Points of View
Subsidies
There was much talk and speculation on subsidies in the run up to, and subsequent collapse, of September's trade talks in Cancun. What once was a "brilliant idea" that brought European food production back in line after the second world war, has now become an "institutionalised nightmare" and constant sticking point between governments of developed and developing countries. The prospect of talks in Cancun brought hope to some, while others remained pessimistic. Would the EU and US back down from their aggressive protection of the much-criticised subsidies they pay their farmers, to allow those in the developing countries to develop industries where they have comparative advantage? Or is the truth of the matter that farmers in the 'north' are not efficient enough to manage without government handouts? A recent report published by the International Food Policy Research Institute puts an economic cost on subsidies - calculating how much poor countries are losing because of resistance to change. The figures are staggering*. So, why are subsidies such a contentious issue? What is stopping the EU and US from making concessions? In Points of View, people in the know tell the story of subsidies...
In the beginning there were subsidies...
"Giving subsidies to farmers was a brilliant idea that transformed
the food shortages after the second world war into a surplus. But it has
grown into an institutionalised nightmare preventing developing countries
from fulfilling their potential in one of the few areas where they enjoy
a natural advantage - agriculture."
From 'Third world farmers need a fair deal' in The Guardian,
18/08/03
"The average European cow attracts more subsidy that the average
African farmer earns, which obviously makes it difficult for beef farmers
in Botswana to compete with beef farmers in Europe. [European] farmers
are also the main obstacle to progress in the Doha round of world trade
negotiations, whose success is vital to help poor countries trade their
way out of poverty."
The Economist, 05/07/03
"In 2002, direct support to farmers by countries belonging to the
Organisation for Economic Co-operation and Development (OECD) added
up to around US$235 billion - three-quarters of the total OECD support
estimate of US$318 billion. Subsidies by this group of countries account
for over 90 per cent of trade-distorting domestic support and export subsidies
reported to the WTO."
FAO, 2003, From 'Subsidies,
food imports and tariffs. Key issues for developing countries'
Winners and losers
"Protectionism and subsidies by industrialised nations cost developing
countries about US$24bn annually in lost agricultural and agro-industrial
income. Latin America and the Caribbean lose about US$8.3bn in annual
income from agriculture, Asia loses some US$6.6bn, and sub-Saharan Africa,
close to US$2bn."
International Food Policy Research Institute, 2003 in a press release
for 'How
Much Does it Hurt? Measuring the Impact of Agricultural Trade Policies
on Developing Nations'
"Subsidies to farmers in the developed world have negative ramifications
for agriculture in the developing world. By enabling farmers and agro-companies
to sell on the international market at prices far below production value,
they leave growers in the developing world unable to compete. They also
encourage excess supply, which further lowers world agricultural prices
- reducing the money that poor farmers make, or pushing them out
of the business entirely."
FAO, 2003, From 'Subsidies,
food imports and tariffs. Key issues for developing countries'
"US cotton subsidies graphically illustrate how world trade rules
are rigged against poor countries. They also cast into sharp relief some
of the double standards and hypocrisy in world agricultural trade negotiations.
The US may be a world leader in espousing the virtues of open markets
and level playing fields at the WTO. But it is also a world leader in
the provision of subsidies for cotton farmers."
Kevin Watkins, Oxfam, Speech at WTO Public Symposium 'Challenges
ahead on the road to Cancun', 16-18 June, 2003
"Small-scale farmers in developing countries have a hard time competing
against subsidised products that are dumped on their local markets. One
more kilogram of subsidised sugar in the European Union could very well
mean one less kilogram produced in Kenya or Guatemala. Another bale of
subsidised cotton in the United States may mean less production in Mali.
Or another ton of subsidised rice in Japan can have the same displacement
effect in Vietnam."
Eugenio Diaz-Bonilla, International Food Policy Research Institute
senior research fellow
Quoted in IFPRI's press release for 'How
Much Does it Hurt? Measuring the Impact of Agricultural Trade Policies
on Developing Nations'
"Their [the EU's] system of supporting their farmers with
$300bn per year is a scandal. Farm subsidies leading to dumping of cheap
goods on Third World markets, destroying the livelihoods of poor farmers."
Patrick Nicholson, Catholic Agency for Overseas Development (CAFOD)
in an article for BBC News Online, Viewpoint:
Blame game over WTO failure
"Far from operating on a 'level playing field', small
farmers in Chiapas and elsewhere in Mexico are at the wrong end of a steeply
sloping playing field which runs downhill from the US Mid-West. They are
competing not against US farmers, but against US taxpayers and the world's
most powerful treasury. It is difficult to think of a starker illustration
of unfair trade in practice."
From Oxfam briefing paper 50, Dumping
without borders: How US agricultural policies are destroying the livelihoods
of Mexican corn farmers
Making economic sense (or no sense?)
"It is economic and social madness for Europe to be growing, for
instance, subsidised sugar beet when its average cost of production is
more than double that of efficient exporters such as Brazil and Zambia.
It is only possible thanks to ludicrous subsidies, including protective
tariffs of up to 140 per cent."
From 'Third world farmers need a fair deal' in The Guardian,
18/08/03
"I see the level of food subsidies primarily in the EU and the
USA as a very substantial barrier to dealing with the poverty issue in
developing countries. It is substantially hindering these [developing]
countries in areas where they could be competitive. It's the USA
and EU that must lead the way [in reducing subsidies] because that is
where the majority of subsidies are."
