UNITED STATES: Huge farm subsidies expose 'free trade' hypocrisy

May 15, 2002


Hard on the heels of the US House of Representatives' May 2 approval of a bill containing a mammoth US$249 billion, six-year package of farm subsidies, the US Senate endorsed the legislation on May 8. US President George Bush has given assurances that he will give the bill his stamp of final approval. The farm bill subsidies are the biggest in US history.

The Farm Security and Rural Investment Act provides for a 70% increase in subsidies — US$82.8 billion — compared to the previous farm bill.

Such subsidies contradict the "free trade" doctrine that Washington has been preaching, especially in relation to the rules of the World Trade Organisation (WTO) which oblige all countries to reduce and eventually remove all trade barriers. Government assistance that distorts trade, which the new US farm subsidies will do, are supposed to be eliminated.

Because the US is such a major agricultural producer and exporter, the new subsidies will seriously disadvantage its competitors. Third World producers — already struggling because of WTO requirements to sharply reduce tariffs and other protection — will be particularly hard hit.

Under the WTO regime — so its propaganda goes — all member countries must progressively open their markets to produce from other member states. A longer transition period is allowed for developing countries. In reality, "exemptions" give the countries with economic muscle a much better deal.

Since the WTO rules were implemented six years ago, many Third World countries have been hit by the flood of foreign (mainly First World) imports. However, First World governments have done little to deliver on their promises to open their markets in return. The rich countries have offered numerous pretexts that are permissible under some WTO "special provisions".

For example, under the WTO's Agreement on Agriculture (which is currently being expanded under the ongoing "Doha round" of trade negotiations) only 25 WTO members can subsidise exports. This exclusive club is made up of those countries which had subsidised their exports prior to the agreement. The condition is that the subsidies must be progressively reduced.

The US is a member of this club, as are the Europe Union (EU), Canada, New Zealand and Australia. Third World governments cannot match the subsidies that rich-country governments can afford. This lopsided rule deprives Third World countries of an important policy tool.

Fudging the rules

Moreover, the attempts of First World countries to circumvent the rules, or fudge the definitions of what is and is not permissible, have been rampant. This is what the Bush regime is trying to do.

Under WTO rules, support for domestic agriculture is permitted. Only those measures with "serious trade distorting effects" — those in the "amber box" in WTO language — are limited by the WTO. Measures with "minimal trade distorting effects" — those in the "green box" — are free from WTO control.

However, the dividing line between these "boxes" can be fudged, at least by the economically powerful countries. At present, the WTO limits US subsidies in the "amber box" to US$19.1 billion a year.

The May 3 Inside US Trade observed that the last time the US notified the WTO of its domestic agricultural support payments, agriculture secretary Ann Veneman "classified a chunk of amber-box payment as non-commodity specific in order to avoid breaking the $19.1 billion cap".

The magazine quoted "informed sources" as saying that the latest farm bill has been carefully written so that payments for specific commodities are categorised as "non-commodity specific". The excuse is that "the payments will not influence planting because they do not change, even if farmers switch to a different commodity".

Another trick is that US secretary of agriculture will be authorised to adjust the payment level if it is deemed necessary to avoid breaching the WTO limits.

Not surprisingly, the EU is outraged. EU commissioner of agriculture Franz Fischler described the so-called anti-cyclical program contained in the new US farm bill as "hidden export subsidies" designed to "depress domestic prices to block out imports".

Fischler said on May 1 that the new subsidies marked "a blow for the credibility of the US policy in the WTO", adding "we cannot negotiate on the basis of 'do as I say, not as I do'".

Canada's agriculture minister Lyle Vanclief said on May 5 that Ottawa was considering increasing aid to Canadian farmers to counter the new US subsidies.

Brazil's foreign minister Celso Lafer said on May 3 that Brazil would not "hesitate to use all possible options of commercial defence to nullify the harmful effect of subsidised products heading for Brazil".

Lafer predicted that the US subsidies would have "negative consequences" for the negotiations for the Free Trade Area of the Americas agreement which will cover 34 countries across the Americas.

Subsidies for the rich

There has been widespread outrage in the US, especially following the recent revelation by the Washington-based Environmental Working Group (EWG — visit <http://www.ewg.org>) that the bulk of existing US farm subsidies have gone to a handful of rich and corporate landowners, excluding the majority of people who work the land. The May 2 New York Times further pointed out that two-thirds of existing subsidies had gone to just 3% of US farmers.

The top 10% of US farms already produce nearly two-thirds of US food, according to the US department of agriculture. This concentration is set to intensify with the new subsidies.

The Sustainable Agriculture Coalition has described such pro-rich subsidies as taxpayers "giving mega-farms a down payment to buy out their struggling neighbours, who won't get a penny".

Calling the subsidies a move to buy electoral support, the Atlanta Journal and Constitution pointed out on January 16 that 90% of farm subsidies have gone to just five crops — corn, wheat, cotton, rice and soybeans — while 60% of US farmers, who grow most of the United States' vegetables and nuts and produce most of its poultry and cattle, are not even eligible for such welfare.

According to the EWG, the top 10% of Iowa recipients, about 16,000 farmers and landowners, received nearly half of all federal US farm subsidies in the five years to 2000.

In a feeble attempt to repel criticism, Veneman pointed out on May 2 that the EU or Japan have much higher domestic support limits under the WTO than the US.

Veneman is right, at least to the extent that neither the EU and Japan are angels and share Washington's double standards on trade issues. According to Organisation for Economic Cooperation and Development estimates, EU support for its producers in 2000 was worth US$90.2 billion (38% of the value of production), while Japan's totalled US$59.9 billion (64%). This compares to US$49 billion by the US (22%).

The truth is that all First World governments are hypocrites. Altogether, they subsidise their farming industry to the tune of US$350 billion a year while, at the same time, they try to squeeze more impoverished Third World producers out of their only means of livelihood.

Washington's hypocrisy is particularly astounding. It openly breaches the spirit of the trade rules while vigorously pumping out the "free trade" rhetoric, and is the most aggressive in punishing others for the slightest suspected transgressions of WTO rules.

The US launched 79 WTO-allowed "anti-dumping" investigations last year, more than any other WTO member, in a bid to discourage imports. In March, it imposed tariffs of up to 30% on steel imports by stretching what is reasonably acceptable under another WTO "special provision".

The May 1 Los Angeles Times, summing up the impact of the new subsidies, said the farm bill will "promote overproduction, driving down world commodity prices and preventing many developing countries from expanding their agricultural exports".

From Green Left Weekly, May 15, 2002.
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