Axing U.S. Subsidies Will Hurt All Farmers - Report

WTO-CANCUN:
Axing U.S. Subsidies Will Hurt All Farmers - Report
Stephen Leahy - IPS 9/6/03

BROOKLIN, Canada, Sep 6 (IPS) - U.S. agriculture subsidies of nearly 20 billion dollars annually hurt small growers in both the south and the United States but, paradoxically, eliminating those trade-distorting supports would not benefit either group, according to a new U.S. report.

"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," said Daryll Ray, director of the University of Tennessee's Agricultural Policy Analysis Centre (APAC) and co-author of the report.

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, he added in a statement at the study's release Wednesday.

The report, 'Rethinking U.S. Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide', details how the nation's farm policy has abandoned a policy of market stabilisation in favour of production and trade liberalisation with a disastrous result: record-low crop prices.

This cheap-grain policy has benefited multinational agri-business firms, large U.S. livestock operators, and importers -- not U.S. crop farmers, who now sell grain below their cost of production.

Sponsored by Oxfam America and endorsed by several U.S. farm and commodity organisations, the report says that foreign competitors rightly charge the United States with dumping its excess production on world markets for less than the cost of production.

That in turn, ratchets up the cost of competitors' farm programmes (those of the European Union, EU, for example) and damages the agricultural economies of developing countries.

The main U.S. subsidy programme, Freedom to Farm, began in 1996. Since then, world prices for the four chief U.S. farm exports -- corn, wheat, soybeans and cotton -- have plunged more than 40 percent.

"The outcome of this 'race to the bottom' is certain: all farmers around the world will lose," the report concludes.

U.S. farm policy is not working for farmers anywhere in the world, said John Dittrich, a Nebraska farmer and analyst for the American Corn Growers, in a statement. His group and a number of other sponsors of the report are travelling to Cancun, Mexico for next week's World Trade Organisation (WTO) meeting to present the report.

Even in the unlikely event that the 300 billion dollars in annual global farm subsidies were eliminated, family-based agriculture would continue to spiral downward because of continued low commodity prices, adds John Hansen of the National Farmers Union (NFU).

"Farmer-orientated policies and international cooperation are the real solutions," he added in a release.

And simply getting rid of agricultural subsidies will not help farmers in the South, because prices will not go up, says Daniel De La Torre Ugart, an agricultural economist at APAC and co-author of the report.

The real problem is that too many U.S. acres are producing too much food for export, Ugart told IPS.

Without subsidies, U.S. farmers would simply shift from growing cotton and rice to corn, soy and wheat, he adds; the mix of crops would change but the same number of acres would continue to be farmed.

Even if prices are low, farmers will always plant as many acres as they can because leaving acres idle means no income, while taxes, rent and equipment costs must still be paid, he explained. For that reason, the total acreage farmed in the United States is about the same today as it was 100 years ago, long before the fad of government subsidies.

As for world prices, the centre's computer models shows that cotton and rice prices might rise five percent if subsidies ended, but prices for corn, soy and wheat would fall because of the increased production.

A similar study by The International Food Policy Research Institute (IFPRI) found that if all of the world's agricultural subsidies vanished, prices for grains would only rise slightly -- three percent for corn and 1.5 percent for rice -- by the year 2020. Larger increases would be expected in dairy and meat sectors -- 20 and 5 percent, respectively.

"Agriculture doesn't fit the textbook model of free trade and free markets. It has no chance of working as free trade is preached today," Ugart says.

Instead, the University of Tennessee agricultural economists offer a strategy that involves reducing U.S. acres in production through short-term acreage ''asides'' and longer-term acreage reserves. That would reduce U.S. exports and help the world's other farmers, they say.

Another way to boost prices and improve the world's food security would be to create a U.S. farmer-owned food security reserve. With reserves of global grain and other food stocks approaching 50-year lows, this proposal could help stave off price spikes if a major disaster, such as widespread drought, affects agriculture.

A third strategy would see Washington buy up surplus harvests to maintain a price floor for each crop. If prices were to rise too high, the government would sell off the surplus creating a price ceiling. "That stability would be good for everyone worldwide," Ugart believes.

If these strategies were followed, total cropland planted in the eight major U.S. crops would drop by 14 million acres in the first year, according to the centre's computer model. Prices for the major commodities should increase substantially -- 23 percent for soybeans and 30 percent for corn.

The report also predicts that net farm income of U.S. farmers would rise as government payments fall by more than 10 billion dollars a year.

While these proposals are not novel, people have been so overwhelmed by the dogma of unregulated markets, getting government out of agriculture and free trade that they have forgotten that agriculture is different, Ugart says.

"What we hope this report does is to bring people back to the realities of agriculture."