This House would abolish agricultural subsidies

Government intervention in the marketplace contradicts the values of free-trade advocated by western liberal democracies. The complexities of agricultural subsidies, price supports, regulations and protective tariffs means that farming in the US and the EU now has the air of a command economy. Coupled with highly liberal international trade markets and the relative ease of shipping foodstuffs around the world, subsidy schemes are increasingly subject to manipulation by farmers seeking to maximise the size of their support payments without engaging in additional productive activity. For example, “set-aside”[i] payments have been used by both European and American administrations to encourage farmers to leave a proportion of their fields fallow, in order to maintain the productivity and fertility of farming soil. However, many farmers have claimed set-aside payments by designating fertile land that is difficult or impossible cultivate (land on steep inclines, land obstructed by streams) as fallow fields.

By promoting behaviour of this type, however inadvertently, the CAP and America’s Farm bills effectively reduce the credibility and good will that the west can command when engaged in trade talks with developing states. Policy makers may attempt to frame the debate over subsidies in terms of food supply security. However, the de facto protectionism of current subsidies regimes does nothing more than trade diplomatic credibility and geo political security for stable domestic food prices. Other countries that the developed world is engaging in protectionism and so are unwilling to compromise in areas where the developed world wants changes – as a result the Doha trade round is going nowhere, the developed world has to concede and abolish these subsidies. 

[i] ‘Set-Aside’, UK Agriculture, http://www.ukagriculture.com/crops/setaside.cfm

A subsidised farming industry is not protectionism rather it helps to create the most stable farming infrastructure possible. Agricultural commodities are subject to significant swings in price, due unpredictable changes in the weather, in pest activity and market volatility. Without government support to smooth the impact of market fluctuations, huge numbers of American farmers would be pushed into bankruptcy and forced off of their land and into penury. This would have knock on effects on economies throughout Europe and the United States, and would devastate many small rural communities.

Even if side proposition only eliminated subsidies paid to large agribusinesses, rather than farms with substantial family or community involvement, food prices within developed states would still be significantly disrupted. This would have a material impact upon the standard of living of all but the wealthiest individuals. Moreover, ending subsidy schemes would also reduce the volume of food exports currently being sent to developing states. While side proposition may attempt to argue that this will benefit the domestic economies of developing nations, they fail to recognise that the needs and demands of developing populations will quickly outgrow the types of products available on domestic markets. Milk powder is a necessity in any state with a high birth rate – so how will a state with a minimal dairy industry and almost no livestock reserves satisfy this source of demand? States including Equatorial Guinea, Micronesia and Sao Tome would be confronted with exactly this type of problem.

Subsidies cause poverty, both domestically and internationally. By maintaining the price of certain goods at a low level that does not reflect their market price, subsidies prevent farmers in the developing world from selling comparable goods to international customers for a comparable price. Despite higher labor costs wealthy western farmers are able to undercut their poorer counterparts in the developing world, with any shortfall in their incomes accounted for by their government subsidy.

Not only do subsidies harm the competitiveness of developing states’ export economies, they can also affect their domestic markets. Large food export businesses based in developed states are able to sell western produce to the citizens of underdeveloped states for less than its production cost. Once again, the shortfall is accounted for by subsidy payments. For examples, onion growers in Jamaica once lived off profits generated by their domestic market. However, once growers based in the United State gained the right to sell their produce in Jamaica, their heavily subsidised onions quickly put local producers out of business.[i]

A further example of the trend illustrated above is provided by the international cotton trade. Growing cotton in West Africa is a much cheaper and much more efficient activity than growing it in the USA. It should be possible for growers in states such as Mali to export their cotton profitably, benefiting themselves, their states’ economies and consumers in the developed world. However, American subsidies incentivise over-production in the United States, which encourages US cotton farmers to sell their fibre overseas at massive discounts. This case study illuminates another of the negative externalities that exists in the status quo. Cotton is a hardy commodity, able to grow in areas that would normally be unsuitable for producing other cash crops. As the Guardian notes, an economy built on cotton cannot easily adapt to growing other forms of produce; survival and subsistence in Mali are entirely dependent on Malian farmers’ ability to sell fibre.[ii]

If farmers in the developing world cannot be allowed by the developed countries to be competitive on even the most basic products such as agriculture where they have an advantage how can we expect to eliminate poverty?

