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Why no one wins in the global food fight

(Monday, Sept. 22, 2003 -- CropChoice news) -- Brian Halweil, Washington Post op-ed, 09/21/03: Free trade in food is simple. At least on paper.

If Mexico produces corn for $3 a bushel, and the United States can do it for $2, then Mexicans get out of the corn-growing business and eat American corn.

Ah, but in the real world, an ear of corn isn't always just an ear of corn. Food is wrapped up in culture, ethnic pride, cuisine and national security. Everyone present at the global trade negotiations in Cancun, Mexico, last week understood this -- though delegates from the United States, Europe and Japan pretended not to. As a result, a block of participants from Africa, Asia and Latin America walked out and the talks disintegrated. Suddenly, the flotilla of farmers, environmentalists, consumer advocates and workers protesting outside the fenced-off convention center shared a common enemy with the Third World delegates inside who were arguing that global rules on agricultural trade were crippling their impoverished farm economies.

In the aftermath, trade experts warned that the world may lack the stomach for further market-opening measures, and that the global economic slowdown would continue. But the collapse in Cancun should spur some creative thinking about how both farmers and governments can have their subsidized, eco-friendly cakes and eat them, too.

Part of the problem is that the theoretical calculus of global trade treats food as little more than a generic commodity, bereft of national origin. Trade officials do not want to know if an ear of corn is from Zimbabwe, the Philippines or deep in the heart of Texas.

But for trade ministers from African, Asian and Latin American nations -- where most people still derive at least part of their income from farming -- the difference between an ear of corn raised and sold domestically and one that is imported using scarce foreign exchange is crucial. Current trade agreements prevent these nations from favoring their own farmers and homegrown produce. Worse, the same agreements allow First World governments to subsidize their own farmers -- to the tune of $300 billion a year.

These subsidies allow wealthy nations to sell farm commodities on world markets at well below the cost of production. (In a nutshell, if it costs a farmer $3 to grow a bushel of corn, but the market is only paying $2 a bushel, the government pays the farmer an extra buck, allowing the farmer to sell the crop for less than he otherwise could.) This is called dumping, and it's flatly illegal under international trade rules.

Both the United States and the European Union are notorious for dumping agricultural products. A recent report from the Institute for Agriculture and Trade Policy, a Minneapolis-based agricultural research group, estimated that between 1990 and 2001, the United States sold cotton on the world market at almost 60 percent below the cost of production. Wheat was underpriced by 40 percent, while corn and soybeans were 25 percent to 30 percent below costs. The below-cost products drive farmers in Africa, Asia and Latin America out of business by stealing markets in their own backyards.

Mexico supplies a stark example. The country that hosted the Cancun talks also provided a large portion of the protesters: its own displaced farmers. Under the North American Free Trade Agreement (NAFTA) and other trade rules, Mexico has been encouraged, even forced, to rely increasingly on cheap U.S. corn.

How could that be? Mexico's lower labor and living costs should give local growers a competitive edge. But Uncle Sam has his thumb on the scales in the form of $10 billion in annual subsidies that enable U.S. growers to sell #2 Yellow Corn at $2.20 per bushel -- about 25 percent below production costs. The result: Mexico now imports more than a quarter of its corn from the United States. That represents a nearly four-fold surge since NAFTA took effect nine years ago, according to the U.S. Department of Agriculture. Over the same period, inflation-adjusted prices for Mexican corn have plummeted by more than 70 percent, prompting millions of local growers to abandon their farms and seek work in nearby cities or in the United States. As "Dumping Without Borders," a report prepared for Cancun by the aid group Oxfam International, puts it: "There is a direct link between government agricultural policies in the U.S. and rural misery in Mexico."

Thus, when Third World representatives at Cancun demanded that wealthy nations eliminate their agricultural subsidies, it wasn't simply to gain access to the world's most affluent markets, where imported food now looks artificially expensive. They wanted to give farmers in Africa, Asia and Latin America a fighting chance in their own domestic markets.

Why does this argument seem so unpalatable? The United States and Europe developed their farm subsidies half a century ago to provide a safety net for their farmers. By spurring farmers to produce more than was needed, these nations were able to hedge against shortages, famine and the risk of being at another country's mercy for staples.

But the subsidies, which are tied to the amount of land under cultivation or the volume of commodity produced, have had the perverse effect of favoring the largest producers and helping to drive smaller farmers out of business in both the United States and Europe. (A recent survey by the Environmental Working Group found that the largest 10 percent of American farmers raked in 65 percent of subsidies.) These subsidies also deny poorer nations the kind of farmer-led growth and food security that was considered so critical to recovery in post-war America and Europe.

This is not to argue that every locale should produce all of its food. Food trade is natural and beneficial; self-sufficiency is not always practical or prudent. But nations that increase their self-reliance can buffer themselves against the whims of foreign markets, while creating local jobs and income.

The irony is that hardly anyone seems to support these subsidies. Small farmers argue that the payments favor large growers. Environmentalists say they encourage farming that is low on diversity and high on pesticides and other chemicals. Tight-fisted bureaucrats say they waste taxpayer dollars. International development groups and charities say they exacerbate global poverty. The persistence of the subsidies testifies to the awesome influence of the interest groups that clearly benefit: the largest farmers and international food processors and brokers such as Archer Daniels Midland and Cargill.

But subsidies need not stick in our collective craw forever. Creative governments can restructure their farm-support programs to reduce the burden on taxpayers and improve the environmental performance of farms, without crippling producers in poorer nations.

Snake oil? Hardly. A few innovative nations in Europe already are shifting subsidies away from paying farmers to produce specific commodities toward rewarding farmers for meeting ecological goals: rotating crops, reducing pesticide use and creating on-farm refuges for wildlife. The United Kingdom is considering shifting 5 percent of its subsidies, and France is flirting with 20 percent. Since the mid-1990s, Swiss farmers have received payments based on how well they comply with certain environmental standards. (Farmers get extra money for planting strips of wildflowers or moving livestock out of crowded feedlots.) Enrollment now includes 85 percent of Swiss farmland. And, in the past decade, pesticide use has fallen by a third, phosphate fertilizer use is down 60 percent and nitrogen fertilizer use has been cut in half.

This shift spreads farm payments more equitably and boosts struggling rural economies without distorting international markets. And taxpayers -- who now provide half of farm income in wealthy nations -- should be happy to know that their money isn't going to fatten agribusiness.

Still, these measures are minor and slow to arrive, even in Europe. And they are all but absent in the United States. (Early drafts of last year's farm bill included some new "conservation payments," but Congress chopped most of them out of the final draft and hasn't funded all the ones that remain.)

Global trade in food isn't going to vanish if Third World countries become more self-sufficient. Since 1961, the value of food shipped between countries has tripled, while the tonnage has grown four-fold. To remain relevant, trade agreements must create routes for Third World governments, which cannot afford to subsidize their farmers, to support their rural economies in other ways. As long as wealthy nations remain mired in the Dark Ages of farm policy, however, international trade talks are bound to stall, and the world will never share the benefits that greater trade is supposed to bring.

Author's e-mail: halweil@worldwatch.org

Brian Halweil is a senior researcher for food policy at the Worldwatch Institute.