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WTO cotton ruling: Time to reevaluate bankrupt U.S. agriculture and trade policy By R. Dennis Olson
(Friday, May 7, 2004 -- CropChoice guest commentary) -- The U.S. government lost the first round of a dispute at the World Trade Organization last week when a panel ruled that our cotton program violated international trade rules. There is much hand wringing from farm state legislators and Bush Administration officials about what to do. But
instead of trying to untangle the WTO's trade rules, it's time to confront
the fact that our current U.S. agriculture and trade policy has not only
devastated farmers around the world, but has failed U.S. farmers as well.
The Brazilian victory provides an opportunity to reevaluate the failures of the bankrupt agricultural trading system, and begin an open and honest debate that would examine viable alternatives.
According to the promises made by the agribusiness cartels and other
supporters of the existing system, passage of both NAFTA and the 1996 Farm
Bill were supposed to have gotten the government out of agriculture, and
let farmers export their way to prosperity. The record is now in, and the
promises have not materialized on either count. According to a recent
study by the University of Tennessee's Agricultural Policy Analysis
Center, since NAFTA and the 1997 farm bill have been implemented, "U.S.
crop exports have remained flat or declined, farm income derived from the
marketplace has fallen dramatically, government payments to farmers have
skyrocketed, and consolidation and corporate control in the marketplace
have reached record levels."
Brazil challenged the U.S. cotton program at the WTO because widespread
dumping at below cost of production prices was driving global prices down,
and hurting Brazilian cotton farmers. Earlier this year, my organization
issued an analysis that found U.S. cotton was being exported at over 60
percent below the cost of production in 2002 - continuing a pattern that
has steadily worsened over the last five years.
In essence, farm programs for the major commodities grown in the
U.S.--including cotton--stimulate over-production, which in turn causes
lower prices. When you strip away the technical jargon, the U.S. cotton
program--like the programs for corn, soybeans, and wheat--are constructed
to benefit multinational agribusiness cartels, which are reaping huge
profits from the rock bottom prices this system provides.
Brazil and many developing countries are hoping that if the WTO ruling
compels Congress to slash U.S. farm subsidies, farmers will stop
producing, production will fall, and supply will balance demand. But
historically, farmers produce as much as they can whether prices are high
or low. If subsidies are taken away, they'll simply try to produce more to
make up for lost income. The independent farmers who can't survive low
prices without subsidies will be bought out by even larger corporate
farms. The loss of cotton subsidies will likely just cause a shift to
other crops like corn or soybeans-creating similar problems for those
crops. The result will be fewer, larger farms, both in the U.S. and
Brazil; and overall production of the major U.S crops will stay about the
same or even increase on world markets. We've already seen this play out
in Mexico, Canada and Australia-all countries that have cut farm subsidies
over the last decade and have seen overall production stay flat, while the
number of farmers forced from the land have increased.
A fair, market-oriented farm policy should include programs that limit
production through tools like acreage set asides, and that manage
inventory in the same way companies do in other sectors. These are not new
concepts for U.S. agriculture. The government used to act as an honest
broker to ensure a fair marketplace. Acreage set-asides, farmer owned
reserves, and government price supports all helped to make the market work
for farmers prior to their complete dismantlement under the 1996 Farm
Bill. These tools buffered farmers and rural communities from low prices
in times of over-supply, and protected consumers from unscrupulous price
gouging in times of shortages when harvests failed.
A new farm and trade policy for agriculture would have to be updated for
the changing times. The U.S. is no longer the only dominant force for
setting world prices for major commodities. And there are new
developments to consider, like the emergence of bio-energy producing crops
is one of the biggest drivers for domestic demand. The APAC study
projected that a new farm program based on acreage set asides and combined
with crop reserves, with an emphasis on bio-energy crops, could lift
commodity prices for farmers both in the U.S. and around the world, while
cutting U.S. farm subsidies by $10 billion per year.
The WTO ruling provides a unique opportunity to debate whether we want an
agriculture policy that supports independent family farmers, or one that
subsidizes multinational agribusiness cartels. At the forefront of such a
debate should be the goal of ensuring that market prices paid to farmers
at the point of sale cover the cost of production. Such policies would
not only make most government subsidies unnecessary for our farmers by
providing them with a fair price from the marketplace, but would also
eliminate agricultural dumping and thereby help farmers and rural
communities in Brazil and around the world.
R. Dennis Olson is the Director, Trade & Agriculture Project | |
