New Internationalist

Robin Hood In Reverse

Issue 353

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Food and farming / SUBSIDIES

Robin Hood in reverse
The relentless over-production of food in the US is destroying the rest of the
world's agriculture. Anuradha Mittal takes a look at the subsidies driving it.

The 2002 Farm Bill can be best described as welfare with a difference, robbing the poor to pay the rich. While the Bill is a big bonanza for large producers of favored crops such as corn, soybeans and cotton, small family farms are shortchanged.

Vast industrial farms require costly equipment, increasing the capital intensity of agriculture. As costs rise, prices fall in markets flush with surplus. As prices fall, farmers need subsidies, which are available to big growers and agribusiness only. Land values and cash rents increase. This encourages heavy borrowing. Rich landowners get richer and young farmers cannot afford to get started. An agricultural bubble-economy is created. Inevitably it crashes as subsidies fail to keep pace with falling crop prices. Farms go bankrupt.

Under the 2002 Farm Bill, huge subsidies - $248.6 billion - will go not to farmers who resemble John Steinbeck's Joad family, but (among others) to 14 members of the Congress that crafted the Bill, to wealthy corporations like Westvaco, Chevron and the John Hancock Insurance Company, to Time-Warner entertainment executive Ted Turner, ABC correspondent Sam Donaldson and billionaire David Rockefeller of Chase Manhattan Bank. Most family farms will get nothing but a tax bill.

With American markets already saturated, the US is aggressively pushing to open up foreign markets - with great success. A quarter of American farm sales are exports already. Yet evidence from the past two decades shows that exports have not delivered on their promise. Low commodity prices have only increased the profits of processors, exporters and seed and chemical companies.

Batteries and bankruptcy – falling prices mean bigger subsidies.
Steve Lewis / Still Pictures

Already saturated
Not only does the Bill act as a welfare program for agribusiness, with taxpayers footing the bill - it also robs the world's poor. The US is forcing poor countries to remove subsidies and lower tariffs - while shielding itself from foreign competition by increasing its subsidies and maintaining tariffs.

‘Americans cannot eat all that America’s farmers and ranchers produce. And therefore it makes sense to sell more food abroad... Let me put it as plainly as I can: we want to be selling our beef and our corn and our beans to people around the world who need to eat.’
– President
George W Bush

Take just one example - cotton. America is the world's largest exporter of cotton, even though it is an inefficient and high-cost producer. Many US cotton growers receive half their income from the government. These subsidies further depress prices by encouraging production, thereby crippling growers in Third World countries. This costs African countries $250 million each year, according to a World Bank study published last February.

For decades the US has been the champion of free trade, pushing others to open their markets for manufactured goods and to stop subsidizing their farmers. Back in the 1980s and 1990s the US pushed hard for reduced agricultural subsidies in the Uruguay Round of trade negotiations. At the World Trade Organization ministerial meeting in Doha in November 2001 the US renewed its anti-subsidy commitment.

Just six months later it lavished an 80-per-cent aid increase on its own farm sector. Nobel Prize winner in economics, Joseph Stiglitz, described the new Bill as 'the perfect illustration of the Bush administration's hypocrisy on trade liberalization'.

These double standards have unleashed a wave of indignation. Even other rich countries are worried. Canada is fighting the Farm Bill at the WTO and through the North American Free Trade Agreement (NAFTA). Saskatchewan Premier Lorne Calvert has warned that if Canada doesn't take action now its farm economy will deteriorate to the point where the country may no longer be able to feed itself.

So now the European Union (EU) - which spends more of its budget on agriculture than on any other program - is no longer the stand-out sinner. The Japanese, too, have reason to feel relieved. In the EU 40 per cent of farm income is subsidy; in Japan it is 63 per cent.

The 'world market' in agricultural products simply does not exist. What does exist is an international trade in surpluses of grain, cereals and meat dumped primarily by rich countries and corporations. Behind the faces of trade negotiators are powerful transnationals such as Cargill and Monsanto - the real beneficiaries. Fundamental change to this repressive trade regime is essential.

Who will pay the farm bill when it falls due? American taxpayers have some nasty surprises coming. But the ultimate cost will be the tragic demise of small family farms around the world.

Anuradha Mittal is Co-Director of agricultural
policy NGO Food First based in the US.

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