April 09, 2004

Ending Farm Subsidies Wouldn’t Help the Third World? It Just Ain’t So!

E. C. Pasour explains how farm subsidies in the "first world" produce great damage in low-income countries:

Both the EU and the United States maintain programs to directly subsidize exports of farm products. The EU spends about $3.3 billion per year doing this. That gives EU goods an artificial advantage in international markets and works against the interests of producers in poor countries.3

Direct export subsidies have long been a prominent feature of U.S. farm programs. Public Law 480, enacted in 1954, is still going strong. It was instituted to rid government warehouses of surplus wheat, corn, cotton, and other farm products acquired through price-support programs. Dubbed "Food for Peace" to burnish its desired altruistic image, PL 480 provides easy credit and donates food to people throughout the world in response to famine and other emergencies.

Farmers in poor nations are especially critical of U.S. food aid for humanitarian purposes. Unlike the EU, which for the most part donates cash to buy food from producers in stricken countries, the United States buys food from American farmers. The Department of Agriculture (USDA) estimates the total value of U.S. food aid to be about $1.5 billion this year.

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Indirect subsidies in wealthy countries also damage producers in low-income countries. The U.S. sugar program, for example, holds domestic sugar prices above the world price through import quotas. It also reduces opportunities for sugar producers in low-income countries. Indirect export subsidies are just as harmful to producers in low-income countries as the direct subsidies associated with the production of beef, corn, cotton, rice, wheat, and other commodities in first-world countries.

Farmers in the United States become irate when low-cost imports undercut domestic prices. Farmers in low-income countries are just as concerned about the effects of subsidized agricultural imports on their markets. It is ironic that one arm of the U.S. government provides assistance for economic development in poor countries while another subsidizes farm exports that stifle development.