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Subsidy struggle

(Tuesday, Sept. 9, 2003 -- CropChoice news) -- The following collection of stories and commentary focuses on the WTO, agriculture subsidies. The last two pieces, both from the Agricultural Policy Analyis Center, provide a bit of alternative thinking.

  • Western Farmers Fear Third-World Challenge to Subsidies


    AIX-EN-PROVENCE, France, Sept. 8 — Christian Vachier, the last sheep farmer in his small commune north of here, is wondering whether his pastoral life in the Lubéron mountains is about to end.

    Halfway across the world, Dean Argotsinger, who raises corn and soybeans on nearly 2,000 acres of land once cultivated by his father and grandfather outside Denison, Iowa, has the same worries.

    Mr. Vachier grazes his flock on 36 acres of pasture and sends them off in the summer to wild mountain meadows, a land-intensive and expensive method underwritten by checks from the European Union and the French government. His lamb is never sold outside the region, much less overseas.

    Mr. Argotsinger is a very different kind of farmer. He considers himself modern and efficient. He uses chemical fertilizers and receives more than $336,000 from the government every four years and sells his grain in the global marketplace.

    But both farmers worry that they will be the targets when trade ministers from around the world meet in Cancún, Mexico, on Wednesday to begin deciding which subsidies to cut back in the wealthiest nations in order to lessen the damage the subsidies inflict on poor farmers in the developing world.

    The world's wealthiest nations give more than $300 billion of subsidies to their farmers every year, more than the gross national product of sub-Saharan Africa. Those payments are now the biggest complaint of poor nations.

    "It's ridiculous that rich farmers are getting richer and poor farmers are getting poorer," said John Nagenda, a farmer in Uganda and adviser to President Yoweri Museveni. "We are kept out of the world market. When countries like America, Britain and France subsidize their farmers, we get hurt."

    Siphiwe Mkhize, agriculture attaché at the South African Embassy in Washington, said: "We would give up foreign aid if the farm subsidies were eliminated. The subsidies give the rich-nation farmers the upper hand in all markets, and we can't even compete in our own markets, much less theirs."

    Mr. Vachier, however, said, "Why should world trade rules dictate whether French taxpayers can pay me to preserve our way of life and protect our countryside?"

    Though he has different views about world trade, Mr. Argotsinger has similar complaints.

    "The federal government made a promise to us farmers in the farm bill last year and all at once they're telling us the World Trade Organization can take that away from us," he said at his Iowa farm.

    From the hillside vineyards of Europe to the dense cornfields of Middle America, dozens of farmers said in interviews that they were anxiously awaiting the outcome of the talks in Cancún, where the first order of business is farm policy.

    In the past decade, the top quarter of farmers in the developed world have steadily gained most of the subsidies — 70 percent in Europe and 90 percent in the United States, according to the Organization for Economic Cooperation and Development. Those payments allow industrial-size farms to produce many more acres of crops than are needed for domestic consumption, and they are sold overseas at low, subsidized prices.

    Farmers in developing markets cannot compete with the cheap imports. They lose out in their own markets and have little chance of exporting.

    A recent American-European farm proposal disappointed many developing nations. Seventeen developing nations countered by asking the United States to make deeper cuts in its subsidies and Europe to eliminate subsidies that underwrite exports.

    The U.S. and Europe: How Their Subsidies Differ

    Subsidies began in times of hardship — during the Depression in the United States, to help farmers survive as their costs rose and market prices stagnated, and after World War II in Europe, to encourage farmers to increase food production and avert malnutrition.

    But today Western countries are drowning in food, their citizens more likely to suffer from obesity than starvation, and the huge surpluses are sold cheaply overseas.

    The American system — with farms 10 times larger than those in Europe — has grown the most lopsided. In 1995, the top 10 percent of American farmers received 55 percent of government subsidies; in 2002 their share rose to 65 percent, according the Environmental Working Group.

    While Europe also gives more money to its larger farms, it is slowly shifting to reward small farmers like Mr. Vachier who raise expensive, high-quality food that is rarely exported, subsidies that are considered harmless to the developing world. "Cutting these subsidies to the huge farmers in favor of the small farmers would also help small farmers in the developing world," said Stefan Tangermann, author of the O.E.C.D. report.

    Pascal Lamy, the top European trade official, said the answer for European agriculture "is shifting from quantity to quality." When the European Union grows by 15 countries next year, farm subsidies will be further diluted.

    Philip Bloomer, director of advocacy at Oxfam, which lobbies against farm subsidies, said that while Europe, including France, is still among the worst offenders in farm policy, it is slowly understanding that it has to change.

