Author: Peter Hartcher Washington
Publication: Australian Financial
Review
Date: May 10, 2002
According to WTO limits, the United
States can shell out no more than $19.1 billion a year in federal aid to
farmers.
Agricultural commodities account
for 52 percent of Argentina's exports. That proportion stands at 39 percent
in Bolivia, 33 percent in Brazil, 15 percent in Chile, 37 percent in Colombia,
67 percent in Ecuador, 24 percent in Peru and 55 percent in Uruguay.
The US Senate has ratified a farm
bill that increases American farm subsidies by 80 per cent to a record
total of at least $US180 billion($333 billion) over the next 10 years,
a brutal blow to farmers and free trade around the world.
The torrent of subsidised new farm
produce is expected to depress the price of farm produce around the world.
The European Union, Canada, Brazil, Australia and New Zealand have been
among the governments to protest. Poor countries that are dependent on
agriculture exports will suffer most acutely but all farm-trading nations
will feel the effect. In a country with fewer farmers than prisoners, the
US Federal Government will now be paying farmers US60cents in subsidies
for every dollar of output, according to figures from the US Department
of Agriculture and the Congressional Budget Office.
The lavish spending, larger than
the entire national output of 158 of the world's 180 measured economies,
is designed to shore up the rural vote at November's mid-term election
for the US Congress. "This is a total catastrophe for global trade," said
the global economist at the Zurich Group in Chicago, David Hale. "This
is totally hypocritical policy and it undermines everything the US stands
for." The new round of worldwide market-opening negotiations in the World
Trade Organisation launched last year at Doha were now effectively dead,
he said. Officials around the world agreed that the round was, at least,
in grave trouble.
The farm bill has been passed by
both Houses of Congress and is set to be signed into law by the President,
who has campaigned for free trade yet has declined to exercise his veto
power over this legislation. The Wall Street Journal, editorialising that
the bill was "a bucket of slop that has even Washington agog", observed
that the price of the farm vote was too high: "We all know democracy isn't
cheap, but this is ridiculous." The bill was described by two of its congressional
opponents as having the effect of "turning back the clock 50 years in federal
farm policy" in making American farmers increasingly dependent on cheques
from the Government. "Growers will overproduce, and that will drive down
world market prices, which become more volatile and lower and we are going
to have to live with those prices," the deputy chief executive of the National
Farmers' Federation in Canberra, Lyall Howard, said.
The spending is lavished on a minuscule
fraction of the population, skewed in favour of the biggest and richest
farmers. The US has only 400,000 farms that are worked full time and a
farm population of 2 million people. That's 0.7 per cent of the national
population. The new bill provides $US18 billion in payments to farmers
next year. It averages out at $US9,000 for every farm worker in the nation
but the payments are not distributed evenly.
Last year, as a guide, 73 per cent
of all subsidies went to the richest 10 per cent of farms. Among needy
recipients were David Rockefeller of the Rockefeller dynasty ($US134,000),
media magnate Ted Turner ($US12,000) and the chief executive of the celebrity
fraud case Enron Corp, Ken Lay ($US6,000). Brian Riedl, a conservative
US farm policy specialist, observes that "historically every farm bill
ends up costing at least double the cost estimated at the time it was passed".
That's going to be a problem. Not only is the Federal Government plunging
back into deficit this year's is projected to be $US100 billion but the
US has undertaken in the World Trade Organisation to limit market-distorting
subsidies to $US19.1 billion a year. This limit is likely to be tested
within a couple of years.
And even these extraordinary sums
likely to make the US an even bigger farm subsidiser than the European
Union for the first time, according to Riedl don't convey the true dimensions
of US agricultural protectionism. The subsidies are directed almost exclusively
at five crops: wheat, corn, cotton, soybeans and rice. But this doesn't
embrace two of the most heavily cossetted sectors sugar and dairy because
they are protected in an entirely different way. Sugar and dairy are not
supported with subsidies but protected by government quotas and tariffs
and price regulations.
The cost of these, instead of being
paid by taxpayers as subsidies, is paid by shoppers through high prices
at the supermarket. And they will pay $US271 billion in higher prices over
the next decade, Riedl estimates, for their milk and sugar. Together with
the minimum cost of the new farm bill, that takes the total cost of US
farm support to $US451 billion over 10 years. Will any of this help the
American farm sector to grow stronger? Of course not. It is a desperately
cynical replay of the same policies that have failed wherever they have
been tried.
As Senator Richard Lugar, deputy
chairman of the Senate Agriculture Committee, points out, the subsidies
will create an increasingly dependent and inefficient farm sector. In January,
George Bush said: "Free markets and open trade are the best weapons against
poverty, disease and tyranny." In allowing this farm bill to weaken US
agriculture, corrupt world markets and attack the income of the Third World,
what is this new vision he is offering us?
