December 2000


While developing country governments believe that, under the World Trade Organisation’s Agreement on Agriculture, drastic reductions will be made in agricultural subsidies in the Western nations, candidates in the recent US presidential election campaign pledged more subsidies for their farmers.

By Devinder Sharma

There is trouble ahead on the farm front. Contrary to assurances from the Indian government and for that matter governments of other developing countries, which quote at length from the World Trade Organisation (WTO)’s Agreement on Agriculture promising drastic reductions in agricultural subsidies being doled out in the Western countries, the American presidential election campaign saw renewed pledges for enhancing subsidy.

Both the presidential candidates were generous in making tall promises to the farming community. Al Gore, a strong supporter of the free trade regime, time and again reminded the farm lobby that as vice-president, he supported an additional US$11 billion subsidy for the American farmers.

Republican George Bush was not far behind. ‘I support additional emergency assistance, which should come in the form of direct payments, consistent with the principles in the 1996 farm bill,’ Bush was quoted as saying.

Interestingly, the US farm bill that George Bush referred to, promises to end agricultural subsidies by the year 2002 - a promise that is sure to remain unfulfilled.

Al Gore added, ‘I believe that long-term US farm policy should be based on counter-cyclical income assistance that attempts to stabilise farm income on a year-to-year basis and complementary federally backed insurance policies that attempt to achieve revenue stability within the growing year.’

George Bush was more categorical in his unabashed support to the American farm sector and that too at a time when the WTO sought to regulate the trade-distorting subsidies. ‘When I am president, I will help farmers overcome everything from bad weather to closed markets, expediting emergency assistance when needed, helping farmers rely less on government control of supply and more on market demand.’

As if this is not enough, Bush promised to aggressively push to dismantle foreign trade barriers and eliminate other countries’ agricultural export subsidies. And here lies the catch. True to the American character, Bush has promised to force open the other countries’ markets while protecting his own.

Still, we are being told that the world is beginning to dismantle its subsidy support and that we need to open our trade barriers to make agriculture competitive. And if you think that it is the American rhetoric (and not its actual actions) that is swaying popular economic thinking in developing countries for opening up to US farm exports, you are mistaken. There is a strong vested interest for food imports, and for obvious reasons.

Not only America, other industrial nations too refuse to reduce agriculture subsidies. In fact, the total support that the agriculture sector receives in the richest trading block, the Organisation for Economic Cooperation and Development (OECD), stood at a staggering US$361 billion in 1999. And Europe, which has got a subsidy-waiver under the Peace Clause till the year 2003, continues to come out with clever and manipulative environmental jargon like ‘multi-functionality’ so as to seek unlimited protection for its agriculture.

And if you are wondering as to how these subsidies, for instance, impact the American farmers, let me explain. The Chicago Tribune recently reported a study conducted by Farm Credit Systems, a company dealing in farm loans. According to the study, subsidies are, in a weak climate like the one that prevails today, the only barrier to insolvency.

‘Without federal assistance over the last three years, we would have seen large numbers of farm bankruptcies,’ said Doug Yoder, director of marketing for the Illinois Farm Bureau, adding that one in seven of the state’s 79,000 farms is losing money this year, while many others are barely breaking even.

How do the American farmers view the federal subsidies? ‘It’s a welfare cheque,’ the report quoted Robert Johnson, 57, who farms 500 acres of corn and soybeans. ‘I don’t like welfare and I know other people don’t either - but you have to take it to survive.’

He said prices for his crops are too low for him to make a living. He drives a truck at night and his wife drives a school bus to make ends meet. Perhaps what Johnson does not know, and no one cared to tell him, is that when the subsidised farm commodities are exported to countries like India, it drives out farmers from agriculture, leading to further marginalisation of the farming communities.

In Illinois alone, the average income of a farmer this year averaged at US$37,000, of which US$16,000 comes from government farm subsidies. These subsidies reportedly help farmers meet their current debt liabilities.

In the past two years, direct government payments to farmers in America rose 86% to reach US$22.7 billion, and are expected to go even higher this year. George Bush and Al Gore have already promised still higher federal support by way of direct payments. Incidentally, direct payments to farmers are excluded from the WTO’s subsidy reduction commitments.

The US Department of Agriculture expects farm income to drop this year. ‘Crop receipts are forecast to fall by $2 billion in 2000, reaching their lowest level since 1994,’ the USDA said in a report earlier this year. ‘Net farm income is forecast to be US$40.4 billion in 2000, a decline of $7.7 billion from the preliminary estimate of $48.1 billion for 1999.’

But interestingly, what the USDA refuses to acknowledge is that farm incomes are also falling in the developing countries (including India) whose trade barriers are being forced open.

Now, where will all this lead to? With the subsidy to America’s minuscule farm community multiplying, and with the other industrialised countries also relentlessly jacking up financial support for agriculture, there is practically no hope for predominantly agrarian economies like India to find a foothold in the global food market. In turn, with India phasing out or completely doing away with the quantitative restrictions (QRs), the country is sure to be inundated with cheap and highly subsidised farm imports.

It has happened in the past in Zimbabwe, Burkina Faso, Mexico, Brazil and the Philippines. It is now the turn of India to be faced with a flood of subsidised agricultural imports,  some  of  which  have  already  started  pouring in.  Unless developing countries refuse to open up their agricultural market till such time that all farm subsidies in the developed countries are brought to zero, a disaster awaits to strike.

But then, why blame the WTO when our own governments are keen to allow imports? When will we have political leaders of the likes of George Bush and Al Gore, for whom the nation’s economic interests are paramount? How long will we remain the children of the lesser God? - Third World Network Features

About the writer: Devinder Sharma is a New Delhi-based food and trade policy analyst.