[i] Campbell, Mavis, ‘Jamaica’, FAO Corporate Document Repository, http://www.fao.org/DOCREP/005/Y4632E/y4632e0m.htm

[ii] Jowit, Juliette, ‘Cotton subsidies costing west African farmers £155m a year, report reveals’, The Guardian, 15 November 2010, http://www.guardian.co.uk/environment/2010/nov/15/cotton-subsidies-west-africa

Neither the US nor the EU can be held responsible for international externalities caused by subsidy policies. If the US were to stop funding its farming industry, other developed nations would continue to engage in practices that would distort the international market. Indeed, the USA’s share of world food exports has been either flat or falling for almost 25 years, so it would be disproportionate to claim that the US is the primary cause of declining farm revenues in the developing world.

The European Union only has the ability to prevent its members applying subsidies to products that they trade to other EU member states. If EU subsidies were abolished, individual member states would still be within their rights to impose subsidies on goods exported to foreign markets.

Moreover, other developed states that are not affiliated with the US and the EU also spend large amounts of money on subsidy policies. Farmers in both Norway and Switzerland receive approximately 70% or their revenue from government payments. Similarly Japan protects its farming community with an array of national subsidies and tariffs.

Finally, it should be pointed out that the international market for cotton is not analogous or comparable to the international market for staple foods. It is possible to make a case for eliminating subsidised cotton, while retaining the subsidy structure used to support the prices of grain, rice and other consumables. If side proposition truly wish to create an environment in which poorer states’ agribusinesses can compete on equal terms with their wealthier counterparts, they should be prepared to make a nuanced distinction between the need to eliminate subsidies in some areas, and the importance of retaining them in others.

Subsidies can contribute significantly to longer term ecological and environmental damage. By rendering the export of food so profitable, subsidies increase the use of air freight and rapid road haulage, increasing the emissions cost of trading produce.

Subsidies also cause the loss of land management and farming skills amongst the working population of developing states. As small farmers and more affluent land owners are priced out of domestic markets by imports from the developed world, they will increasingly turn to alternative methods of making money. Farming skills will not be passed on to other family members or to agricultural workers. Unemployed agricultural workers will be affected by deskilling. In addition, they may migrate away from their home states in search of jobs. Otherwise useful, fertile land may be left fallow, becoming damaged and eroded due to neglect.

Subsidies encourage monoculture farming – the large scale production of specialised produce. Subsidies instituted by the US government that were intended to encourage the production of maize for use in biofuels led many farmers to give over excessive acreage to the crop. Monoculture crops can expose farmer to economic risks that subsidies cannot compensate for. If a particularly virulent strain of disease attacks a monoculture crop it is likely to spread quickly, assisted by the large, un-partitioned fields and storage areas that are characteristic of the practice. This, in turn, will lead to widespread crop failure, incurring significant losses for the farmers involved. Moreover, the need to protect large amounts of uniformly vulnerable biomass from pests and disease causes farmers to employ large quantities of pesticides, insecticides and herbicides, all of which can damage soil quality, pollute water sources and harm local biodiversity.[i]

Finally, subsidies also encourage intensive agricultural production in unsuitable or unstable areas. Examples of this practice include the cultivation of fruit and vegetable crops in naturally arid areas of south California. Successful cultivation of this produce has necessitated the construction of extensive and disruptive irrigation networks. The burden that irrigation has placed on the Sacramento-san Joaquin delta, west of San Francisco has become so great that the salinity of delta water is now slowly increasing, due to tidal intrusion of seawater. This change in the salt content of irrigation water threatens to pollute the same soil that the irrigation system feeds.[ii]

[i] Price, Aaron E., ‘Corn Monoculture no friend of Biodiversity’, Ethanol: Salvation or Damnation?, University of Nebraska-Lincoln College of Journalism and Mass Communications DEEP Report, 2008, http://digitalcommons.unl.edu/journalismstudent/16/

