Tuesday, September 11, 2007

U.S. subsidies and its impact on the rural poor in developing countries

It is important to keep in mind the role of agriculture in international trade and the impact of U.S. agricultural subsidies on rural areas in developing countries. Although subsidies play an important role in supporting a stable income for domestic farmers (putting aside those questions of whether subsidies are really only benefiting large farms), it also potentially/does promote poverty in developing countries by driving down global crop prices. The U.S. has played a particularly significant role in this aspect of global affairs and in the WTO.

One argument is that by providing subsidies, the U.S. “dumps”, or floods, the global market with crops that growers in developing countries (as well as domestic small farms) cannot compete with. The staples that are being sold are often sold at lower prices than it costs to produce them.

For example, the five crops that are subsidized now and with the upcoming bill, corn, cotton, wheat, rice, and soybeans are already overproduced (hence why we have corn syrup in almost everything we eat/drink). They often sell on global markets below production costs, which means that farmers growing those products in developing countries cannot compete, and are being driven from the market and their livelihoods.

“[R]ice, one of the world’s most universal staple crops and a major US export, is sold on the world market at 20 to 34 percent less than what it costs the average US farmer to grow it—devastating competition for farmers who need to recoup their full production costs to survive.[9] In 2004, Indonesia banned rice imports to protect the livelihoods of its farmers, who produce enough rice to feed Indonesia’s population.[10]” http://www.foodfirst.org/backgrouders/goinglocal.

By providing subsidies to domestic agriculture, this flies in the face of the trade liberalization ideals they are promoting, requiring, and enforcing in developing countries.

Developing and developed countries are now completely polarized on this issue. This has caused a huge amount of protest, against the U.S. and WTO, as well as the almost complete stalling of negotiations during the recent WTO meetings in Seattle, Cancun, and Hong Kong.

It's a complicated issue, but I think it relevant to our discussions on the current farm bill.

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