Asia Times: Global Economy


	May 15, 2002	atimes.com

Global Economy

Bush signs US farm subsidies into reality
By Emad Mekay

WASHINGTON - Proponents of free trade and fair trade alike decried on Monday legislation giving US farmers US$190 billion in subsidies over the coming 10 years, saying the move would hurt poor farmers around the world.

"It is indeed a sad day for world farmers," said a World Bank official who spoke on condition of anonymity. "This is surely a step backward."

The bank has urged an end to agricultural subsidies in rich nations, saying these hinder exports from developing nations.

The legislation signed on Monday by President George W Bush represents an 80 percent increase in certain farm subsidies. The new bill provides US farmers with secure proceeds by increasing price supports for wheat, corn, soybeans, rice and cotton. The bill will also bolster subsidies for mohair, honey, and wool while creating new ones for lentils, peanuts, dry pea, chickpeas, and milk. Unlike other farm bills, the latest one expands subsidies to almost all US growers, not only the big producers.

"For any amount of money we put into our farmers' hands, other world farmers become disadvantaged," said Neil Ritchie, national organizer with the Institute for Agriculture and Trade Policy (IATP). "The US has gone beyond everything it called for in trade talks for less restrictive trade systems."

The new injection of funds could depress world farm-product prices, making imports cheaper than home-grown products in the developing world and ultimately forcing local farmers out of business, analysts said. About 25 percent of US farm income comes from exports.

The US legislation has already received some protest from Australia, Brazil, New Zealand, and other trade competitors. The European Union, itself among the biggest subsidizers of agricultural products, has reportedly said it might challenge the US subsidies at the World Trade Organization (WTO).

At a signing ceremony for the legislation, Bush said he was trying to open markets further for US products but made no reference to foreign access to US markets. "We want to be selling our beef and our corn and our beans to people around the world who need to eat. My administration is working hard to open up markets," he said.

The Bush administration, the World Bank, the International Monetary Fund (IMF), and the WTO have pressed developing countries to open their economies and drop tariff and non-tariff barriers for goods from wealthy nations. The administration, however, has not heeded appeals by the international institutions and supporters of developing countries to ditch its subsidies and to give developing nations greater access to lucrative US markets.

World Bank data indicate that cotton exporters in West and Central Africa would see their revenues swell by $250 million per year if the United States - the world's biggest cotton producer - stopped subsidizing domestic production.

The non-governmental group Oxfam International, in a report last month, singled out US farm subsidies as a blatant form of protectionism and said they were worth one-fourth of total US farm output. The World Bank says that cotton subsidies paid by just eight of the world's richest nations amounted to $5.4 billion in the 1998-99 crop season, with the US accounting for more than $2 billion of this total. Such subsidies have driven down world cotton prices to nearly one-third of their peak level of the mid-1990s.

Some analysts suggested the bill would do most damage to the credibility of free-trade talks begun last year at the WTO ministerial meeting in Doha, Qatar. The bill "may not yet have killed the new round of trade negotiations, but has made even less credible the claims about a 'development agenda' at Doha", said Chakravarthi Raghavan, a veteran Geneva-based trade analyst.

Others attributed Bush's willingness to risk setbacks in global trade talks - and to add the cost of the subsidies to a projected $100 billion budget deficit - to election-year domestic politics. Farm states including Georgia, Iowa, Minnesota, and Missouri will be important to the outcome of congressional elections later this year - elections in which Bush's Republican Party hopes to regain control of the US Senate, said Ritchie.

"Both the US and the Soviet Union tried to give their populations cheap food during the Cold War," said Ritchie. "The little secret behind this farm bill is that cheap food keeps the lid on social unrest."

(Inter Press Service)