[ii] Ikehara, Marti E., and Ingebritsen, S.E., ‘Sacramento-San Joaquin Delta The sinking heart of the state’, U.S. Geological Survey, http://pubs.usgs.gov/circ/circ1182/pdf/11Delta.pdf

Food is a unique good, in the sense that it is essential for sustaining life, and plays a significant role in ensuring social stability and supporting the health and development of children. Governments should not gamble on an industry that supplies a commodity of such great importance by exposing farmers to the fluctuations and speculative impulses of the food markets. Nor should farmers and their crops be exposed the effects of sudden environmental change without some form of defence mechanism or insurance scheme being put in place.

Realpolitik dictates that, no matter how interdependent and interlinked the world becomes, it will always be necessary for the state to secure a reliable food supply for its population. The importance of retaining some form of independence from other commodity suppliers has been heightened by the geopolitical debates surrounding the war on terror.

It would be perverse to expect developed states to recreate the economic and political conditions that led to dependency on mineral oil within their domestic markets for grain, milk and sugar.

Political unrest has affected stability in Africa’s major food producing regions (Zimbabwe, Cote d’ivoire); climactic disasters in Russia (one of the world’s largest grain exporters) have caused bread prices to rise across the world. All of these occurrences could adversely affect food prices and reduce standards of living within supposedly safe, secure and wealthy states who therefore need to be able to produce enough food to cover most of their needs rather than relying on imports.

There are limits to the extent to which cash and monetary wealth can be used to influence environmental and ecological conditions in the world at large. The destruction of agricultural land or harmful agricultural practices can take decades to correct. Under these circumstances, domestic food subsidies are entirely necessary form of government spending. 

Government intervention in the marketplace contradicts the values of free-trade advocated by western liberal democracies. The complexities of agricultural subsidies, price supports, regulations and protective tariffs means that farming in the US and the EU now has the air of a command economy. Coupled with highly liberal international trade markets and the relative ease of shipping foodstuffs around the world, subsidy schemes are increasingly subject to manipulation by farmers seeking to maximise the size of their support payments without engaging in additional productive activity. For example, “set-aside”[i] payments have been used by both European and American administrations to encourage farmers to leave a proportion of their fields fallow, in order to maintain the productivity and fertility of farming soil. However, many farmers have claimed set-aside payments by designating fertile land that is difficult or impossible cultivate (land on steep inclines, land obstructed by streams) as fallow fields.

By promoting behaviour of this type, however inadvertently, the CAP and America’s Farm bills effectively reduce the credibility and good will that the west can command when engaged in trade talks with developing states. Policy makers may attempt to frame the debate over subsidies in terms of food supply security. However, the de facto protectionism of current subsidies regimes does nothing more than trade diplomatic credibility and geo political security for stable domestic food prices. Other countries that the developed world is engaging in protectionism and so are unwilling to compromise in areas where the developed world wants changes – as a result the Doha trade round is going nowhere, the developed world has to concede and abolish these subsidies. 

[i] ‘Set-Aside’, UK Agriculture, http://www.ukagriculture.com/crops/setaside.cfm

A subsidised farming industry is not protectionism rather it helps to create the most stable farming infrastructure possible. Agricultural commodities are subject to significant swings in price, due unpredictable changes in the weather, in pest activity and market volatility. Without government support to smooth the impact of market fluctuations, huge numbers of American farmers would be pushed into bankruptcy and forced off of their land and into penury. This would have knock on effects on economies throughout Europe and the United States, and would devastate many small rural communities.

Even if side proposition only eliminated subsidies paid to large agribusinesses, rather than farms with substantial family or community involvement, food prices within developed states would still be significantly disrupted. This would have a material impact upon the standard of living of all but the wealthiest individuals. Moreover, ending subsidy schemes would also reduce the volume of food exports currently being sent to developing states. While side proposition may attempt to argue that this will benefit the domestic economies of developing nations, they fail to recognise that the needs and demands of developing populations will quickly outgrow the types of products available on domestic markets. Milk powder is a necessity in any state with a high birth rate – so how will a state with a minimal dairy industry and almost no livestock reserves satisfy this source of demand? States including Equatorial Guinea, Micronesia and Sao Tome would be confronted with exactly this type of problem.

