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Cultivating poverty

The real issue in agriculture is the US, Europe and Japan spending $350 billion each year on agricultural subsidies (seven times as much as global aid of $50 billion by all developed countries). $350 billion each year is a sum greater than all of Africa’s annual economic output.

Millions of poor farmers in developing countries cannot earn a living because of cheap food imports. The practice of dumping – exporting at prices far below the costs of production – has a devastating effect on poor countries and is destroying their domestic markets.

For example, American cotton subsidies are destroying livelihoods in Africa and other developing regions:
– $4 billion each year paid by the US government to cotton farmers
– Between 1997 and 2002, the price of cotton has decreased by 50%
– 10 million African farmers, especially in Burkina Faso, Mali, Benin, Chad, and Togo, are kept in poverty by 125 000 rich subsidized American cotton farmers especially in Texas and California
– African farmers loose $1 billion a year because of by US government subsidies

Over all, according to Oxfam, the American government spends three times as much on cotton subsidies as it does on foreign aid for all of Africa.

For poor farmers in the 33 countries of Africa that have lost an average of $400 million a year on account of subsidies, this is a matter of survival. These farmers are simply no longer able to provide for their families on their shrinking incomes. In West Africa, the crop is typically grown on small family farms, for whom it provides essential cash income for basic needs such as medicines, school textbooks, and tools. But the USA pays no heed to their concerns. Although US programmes are illegal under WTO rules, the USA is maintaining a hard line on cotton.

Brazilian officials contend that American cotton subsidies contributed heavily to a downward spiral in cotton prices that cost Brazil $640 million last year. India, another big cotton producer, estimated that American subsidies eroded its export revenues by $1 billion last year. On Oct. 5, Brazil said it would request authority from the 148-member WTO to impose trade sanctions on the United States for the Bush administration’s failure to act on a March ruling that U.S. aid to cotton farmers violated global trade rules. In March, the WTO upheld a ruling condemning subsidies for U.S. cotton producers under an « illegal Export subsidy program »

Uganda has been battered by a huge decline in world prices for coffee – its biggest export. But the International Monetary Fund and the World Bank can put much more pressure on poor countries than on rich ones to open up markets.

Three billion people, half the world’s population, rely on rice for food. The USA is the world’s third largest rice exporter, even though US rice costs over twice as much to grow as it does in export-leading Thailand and Viet Nam.

Two billion people also depend on growing and processing rice for their living, most of them smallholders in poor countries. In the United States, rice is produced on large farms employing few people; in Sri Lanka, for example – a country 140 times smaller – there are almost 50 times as many rice farmers. This is only possible because of lavish state funding: in 2003 the US government ploughed $1.3 billion into rice sector subsidies, supporting farmers to produce a crop that cost them $1.8 billion to grow – effectively footing the bill for 72 per cent of the cost of production. No wonder the country’s rice millers and exporters invest so much in lobbying alongside the US government, to open up new export markets for their dumped surpluses.

Haiti also provides a depressing case. In 1995 the IMF forced the Haitian government to cut its rice tariffs from 35% to just 3%. As a result, imports increased 150% in nine years and today three out of every four plates of rice eaten in Haiti comes from the US. Meanwhile, profits for Riceland Foods of Arkansas – the world’s biggest rice mill – rose by $123m from 2002 to 2003 thanks in large part to a 50% increase in its exports, many of them to Haiti. But it has devastated farmers in Haiti, where rice-growing areas now have some of the highest levels of malnutrition and poverty.

If I had my own way, I’d stop US rice coming into the country – and I tell you, if it didn’t come in, we would have prospered and we’d be out of poverty.

Al-Hassan Abukari, a rice farmer in northern Ghana

More than 80 per cent of the world’s poor people live in rural areas, so it is crucial to ensure that agriculture works for them. Poor-country producers make up 96 per cent of the world’s farmers. While poor countries are being forced to remove tariff protection, rich countries continue dumping subsidized produce on poor countries. For perspective, consider that in the year 2000 alone, U.S. spending on farm subsidies exceeded the gross domestic product of more than 70 nations, based on federal government figures.

The USA and EU, in particular, have repackaged their agricultural subsidies so that they appear to be legitimate under WTO rules, allowing them to continue dumping products such as rice, corn, milk, sugar, cotton, coffee, poultry, soyabeans, maize, and cereals at prices far below their true costs of production. At the same time, they are aggressively pushing developing countries to open their markets further by cutting their import tariffs. If the United States were to stop subsidizing agriculture, it could encourage others to do the same

It also seems a tad hypocritical of rich countries to complain about governance in third-world countries when we allow tiny groups of farmers to hijack billion of dollars out of our taxes.

