distort world market prices for vegetables, cut flowers and cereal grains, many of which could otherwise be marketed competitively by third world countries.

The United States is not the worst offender — Europe is. But America runs a close and shameful second. Western leaders regularly and rightly tout the virtues of free trade to the underdeveloped world and energetically press for the dismantling of tariffs on manufactured goods and the removal of barriers to free investment. But in the one area where most developed countries enjoy the advantages of cheaper production costs, the West is unwilling to practice free trade itself.

Earlier this year, Washington enacted a new farm bill that raised agricultural subsidies by up to $180 billion over the next decade. In October, French and German leaders cut a deal extending and increasing the size of Europe’s Common Agricultural Policy, which already costs more than $40 billion per year.

Significant proposals for reform are in the air. Robert Zoellick, the Bush administration’s trade representative, has called for coordinated reductions of American and European subsidy payments, the equivalent of mutual arms reduction. Franz Fischler, the European Union’s agricultural commissioner, has proposed a shift away from payments based on maximum output and toward farm assistance based on environmental preservation goals. These proposals will not go anywhere, however, without stronger support than they have attracted so far from political leaders and the public.

Continuing on the present perverse course will feed social instability and environmental devastation throughout the developing world. It will mean increased illegal migration to fill agricultural and other jobs in richer countries, instead of increased jobs and incomes in the third world. Any serious effort to combat extreme poverty, promote third world development and share the benefits of globalization more fairly must begin with a radical assault on agricultural subsidies. It must begin now.

[Source : The New York Times, December 2, 2002]