Subsidies cause poverty, both domestically and internationally. By maintaining the price of certain goods at a low level that does not reflect their market price, subsidies prevent farmers in the developing world from selling comparable goods to international customers for a comparable price. Despite higher labor costs wealthy western farmers are able to undercut their poorer counterparts in the developing world, with any shortfall in their incomes accounted for by their government subsidy.

Not only do subsidies harm the competitiveness of developing states’ export economies, they can also affect their domestic markets. Large food export businesses based in developed states are able to sell western produce to the citizens of underdeveloped states for less than its production cost. Once again, the shortfall is accounted for by subsidy payments. For examples, onion growers in Jamaica once lived off profits generated by their domestic market. However, once growers based in the United State gained the right to sell their produce in Jamaica, their heavily subsidised onions quickly put local producers out of business.[i]

A further example of the trend illustrated above is provided by the international cotton trade. Growing cotton in West Africa is a much cheaper and much more efficient activity than growing it in the USA. It should be possible for growers in states such as Mali to export their cotton profitably, benefiting themselves, their states’ economies and consumers in the developed world. However, American subsidies incentivise over-production in the United States, which encourages US cotton farmers to sell their fibre overseas at massive discounts. This case study illuminates another of the negative externalities that exists in the status quo. Cotton is a hardy commodity, able to grow in areas that would normally be unsuitable for producing other cash crops. As the Guardian notes, an economy built on cotton cannot easily adapt to growing other forms of produce; survival and subsistence in Mali are entirely dependent on Malian farmers’ ability to sell fibre.[ii]

If farmers in the developing world cannot be allowed by the developed countries to be competitive on even the most basic products such as agriculture where they have an advantage how can we expect to eliminate poverty?

[i] Campbell, Mavis, ‘Jamaica’, FAO Corporate Document Repository, http://www.fao.org/DOCREP/005/Y4632E/y4632e0m.htm

[ii] Jowit, Juliette, ‘Cotton subsidies costing west African farmers £155m a year, report reveals’, The Guardian, 15 November 2010, http://www.guardian.co.uk/environment/2010/nov/15/cotton-subsidies-west-africa

Neither the US nor the EU can be held responsible for international externalities caused by subsidy policies. If the US were to stop funding its farming industry, other developed nations would continue to engage in practices that would distort the international market. Indeed, the USA’s share of world food exports has been either flat or falling for almost 25 years, so it would be disproportionate to claim that the US is the primary cause of declining farm revenues in the developing world.

The European Union only has the ability to prevent its members applying subsidies to products that they trade to other EU member states. If EU subsidies were abolished, individual member states would still be within their rights to impose subsidies on goods exported to foreign markets.

Moreover, other developed states that are not affiliated with the US and the EU also spend large amounts of money on subsidy policies. Farmers in both Norway and Switzerland receive approximately 70% or their revenue from government payments. Similarly Japan protects its farming community with an array of national subsidies and tariffs.

Finally, it should be pointed out that the international market for cotton is not analogous or comparable to the international market for staple foods. It is possible to make a case for eliminating subsidised cotton, while retaining the subsidy structure used to support the prices of grain, rice and other consumables. If side proposition truly wish to create an environment in which poorer states’ agribusinesses can compete on equal terms with their wealthier counterparts, they should be prepared to make a nuanced distinction between the need to eliminate subsidies in some areas, and the importance of retaining them in others.

Subsidies can contribute significantly to longer term ecological and environmental damage. By rendering the export of food so profitable, subsidies increase the use of air freight and rapid road haulage, increasing the emissions cost of trading produce.

