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US farm bill sparks widespread criticism

The  US farm bill signed into law by President George W Bush on 13 May has drawn sharp criticism from across a broad spectrum of opinion, castigated by free and fair traders alike and from North to South.

Lean Ka-Min


WHILE free traders bemoaned the US government intervention in the agricultural market to the tune of $190 billion in subsidies over the next decade, activists and developing-country government leaders and farmers voiced concern that the largesse provided US farmers by the new legislation would severely harm agriculture in the South.

For any amount of money we put into our farmers hands, other world farmers become disadvantaged, said Niel Ritchie, national organiser with the US-based NGO Institute for Agriculture and Trade Policy (IATP).1

The concern is that by encouraging overproduction, the farm support will depress already-low commodity prices and thus threaten the very livelihood of farmers in the developing world who cannot compete with cheap subsidised agricultural produce from the North.

Africa could be particularly hard hit, given that agriculture is the lifeblood of many of the continents economies - accounting for more than half the gross domestic product in some - and that some of their major agricultural products, like cotton, are precisely those that are the beneficiaries of the US farm bill. Already, according to World Bank data, cotton exporters in West and Central Africa stand to reap an additional $250 million a year if the US stopped subsidising domestic production. Overproduction has resulted in a two-thirds decline in cotton prices from their peak levels in the mid-1990s, and the World Bank attributes part of this fall to the $2 billion worth of annual subsidies received by US cotton farmers.2

Zambian National Farmers Union president Ajay Vashee has branded the US farm bill a terrible move that will hurt the whole of Africa. Zambian farmers will be forced to produce goods at uncompetitive prices because the US will be able to dump cheaper agricultural produce on the market, said Vashee.

His countrys Agriculture Minister Mundia Sikatana concurred. This is terrible and it is scaring us. They are the same people who tell us not to subsidise production but are doing exactly that.3

The dramatic rise in farm subsidies granted by the new law has also aroused criticism south of the US border. The unfair competition from the US, coupled with a severe drought this year, will make it simply impossible for Mexicos agricultural production to compete with that of its giant neighbour, lamented Eladio Marcos of the countrys National Small Farmers Confederation (CNC).4

The potentially detrimental impacts of the US farm bill come on top of the harm wrought on Mexican agriculture by the North American Free Trade Agreement (NAFTA), to which Mexico, along with the US and Canada, is a party. After NAFTA, which demands that Mexico eliminate nearly all import duties on farm products by 2003, went into effect in 1994, the total area planted under crops shrank by more than 10 million hectares, and 15 million peasant farmers abandoned the countryside for the cities or the US, according to Jose Luis Calva, a researcher at the economy department of the National Autonomous University of Mexico.5

South American and Caribbean economies, which depend to a considerable extent on the agriculture sector, are also expected to be adversely affected by the US farm bill and have made their views known accordingly. Jamaican Agriculture Minister Roger Clarke complained: Already, were reeling under the effects of dumped cheap goods on us, and this puts us in a terrible position, because were not even in a position to subsidise. In countries like Jamaica, cheap imported foodstuffs have exacted a heavy toll on local farmers unable to compete with the low-cost subsidised produce.

We have to rethink our strategy because we were going along a road which they called free trade, said Clarke. This is really flying in the face of whatever were talking about at the WTO [World Trade Organisation], and it is going to be for us now to rethink. We have to find a way because it cannot go like this, our people are going to be totally wiped out.6

Colombian President Andres Pastrana posed the following question: How is it possible that the most powerful countries of the world, with most of the resources on the planet, may channel these to their agricultural sectors not fully understanding, it would appear, that in doing so they close the doors to the growth and the livelihoods of those subsisting on farming in the rest of the world?7

This view was echoed by Hugo Manini Rios, vice-president of the Uruguayan Association of Rice Farmers. They cant just close the door on a country that wants to work in the area where it is able to work. That shows a lack of sensitivity towards emerging economies, whose main chance for development lies in agricultural production. We must not be governed by the law of the strong, he stressed.

Manini Rios said the US move would hurt Brazilian soybean and cotton farmers, who may then turn to rice-growing, which would compete with Uruguays production, thereby triggering a vicious circle that will produce a disaster in the Southern Cone region.8

Dispute danger

Indeed, the possibility of trade disputes erupting as a result of the inevitable distortions in world agricultural markets that will be brought about by the farm bill has been flagged by analysts. The Caracas-based Latin American Economic System (SELA) warned that the US legislation would check growth in international trade this year and could spark trade wars with European Union and Latin American countries. SELA noted that farm products make up 63% of Latin American and Caribbean exports, and 36% goes to the US.9

Brazil and Argentina, in initial reactions to the farm bill, were reportedly considering hauling the US up before the WTOs dispute settlement mechanism.

What some countries perceive as adding insult to injury is the fact that the farm spending hike was passed barely six months after WTO member countries agreed to launch new multilateral trade talks aimed at, among other things, reducing agricultural subsidies. Indeed, some members believe Washington played a key part at the WTO Ministerial Conference in Doha last November in pushing for negotiations on agriculture to be accorded priority.