Bjorn Stigson, president of the World Business Council for Sustainable
Development, speaking to New Agriculturist at the ITDG 'Is small
beautiful' conference
"Cotton is our ticket into the world market... This vital
economic sector in our countries is seriously threatened by agricultural
subsidies granted by rich countries to their cotton producers. Such subsidies
lead to world-wide overproduction and distort cotton prices, depriving
African countries of their only comparative advantage in international
trade."
Amadoe Toumani Toure, president of Mali, and Blaise Compaore, president
of Burkina Faso, in The Guardian 'Trade' supplement 08/09/03
Subsidies for survival
"Japan's cattle farmers are usually portrayed in the outside
world as even more pampered than the country's cows, which are famously
reared on a stress-free diet of cool beer, imported feed, soothing music
and daily massages. Protected by tariffs, fattened by hefty subsidies
and catering to gourmet consumers in the second biggest economy in the
world, their business environment has been a source of envy and resentment
among foreign competitors for several decades. But after 10 years of economic
stagnation, increased imports and food scares such as BSE, Japan's
farmers say that image is long out of date. Without subsidies, they say,
they cannot survive."
Jonathon Watts, Charlotte Denny and Larry Elliot in The Guardian 'Trade'
supplement 08/09/03
"It is true to say that one needs subsidy if you've got a
life style choice in favour of your farmers. It is terrible to see in
the farmers of Britain this gradual decline and ruination of a lifestyle
which has been very close to the culture of the British people."
Craddock Williams, Economics Director for Tricontinental Development
Consultants, based in Kampala, Uganda, speaking to New Agriculturist at
the ITDG 'Is small beautiful?' conference in September
"I do not know of a single farmer who would not rather have received
their income from the marketplace than in a government cheque. But the
international marketplace is not a free market place. It is one where
all countries, including our own, mess around."
American cotton grower Billy Tiller, quoted in 'Field of Dreams'
in The Guardian 'Trade' supplement 08/09/03
Time for change?
"Rich countries can't preach free trade abroad and have
protectionism at home. There is a danger of locking developing countries
into poverty because we lock them out of our markets."
Patricia Hewitt MP, Britain's trade secretary quoted in 'EU
farm chief slams poor nations' demands' in The Guardian 05/09/03
"While the wealthy nations need to make the biggest changes, developing
countries have to take a look at their own policies, as well. Developing
countries need to reduce their protectionist measures on agriculture,
as these policies increase the cost of food for poor consumers."
David Orden, IFPRI senior research fellow in a press release for
'How
Much Does it Hurt? Measuring the Impact of Agricultural Trade Policies
on Developing Nations'
"We have found conclusive evidence through our analysis that international
trade policies have indeed led the way for the global downward spiral
of farm prices and farm income. But simply ending those policies would
destroy the U.S. farm and rural economy, and would perpetuate, not alleviate,
the problems facing farmers in developing countries."
Daryll Ray, director of the University of Tennessee's Agricultural
Policy Analysis Centre, in a presentation launching the report: Rethinking
US Agricultural Policy: Changing Course to Secure Farmer Livelihoods
"Any setback in the Doha Round, which was launched in 2001, to
reduce import barriers and farm aid, will leave them [African countries]
in an even weaker position than at present. Big economic powers such as
the EU, America and China are likely to turn instead to regional and bilateral
free trade agreements... In such dealing outside the framework of
the WTO, poor, weak nations have next to no say."
The Daily Telegraph, 16/09/03
"If I look at the recent extreme proposal co-sponsored by Brazil,
China, India and others, I cannot help [getting] the impression that they
are circling a different orbit. If they want to do business, they should
come back to mother earth. If they choose to continue their space odyssey
they will not get to the stars, they will not get to the moon, they will
end up with empty hands."
Franz Fischler, EU agriculture commissioner quoted in 'EU farm
chief slams poor nations' demands' in The Guardian 05/09/03
"From the setback at Cancun, Europe must accept that investment
and competition will now take a back seat, and instead work towards delivering
the reforms to the common agricultural policy, which were agreed at EU
level in June. These reforms will mean substantial cuts in the trade-distorting
support and export subsidies we give our own farmers. That will benefit
farmers the world over. The EU has also offered in principle to phase
out export subsidies on products of particular interest to developing
countries. Those reforms will not falter on the breakdown at Cancun."
Patricia Hewitt MP, Britain's trade secretary in The
Guardian 23/09/03
The after life
"The abolition of subsidies would boost rich nations by releasing
$300 billion a year currently squandered on subsidies for other things.
More importantly it would give an unprecedented boost to developing nations
who would be able to grow more crops like sugar, cereals and cotton where
they have a natural advantage if only they were not being undercut, even
in their domestic markets by heavily subsidised exports from the West."
Kick all Agricultural Subsidies
(a campaign launched by the Guardian newspaper in the UK)
"If trade-distorting policies were eliminated world-wide, the value
of sub-Saharan imports would rise, but almost 70 per cent of that increase
would come from liberalisation in the European Union."
International Food Policy Research Institute, 2003, in a press release
for 'How
Much Does it Hurt? Measuring the Impact of Agricultural Trade Policies
on Developing Nations'
"If the Common Agricultural Policy (CAP) were to be abolished today,
as some commentators suggest, the poorest countries would enjoy very little,
if any, benefit. Countries like Brazil and Australia, as well as the transnational
food companies, can be expected to reap the lion's share of any
new market opportunities that might arise. It [is] vital that appropriate
policies are in place to ensure the gains from trade stay with the farmers
in developing countries and are not captured by third parties."
Sir Ben Gill, President of the UK's National Farmers Union in
a statement
to the press 02/09/03