Subsidies also cause the loss of land management and farming skills amongst the working population of developing states. As small farmers and more affluent land owners are priced out of domestic markets by imports from the developed world, they will increasingly turn to alternative methods of making money. Farming skills will not be passed on to other family members or to agricultural workers. Unemployed agricultural workers will be affected by deskilling. In addition, they may migrate away from their home states in search of jobs. Otherwise useful, fertile land may be left fallow, becoming damaged and eroded due to neglect.

Subsidies encourage monoculture farming – the large scale production of specialised produce. Subsidies instituted by the US government that were intended to encourage the production of maize for use in biofuels led many farmers to give over excessive acreage to the crop. Monoculture crops can expose farmer to economic risks that subsidies cannot compensate for. If a particularly virulent strain of disease attacks a monoculture crop it is likely to spread quickly, assisted by the large, un-partitioned fields and storage areas that are characteristic of the practice. This, in turn, will lead to widespread crop failure, incurring significant losses for the farmers involved. Moreover, the need to protect large amounts of uniformly vulnerable biomass from pests and disease causes farmers to employ large quantities of pesticides, insecticides and herbicides, all of which can damage soil quality, pollute water sources and harm local biodiversity.[i]

Finally, subsidies also encourage intensive agricultural production in unsuitable or unstable areas. Examples of this practice include the cultivation of fruit and vegetable crops in naturally arid areas of south California. Successful cultivation of this produce has necessitated the construction of extensive and disruptive irrigation networks. The burden that irrigation has placed on the Sacramento-san Joaquin delta, west of San Francisco has become so great that the salinity of delta water is now slowly increasing, due to tidal intrusion of seawater. This change in the salt content of irrigation water threatens to pollute the same soil that the irrigation system feeds.[ii]

[i] Price, Aaron E., ‘Corn Monoculture no friend of Biodiversity’, Ethanol: Salvation or Damnation?, University of Nebraska-Lincoln College of Journalism and Mass Communications DEEP Report, 2008, http://digitalcommons.unl.edu/journalismstudent/16/

[ii] Ikehara, Marti E., and Ingebritsen, S.E., ‘Sacramento-San Joaquin Delta The sinking heart of the state’, U.S. Geological Survey, http://pubs.usgs.gov/circ/circ1182/pdf/11Delta.pdf

Food is a unique good, in the sense that it is essential for sustaining life, and plays a significant role in ensuring social stability and supporting the health and development of children. Governments should not gamble on an industry that supplies a commodity of such great importance by exposing farmers to the fluctuations and speculative impulses of the food markets. Nor should farmers and their crops be exposed the effects of sudden environmental change without some form of defence mechanism or insurance scheme being put in place.

Realpolitik dictates that, no matter how interdependent and interlinked the world becomes, it will always be necessary for the state to secure a reliable food supply for its population. The importance of retaining some form of independence from other commodity suppliers has been heightened by the geopolitical debates surrounding the war on terror.

It would be perverse to expect developed states to recreate the economic and political conditions that led to dependency on mineral oil within their domestic markets for grain, milk and sugar.

Political unrest has affected stability in Africa’s major food producing regions (Zimbabwe, Cote d’ivoire); climactic disasters in Russia (one of the world’s largest grain exporters) have caused bread prices to rise across the world. All of these occurrences could adversely affect food prices and reduce standards of living within supposedly safe, secure and wealthy states who therefore need to be able to produce enough food to cover most of their needs rather than relying on imports.

There are limits to the extent to which cash and monetary wealth can be used to influence environmental and ecological conditions in the world at large. The destruction of agricultural land or harmful agricultural practices can take decades to correct. Under these circumstances, domestic food subsidies are entirely necessary form of government spending. 

American and European food subsidies actually act to support growth and productivity in the developing world. The kinds of foodstuffs typically exported to poorer states are staples like wheat, maize, milk products and sugar. Subsidy and food aid schemes ensure that basic goods are available to consumers in poorer states at prices lower than a domestic market could comfortably sustain.[i]

It is arguable that the most efficient development solution for many of the world’s poorest states does not include investing in capital intensive commodity crops. Spending on fertilisers, land and equipment is essential for farmers seeking to grow sufficient quantities of corn or soy to compete in global and local market places. The scale of capital investment required by maize and wheat is so high that domestic food prices within many African and Asian states would jump rapidly if wholesalers, manufacturers and families were no longer able to acquire these commodities via subsidised imports from developed countries.