The US played a strong leadership role in Doha in developing a negotiating agenda to help level the international playing field, said Canadian Agriculture Minister Lyle Vanclief. He added, however, that the farm bill was contrary to that agenda and ... nations around the world are closely watching the United States for a commitment to achieving the objectives in the WTO agriculture negotiations that we all agreed to in Doha.10

Besides Canada, another close ally of the US, Australia, has also come out strongly against the new law. Speaking before the US Congress on 12 June, Australian Prime Minister John Howard said, As a true friend, let me say candidly that Australia was intensely disappointed with the passage of the recent farm bill.11

Given such negative reactions to the new subsidies, the potential impact of the US farm bill on the direction of global commerce has not been lost on trade observers. John Weekes, who heads the Global Trade Practice of APCO Worldwide, a Geneva-based consulting firm, expressed fears that the new law may convince other nations that the US is not serious about trade reform, thus dooming the WTO round of multilateral talks. Its a dangerous game, said Weekes, a former Canadian government trade official. It will have a severe impact on other countries trading prospects, and also on the temperament and mood of [trade] negotiations.12

Double standards

It is in such negotiations that developing countries are constantly pressured to open up their domestic markets, even while, as now, industrialised countries like the US openly flout the very precepts of free trade which they  so  fervently  preach  to  the South.

The blatant hypocrisy and double standards that govern the behaviour of rich countries toward poor countries13 are clearly reflected in the agricultural sector. Developing countries have, under WTO rules, had to bring down their agricultural import duties and are for the most part unable to boost support spending to their farmers. On the other hand, the developed countries have erected high tariff barriers to farm products from the South and every day dole out a collective $1 billion to bolster their own agriculture.14 These subsidies, which constitute almost 40% of the value of Western farm output15, have contributed to a glut in international markets which has seen the US, for example, selling surplus wheat and corn at 46% and 20% below production cost respectively. For practical purposes, the world agricultural market is a dumping market in which prices are unrelated to costs of production, Oxfam has stated in a recent report.16 The US farm bill will only exacerbate this distortion at the expense of poor unsubsidised farmers in the Third World.

This ruinous combination of market-access barriers and lavish subsidies in Northern agriculture drew a strong response from developing-country leaders attending the World Food Summit in Rome on 10-13 June. In pinpointing the causes of hunger in food-insecure Africa, Ugandan President Yoweri Museveni told the UN gathering: Let us stop beating about the bush. The most fundamental problems are not the weather; are not lack of improved seeds; are not lack of education; and are not infrastructure.

The fundamental problems are three: wars, protectionism against agricultural products and protectionism against value-added products. All the others are problems, but they are not as subversive of global development as the above three.17

Philippine Foreign Minister Teofisto Guingona was equally forthright. Do not impose subsidies for exports. Do not dump products that kill our farmers and fisherfolks. Do not in the name of free trade deny us time to integrate our resources, and having integrated them deny us access to your rich markets, he pleaded. We are poor. You are rich. Level the playing field!18

Ironically, by throwing the spotlight on the inequities in agricultural trade in particular and international trade in general, the US farm bill may actually promote greater discussion on how to work towards levelling the playing field. While describing the bill as shocking, the IATPs director of trade programmes Sophia Murphy says the US action could have a positive effect by making clear that Washington has no intention of abandoning subsidies and thus reigniting global debate about support of agriculture, free trade and globalisation.19

But as long as prevailing trade relations continue to be upheld in the name of globalisation, the outlook for the developing world will likely be bleak. Stresses John Lamey, dean of the faculty of agriculture at Jamaicas College of Agriculture, Science and Education: I was never, ever fooled by this idea of globalisation, this whole global village and shilly-shally speech about free trade and open markets. The US wants to dominate trade and they want it one way.

A lot of people have jumped on the global bandwagon, and they dont realise that if we dont find a way to make sure that our voices are heard and protect our people, well just be sitting on the wall, 50,000 youths sitting on the wall, unemployed, and agriculture will be in the doldrums. Theres no such thing as a level playing field when it comes to the US.20 - TWN                                                         

Endnotes

1.   Emad Mekay, Opponents unite to decry US farm subsidies, South-North Development Monitor (SUNS), No. 5118, 15 May 2002.

2.   Warren Vieth, US exports misery to Africa with farm bill, Los Angeles Times, 27 May 2002.

3.   Matthew Green, US subsidies ring alarm bells for Africa farmers, SEATINI Bulletin, Vol. 5, No. 10, 31 May 2002.

4.   Diego Cevallos, Increased farm subsidies in US another harsh blow, SUNS, No. 5123, 23 May 2002.

5.   Ibid.

6.   Dionne Jackson Miller, US farm bill prompts regional rethink, SUNS, No. 5120, 17 May 2002.

7.   Nicole Winfield, Developing countries tell the US, EU to stop subsidies, open markets, Associated Press Worldstream, 11 June 2002.

8.   South America up in arms over US farm bill, Inter Press Service, 11 May 2002.

9.   Cevallos, op. cit.

10. Canada leads assault on US farm bill at World Food Summit, Agence France Presse, 11 June 2002.

11. Australia PM blasts US farm bill, Associated Press, 12 June 2002.

12. Vieth, op. cit.

13. Oxfam, Eight Broken Promises: Why the WTO Isnt Working for the Worlds Poor, quoted in Jack Beatty, Do as we say, not as we do, The Atlantic Monthly, February 2002.

14. Economic giants ‘stack cards’ against developing countries, The Daily Star, 4 June 2002, www.dailystar.com.lb/business/04_06_02_b.htm.

15. Beatty, op. cit.

16. Quoted in Vieth, op. cit.

17. Ferial Haffajee, African leaders urge rich nations to open up their markets, SUNS, No. 5138, 13 June 2002.

18. Winfield, op. cit.

19. Miller, op. cit.

20. Miller, op. cit.

 


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