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How agricultural subsidies in rich countries hurt poor nations 

WOLE AKANDE, Columnist (Nigeria) / YellowTimes.org 19oct02

There is trouble ahead on the farm front, despite assurances made to poor countries by the World Trade Organization's Agreement on Agriculture promising drastic reductions in agricultural subsidies being doled out in the Western countries. Agricultural subsidy is the process whereby governments give large sums of money to agriculture traders and farmers to increase their overall profits; this allows these exporters to drastically reduce the prices of their goods. Earlier this year, President Bush signed into law a new farm bill worth $180 billion that will raise U.S. agricultural subsidies up to 80 percent a year for the next 10 years. 

Behind the 2002 Farm Security and Rural Investment Act is a simple principle: U.S. producers will market crops at very low prices, and then have their incomes topped up by government transfers. For 2002-03, wheat and maize growers will get a 30 percent top-up, rising to almost 50 percent for rice and cotton farmers. The result will be that giant grain traders, such as the Cargill Corporation, will be able to buy commodities from farmers at artificially low prices and farmers will get fat government checks to make up for their losses. 

With agricultural subsidies already accounting for 25 percent of the value of farm output in the United States, the new farm bill will lead to greater American overproduction, further distort agricultural commodity markets around the world and restrict access to the United States market for poor farmers in the developing world. 

While the 2002 farm bill acts as a welfare program for agribusiness, with U.S. taxpayers footing the bill, it also robs the world's poor. Wielding the World Bank, the International Monetary Fund (IMF), and international trade agreements, the U.S. is opening up foreign markets for exports by forcing poor countries to remove government subsidies and lower import tariffs while the U.S. shields itself from foreign competition by increasing its subsidies and maintaining tariffs. 

These measures have allowed the U.S. to dump its farm surplus on world markets. For example, the U.S. exports corn at prices 20 percent below the cost of actual production, and wheat at 46 percent below cost. This has resulted in Mexican corn farmers being put out of business. The dramatic increase in U.S. agricultural subsidies will further jeopardize the livelihoods of those in developing countries. Poor regions, like Africa, depend on agriculture for about a quarter of their total output, most of it coming from low-income families. 

Exporters in Africa will also suffer. According to the World Bank, West African cotton exporters already lose about $250 million a year as a direct result of U.S. subsidies; this figure will rise sharply. In West African countries like Burkina Faso, Mali and Chad, where cotton accounts for more than one-third of export earnings, the losses already represent around three times the savings provided through debt relief. 

This is a classic example of trade policy undermining aid. In the cotton-growing basin of Sikasso, in southeast Mali, where 80 percent live in poverty, the consequences will be devastating. The Texas cotton barons will be cashing in at the bank while desperately poor Africans suffer more. 

Staple food producers in developing countries face particularly bleak prospects as IMF imposed import liberalization exposes them to intensified competition with subsidized imports. For instance, since Mexico's import barriers started tumbling under the North American Free Trade Agreement, U.S. maize imports have tripled. Mexican smallholders have been forced out of local markets, undermining rural economies and fuelling migration. The U.S. department of agriculture is now targeting countries such as Brazil and the Philippines. 

Import liberalization in markets distorted by subsidies can have devastating implications for efforts to combat rural poverty and improve self-reliance. When the IMF bulldozed Haiti into liberalizing its rice markets in the mid-1990s, the country was flooded with cheap U.S. imports. Local production collapsed, along with tens of thousands of rural livelihoods. Self-sufficient a decade ago, Haiti today spends half of its export earnings importing U.S. rice. 

The wider danger is that the U.S. farm bill will undermine local agriculture and foster dependence on imports. This will be particularly damaging in sub-Saharan Africa, where staple food production lags behind population growth and imports have risen 40 percent over the past decade. 

Even the World Bank president, James Wolfensohn, acknowledges "these subsidies are crippling Africa's chance to export its way out of poverty." The developing world faces trade barriers costing them $200 billion per annum - twice as much as they receive in aid. Industrialized nations currently spend about $350 billion a year assisting their farmers, more than the economic output for all of Africa. 

Flipping the script, if developing countries were able to increase their share of world exports by just 5 percent, this would generate $700 billion. The potential for this to translate into poverty reduction for hundreds of millions of people is enormous. Economic modeling by Oxfam indicates that if Africa, East Asia, South Asia and Latin America were each to increase their share of world trade by 1 percent, the resulting gains in income could lift 128 million people out of poverty. 

Not surprisingly, the double standards of the U.S. administration that professes allegiance to market economics and fiscal probity have unleashed a wave of indignation among countries whose development prospects largely depend on farm exports. Agriculture and food are fundamental to the well being of all people, both in terms of access to safe and nutritious food and as foundations of healthy communities, cultures, and environment. All of these have been undermined by dependence on the vagaries of the free market promoted by the World Bank, the International Monetary Fund, and the World Trade Organization. Instead of ensuring the right to food for all, these institutions have created a system that prioritizes export-oriented production and has increased global hunger and poverty while alienating millions from productive assets and resources such as land, water, and seeds. 

For millions in poor countries, the "world market" of agricultural products simply does not exist. What exists is an international trade of grain, cereals, and meat surpluses dumped primarily by the E.U., the U.S., and other members of the Cairns Group. Behind the faces of trade negotiators are powerful transnational corporations such as Cargill and Monsanto, which are the real beneficiaries of domestic subsidies and international trade agreements. Fundamental change to this repressive trade regime is essential. 


[Wole Akande, a former opinion columnist with Ireland's Irish Examiner newspaper, is a freelance journalist. In addition to his work with YellowTimes.org, Wole also maintains http://www.abeokuta.org, a Nigerian community website.] 

Wole Akande encourages your comments: wakande@YellowTimes.org  

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source: http://www.yellowtimes.org/article.php?sid=791 22oct02

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