Agricultural businesses in the developing world are more likely to profit from exports of labour-intensive produce. Palm oil, prepared vegetables, spices, cocoa and cut flowers are crops that can only be produced in a narrow range of climates and environments. The geographical locations of the largest palm oil and cocoa producers give them a competitive advantage over more prosperous northerly states. Similarly, the higher price commanded by commodities that are difficult to produce in other areas of the world means that farmers’ profit margins will be wider once they have accounted for transportation costs. Compare this situation with the profit made on processed potatoes in the US and the UK- often fractions of a penny or a cent- and the advantages of exporting value-added goods become obvious.[ii]

[i] Davies, Daniel, ‘Africa does not need more expensive food’, guardian.co.uk, 26 July 2006, http://www.guardian.co.uk/commentisfree/2006/jul/26/dumpingdumping

[ii] Braun, Joachim von, Gulati, Ashok and Orden, David, ‘Making Agricultural Trade Liberalization Work for the Poor’, International Food Policy Research Institute, http://www.wto.org/english/tratop_e/dda_e/symp04_paper_von_braun_e.doc

As observed by the analyst Daniel Davies, not all primary commodity producers are impoverished states, and not all of these states participate in trade agreements or customs unions as lucrative as those operated by the EU.[i]

States such as Brazil and Malaysia have already made significant progress towards achieving their development goals. Their governments do not find it difficult to guarantee that families have enough to eat; they are beginning to interact with international markets on their own terms, identifying and pursuing trade opportunities based on aspirational and normative ideas, rather than the imperative of achieving a minimal standard of economic, infrastructural and social development. Such states occupy a precarious position. They may wish to reduce their dependence on development aid, may wish to take certain state and social services out of the hands of NGOs or intergovernmental agencies. However, without the ability to compete against other states on fair terms, these states may remain continuously dependent on foreign support.

To put it simply, sometimes the best form of development aid that one state can offer another is an acknowledgement that it should be allowed to participate in the business of statehood as an equal. Although cheap foreign food may facilitate a basic level of development, developing states must eventually be granted the freedom to engage with the world’s markets on their own terms.

The hazards inherent in a state of perpetual underdevelopment, and the dearth of skills and political capital that it causes, are much greater, on balance, than the minimal risk to food security associated with an increase in the export of foodstuffs from the developing world.

[i] Davies, Daniel, ‘Africa does not need more expensive food’, guardian.co.uk, 26 July 2006, http://www.guardian.co.uk/commentisfree/2006/jul/26/dumpingdumping

There is much about the proposition side case that smacks of orientalism. The quality of life of individuals in many of the world’s poorest states has been immeasurably improved by the ready availability of cheap western food imports.[i] The ability of western farmers to provide food at lower prices than their competitors in the developing world’s domestic market is actually driving growth and productivity among poor agricultural producers.

Subsidies’ contribution to poor agricultural production in the developing world is marginal. Indeed, many of the poorest states trade with European Countries on terms as favourable as those set out in the treaties of the European Union. Under the Everything But Arms scheme, underdeveloped states can export goods to EU states without being required to pay tariffs or customs charges.[ii] Further, as noted below, changes to the CAP have now create a European subsidy regime that carefully controls production rates, punishes over production and ensures  surpluses are not “dumped” onto the export market. Under a range of partnership agreements, the EU now sources 71% of its agricultural imports from developing states.[iii]

Increasing developing state’s dependence on their domestic agricultural markets is likely to increase food prices within their borders. The relative level of sophistication of developing states’ transport infrastructure and agricultural technologies is much lower than in Europe. Consequently, the cost of producing a commodity- grain, say- within a developing nation, and then transporting it to consumers will be much higher. Poorly maintained roads will increase journey times and will cause a larger proportion of stock to spoil before it can be sold. Credit and stock systems will be slow and undeveloped, impacting on the efficiency of doing business with local farmers.

