The haves: subsidies, surplus and supremacy

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Indy Politics


In a pre-Cancun position paper entitled Dumping Without Borders, Oxfam calculates that the United States pays its corn farmers $10bn a year, encouraging them to produce a surplus that is then dumped on to world markets at artificially low prices.

While following the letter of world trade rules, American producers manage to sell corn in Mexico at between $105m and $145m a year below the actual cost of production.

The Oxfam report says: "Far from operating on a 'level playing field', small farmers in Chiapas and elsewhere in Mexico are at the wrong end of a steeply sloping playing field which runs downhill from the US Mid-West.

"They are competing not against US farmers, but against US taxpayers and the world's most powerful treasury. It is difficult to think of a starker illustration of unfair trade in practice."

A very similar conclusion was drawn recently by the Heritage Foundation, a right-wing US think-tank, which noted that the most recent American Farm Bill passed last year increased the level of subsidies to domestic farmers by 70 per cent, at a cost to the taxpayer of $180bn over 10 years.

"The majority of the subsidies go to the wealthiest producers. These subsidies benefit the rich while stealing opportunity from developing nations," a Heritage Foundation report says.

American farm policy has had a detrimental effect domestically too, with thousands of smaller family-run farms closing because they cannot compete with the big, well-subsidised agribusiness concerns. Whole towns in Kansas and the Dakotas have been abandoned in response to the slump, fuelling deep anti- government resentment and some extremist politics.

According to Oxfam the effect of US subsidies abroad has been aggravated over the past decade by the North American Free Trade Agreement, which has made it much easier for American growers to dump corn exports on Mexico.

Exports have tripled in that time and now account for almost one third of the Mexican market, severely depressing domestic prices.

Since the early 1990s, American corn exports to Mexico have expanded by a factor of three.

"Real prices for Mexican corn have fallen more than 70 per cent since 1994," the report adds. "For the 15 million Mexicans who depend on the crop, declining prices translate into declining incomes and increased hardship. Many people can no longer afford basic health care," the report says.


When Tony Blair and Jacques Chirac had their celebrated stand-up row at a summit in Brussels a year ago, the subject was food, trade and hypocrisy.

Mr Blair accused M. Chirac of posing as a defender of the Third World, while supporting an EU farm policy that sowed hunger and poverty. M. Chirac, with some justice, said that Mr Blair was painting an exaggerated Anglo-Saxon picture of the iniquities of the EU's Common Agricultural Policy. Europe had a right to defend its farmers.

Both men were right in their way. The CAP has been much reformed in the past 12 years. It no longer builds mountains of wheat or dairy powder, which are dumped on the Third World. But it does subsidise farmers to the tune of €100bn (£71bn)a year, when national subsidies are included. Although France gains the lions' share, the EU also supports farmers in Britain. In both countries some of the money goes to struggling farmers and some goes to the very rich.

Subsidies, the critics say, increase European production, which reduces the prices available on the world market to would-be Third World exporters of products such as sugar or wheat. At the same time, the EU - and the US and Japan - closes its own market to would-be, Third World exporters, or restricts access with quotas and import duties.

To prevent a collision over agricultural trade in Cancun, the EU has agreed another reform of the CAP. Subsidies will not be abolished - as the Third World countries and the big agricultural producers, like Australia and New Zealand, would like. But they will be "decoupled" from production - European farmers will receive subsidies that are not dependant on how much food they produce.

The French government has reluctantly agreed to this- a sign, the critics say, that it will have very little effect.

One of the best-known critics of the world trading system, and self-proclaimed defender of rights of farmers and the hungry in the Third World, is a French small farmer's leader, José Bové.

If subsidies to French, and other European farmers, are causing poverty in the Third World, then M. Bové should be against them, shouldn't he? No he wants more of them.

M. Bové says free trade would benefit food multinationals and not eradicate poverty or hunger. He wants to revert to something called "food sovereignty": everyone should have the right to protect their own agricultural markets as much as they like.

How this would help those Third World countries that have a natural advantage in food production is not clear. But M. Bové's ideas, taken up by the anti-global movement, are at least equitable. They would also be destructive to France, which is the world's second-largest agricultural exporter - after the US.