World Bank ex-President James Wolfensohn accused wealthy countries of « squandering » $1 billion a day on farm subsidies that often have devastating effects on farmers in Latin America and Africa and the subsidies are « crippling Africa’s chance to export its way out of poverty. Mark Malloch Brown, the head of the United Nations Development Program, estimates that these farm subsidies cost poor countries about $50 billion a year in lost agricultural exports. By coincidence, that’s about the same as the total of rich countries’ aid to poor countries, so we take back with our left hand every cent we give with our right.

« It is hypocrisy to encourage poor countries to open their markets while imposing protectionist measures that cater to powerful special interests, » said Nicholas Stern, chief economist of the World Bank. Mr. Stern estimated that the average cow in Europe received about $2.50 a day in subsidies, and that the average cow in Japan received nearly $7 a day. By contrast, he said, 75 percent of the people in sub-Saharan Africa live on less than $2 a day. Stanley Fischer, who was the fund’s deputy managing director in the 1990’s, said protectionist policies by the United States, Europe and Japan were « scandalous. »

« The I.M.F. tells the United States that it should drop its subsidies too, » noted Mara Vanderslice, a spokesperson for Jubilee, an organization that campaigns for debt relief. « But the United States doesn’t borrow any money from the I.M.F., so it doesn’t have to listen. »

One popular misconception that contributes to support for farm subsidies is that because they result in lower food prices, they are a boon to consumers. This ignores the fact that taxes pay for these subsidies. Any reduction in supermarket prices is paid for by your taxes, or someone else’s, whether you buy that ear of corn or not.

Farm subsidies are not intended to reduce the cost of food significantly. If prices fell too much, farmers would lose money. To prevent this, Congress also has “environmental” conservation subsidies that pay farmers not to cultivate their land, resulting in higher prices for crops that are thus made scarcer. Consequently, from 1995 through 2002 we paid $14 billion for farmland conservation subsidies that increased the price of our food.

The General Accounting Office (GAO), Congress’ fact-finding agency, released in mid-June a study of the U.S. Department of Agriculture’s management of the farm-subsidy program, a multibillion-dollar system of direct payments to farmers. The findings should horrify lawmakers but probably won’t. The GAO revealed that government employees are ill-trained and federal laws too vague to properly monitor the hundreds of thousands of farm-subsidy payments granted each year. The GAO found many of the approved recipients were ineligible for subsidies. (The USDA fact-checks only about 1,000 applications each year.) A GAO sample of USDA-reviewed and approved subsidies revealed that 30 percent of even these scrutinized farm subsidies were going to people who shouldn’t be receiving them.

Rich farmers are a powerful lobby in American politics. In the last election, crop producers gave $11.5 million in campaign contributions, according to the Center for Responsive Politics, and they are likely to give much more by this November. So don’t be surprised that the GAO’s report won’t be taken too seriously on Capitol Hill. Farm subsidies are more than just payoffs for loaded, large landowners. They’re subsidies for elected officials, too.

« In 2000, American cotton farmers earned $46 million from selling cotton to China, » Gresser said. « In 2003, they earned $733 million from selling cotton to China, and in just the first two months of 2004, they earned $428 million. This is because the Chinese agreed to join the WTO, and made a series of promises to open their markets to the world’s cotton.



– Cultivating Poverty – The impact of US cotton subsidies on Africa
– Stop the Dumping! – How EU agricultural subsidies
The US and Foreign Aid Assistance
Rich Nations Are Criticized for Enforcing Trade Barriers
The Enduring Political Illusion of Farm Subsidies, August 18, 2004, Nicolas Heidorn, San Francisco Chronicle
The rice trade scandal
, The WTO could be the final nail in the coffin of small farm agriculture, says Oxfam GB’s Head of Research, Duncan Green, April 2005
Why is Fair Trade important?
– Ten examples of naked self-interest, An unfair grand bargain
A little blue lie: harmful subsidies need to be reduced, not redefined
– A Round for Free, How rich countries are getting a free ride on agricultural subsidies at the WTO
– Kicking down the door, How upcoming WTO talks threaten farmers in poor countries