All of the factors listed above also affect export trade. While international travel may be a relatively fast and efficient affair, the process of moving bulky agricultural goods to ports and airports, let alone soliciting and processing orders from European importers, will prove extremely difficult for farmers in the developing world.[iv] The diversification of the food export industry envisioned by side proposition simply will not happen. Underfunding and underdevelopment of infrastructure in poorer states will not allow it. Moreover, the increased cost of transporting goods across rural areas, particularly as many of the poorest countries are cursed with being landlocked, in the subcontinent or Africa places a premium on food before it even reaches the communities that will consume it.[v] At the very least, the controlled reduction of food prices by subsidies ensures that this premium is affordable.

Attempts by side proposition to imply that rural communities suffer disproportionately under the current subsidies scheme are rendered nonsensical by the observation that not all agricultural goods are staple foods. Growers of tobacco or coffee and the other forms of labour intensive export goods mentioned above are already engaged in a trade that has a great deal of developmental potential. However, requiring them to pay higher prices for domestically produced food might undermine the profits farmers make on flowers or spices. Moreover very few rural populations are entirely self-sufficient, and will always require access to external supplies of staple products.[vi]

[i] Davies, Daniel, ‘Africa does not need more expensive food’, guardian.co.uk, 26 July 2006, http://www.guardian.co.uk/commentisfree/2006/jul/26/dumpingdumping

[ii] ‘Everything But Arms’, European Commission Trade, http://ec.europa.eu/trade/wider-agenda/development/generalised-system-of-preferences/everything-but-arms/

[iii] ‘The EU’s Common Agricultural Policy (CAP): on the move in a changing world. How the EU’s agriculture and development policies fit together’, European Commission Agriculture and Rural Development, 2010, p.7 http://ec.europa.eu/agriculture/developing-countries/publi/brochure2010/text_en.pdf

[iv] Sachs, Jeffrey, ‘Lecture 4: Economic Solidarity for a Crowded Planet’, Bursting at the Seams Reith Lectures 2007, http://www.bbc.co.uk/radio4/reith2007/lecture4.shtml

[v] Collier, Paul, ‘Africa: Geography and Growth’, Centre for the Study of African Economies, July 2006, http://users.ox.ac.uk/~econpco/research/pdfs/AfricaGeographyandGrowth.pdf

[vi] Short, Clare, ‘Food Insecurity – A Symptom of Poverty’, Sustainable Food Security For All By 2020, 4-6 September 2001, p.2, http://conferences.ifpri.org/2020conference/PDF/summary_short.pdf

Farm subsidies represent little more than a highly inefficient foreign aid scheme, funded wealthy states’ tax payers.

In essence, subsidies do little more than use tax revenue to reduce the price and control the production of certain agricultural goods. These goods, as has been discussed above, are then sold to the developing world at prices lower than poor states’ domestic markets can match. This is, effectively, equivalent to making payments to developing states – individuals in developing states spend less money on food under the status quo, so have more money to spend on other things.[i]

This situation is problematic, firstly because it obstructs the development of developing states’ agricultural sectors. A rational system of aid giving should not create dependence or inhibit growth. Secondly, “funds” provided to developing states via subsidy schemes are also shared with wealthy first-world farmers an agribusinesses. Subsidies remain a considerable source of profit for the agricultural sector. It seems irrational to pay farmers to improve the monetary and fiscal environment in developing states, rather than allowing aid-giving states to provide money directly to underdeveloped areas. Under the status quo, first world agribusinesses do little more than add to the transaction costs of sending aid to developing economies.

If the quality of roads and rail lines in a state is so poor that food deliveries are delayed, why not pay for upgrades to transport infrastructure? If both the educational institutions and the service sector of a state are underdeveloped, invest in a state’s education system and encourage partnerships with ship brokers and accountancy firms?

Subsidising food in order to offset the worst effects of deprivation, marginalisation, environmental damage and retrograde or corrupt government will do nothing more than entrench the poverty that afflicts many developing nations. It will prevent states’ agricultural sectors growing or functioning competitively and it will continue to foster the dependence on western largess that contemporary development theory attempts to avoid.

[i] Davies, Daniel, ‘Africa does not need more expensive food’, guardian.co.uk, 26 July 2006, http://www.guardian.co.uk/commentisfree/2006/jul/26/dumpingdumping

Even adamant anti subsidy advocates agree that abolishing current financial assistance measures will do more harm than good. Reform of current subsidy policies would achieve more than their complete elimination. Many family farms in the US and the EU are running on extremely slim profit margins, which are squeezed by supermarkets,[i] and eliminating their subsidy payments would devastate their incomes, forcing the sale of land and the sale or slaughter of livestock.

The lacunae and negligent administrative conduct that anti-subsidy campaigners claim is characteristic of the policy’s overall inefficiency are simply design flaws that appropriate legislation can correct. Both the Rural America Preservation Act[ii] and the 2002 Farm Bill[iii] offer the opportunity to remove many of these negative traits from America’s farm subsidy regime. They will cap the amount given to large, heavily capitalised agricultural corporations. These policies will also assist in encouraging the conservation and husbandry of natural resources, and ensuring the health of existing farm soil. Policy makers already recognise the perversity of paying owners of farmland large sums simply to keep the land clear and ready for agricultural use, without also monitoring

Similarly, in Europe, reforms to the Common Agricultural Policy following the ratification of the Treaty of Nice in 2003 now require farmers to engage in sustainable agricultural practices. Penalties reduce the size of the subsidy available to farmers who disregard the limits imposed by the Treaty. The EU is also due to begin applying a policy of intervention pricing. Intervention pricing represents a form of dynamic subsidy. If commodity prices fall below a certain level, the EU will buy up produce in order to raise its price. This method allows the EU to reduce standard subsidy payments, which might incentivise overproduction during periods of economic stability, while allowing it to protect farmer’s incomes if market prices fall.

[i] Vorley, Bill, Food, Inc. Corporate concentration from farm to consumer, UK Food Group, 2003, http://www.ukfg.org.uk/docs/UKFG-Foodinc-Nov03.pdf, pp.21, 11

[ii] Congressional Research Service, ‘S. 1161: Rural America Preservation Act of 2011’, 112^th Congress: 2011-2012, 9 June 2011, http://www.govtrack.us/congress/bill.xpd?bill=s112-1161&tab=summary

[iii] Johnson, Renée, ‘What is the “Farm Bill”?’, CRS Report for Congress, 1 April 2008, http://fpc.state.gov/documents/organization/104270.pdf

Reform will never effectively turn the tables in subsidy distribution. Large-scale agribusinesses have the power to manipulate policy through lobbying and directed campaign contributions in order to ensure they can maintain their comfortable government issued subsidies.

Small family farms cannot compete with rich agro-corporations, who can spend millions of dollars lobbying to stop legislation that would reform current problematic subsidy expenditures. This is exactly why the implementation of bills similar to the 2002 Farm Bill (alongside others supported by subsidy reform activists such as Senators Chuck Grassley and Byron Dorgan) has been slow and piecemeal. As any system aimed at channelling federal money to agriculture will be open to abuses by individuals or organisations with sufficient resources to identify the lacunae in subsidy systems, it would be far better to end subsidies completely, supporting poorer farming families instead through welfare benefits and tax credits.

Further, although the EU has made headway in reforming its approach to farm subsidies, it has done nothing to address other forms of subsidy. Payments made to cotton producers within the EU have survived reform programmes initiated in 1999, 2003 and 2007 more or less intact.[i] Moreover, the EU cotton subsidy is one of a small number of EU agricultural payments that remains linked to production – raising the same issues relating to over-production and export market distortion discussed above.

[i] Jowit, Juliette, ‘Cotton subsidies costing west African farmers £155m a year, report reveals’, The Guardian, 15 November 2010, http://www.guardian.co.uk/environment/2010/nov/15/cotton-subsidies-west-africa