    "In Europe, we believe there is a glacial movement in the right direction," said Mr. Bloomer. "In the United States, there is a fairly rapid movement in the wrong direction."

    The United States openly embraces increased trade as the answer for American agriculture, heavily subsidizing the biggest farms in an industrialized system that generates huge surpluses for export. Robert B. Zoellick, the United States trade representative, boasts that one out of every three acres in the United States is planted for export.

    It is highly unlikely that either the United States or Europe will offer the concessions needed to undo the damage of the system.

    "Our American subsidy system is a crime, it's a sin, but we'll talk a good game and get away with doing almost nothing until after the presidential election," said C. Fred Bergsten, director of the Institute for International Economics in Washington.

    Agriculture is now one of the few sectors of the American economy where the United States runs a trade surplus, and American businesses that thrive on subsidized global trade want to keep the subsidy system in place.

    In the past decade, industrial-scale farmers have tipped their allegiance decisively toward the Republican Party, which supports the current system. Political contributions from agribusiness jumped from $37 million in 1992 to $53 million in 2002, with the Republicans' share rising from 56 percent to 72 percent, according to figures compiled by the Center for Responsive Politics.

    Those commercial companies were not disappointed when President Bush signed into law last year a new farm policy that increases permanent subsidies by $40 billion a year, even though Mr. Zoellick had promised the developing world that subsidies would be cut in this new round of trade talks.

    "Reducing these subsidies and removing agricultural trade barriers is one of the most important things that rich countries can do for millions of people to escape poverty all over the world," said Ian Goldin, the World Bank's vice president for external affairs. "It's not an exaggeration to say that rich countries' agricultural policies lead to starvation."

    The Name of the Cheese: Defending a Way of Life

    For Europeans like Jean-Pierre Boisson, mayor of Châteauneuf-du-Pape, a small village in Provence, subsidies also represent survival of a centuries-old way of life and of the kind of traditional farming that produces the expensive, high-quality wine, olive oil and meat for which his region is known.

    Europe's environmental programs receive a mandated 15 percent of the $46.3 billion in annual European farm subsidies.

    The farmers around Châteauneuf-du-Pape worry that in Cancún, trade ministers with little understanding of agriculture and its effect on a nation's food system and countryside will cut the wrong programs.

    Mayor Boisson is also watching carefully whether the trade ministers adopt a universal respect for geographic indicators, a form of copyright tying the name of a food product to its region. Those labels guarantee the authenticity of products like Roquefort cheese and grand French wines; for farmers like Mr. Boisson, those labels — and not government subsidies — ensure his profits.

    Mr. Lamy, the European trade minister, has told colleagues that if the World Trade Organization is willing to support geographic indicators, he would discuss reducing export subsidies.

    Phillipe Mauguin, director of the French government's Institute of Appellations of Origin, said the government hoped that 20 percent of French produce would eventually besold under a specialty labeling. France already sells $18 billion in products protected by appellations of origin.

    "Without such labeling, there is zero protection for local people, zero protection for local culture," said Mr. Mauguin.

    An Industry Remade: The Passing of the Farmer

    Iowans like Mr. Argotsinger know what it means to lose the traditional farm way of life.

    When the members of the Denison High School class of 1963 held their 40th reunion this summer, they counted only one farmer among them. Over cold beers and enchiladas, they guessed that at least 40 of the 108 men and women in their class were either raised on a farm or spent their summers on the farm of a close relative.

    In one generation, they said, they became witnesses to the remaking of American agriculture, which has been turned upside down by globalization, altered federal farm subsidies and the demands of the "big guys" to make agriculture run on the principles of mass production.

    "The subsidies let the big farms get bigger, and the big companies end up controlling everything around here, paying low prices for grain so they can control markets around the world," said Gaylord Moeller, the surviving farmer of the class of 1963. He said he had held on to the 160-acre farm originally settled by his German great-grandfather because he had resigned himself to living modestly.

    Thomas Dorr, the under secretary of agriculture for rural development and an Iowa farmer himself, advocates the industrial-size farms and said in an interview that it was wrong-headed to view agriculture in terms of small farms versus large. American agriculture, he said, simply reflects the increased global market.

    "Marketplaces are always going to change, they are always going to fluctuate," he said. "Everybody always frames it in small versus large instead of where the opportunities are."

    Mr. Zoellick, the trade representative, has proposed cutting over $8 billion in subsidies, but only if Europe makes deeper cuts.

    Keith Collins, the chief economist at the Department of Agriculture, said there is "compelling evidence" that subsidies do increase production, distort trade and undermine poor countries.

    "Payments increase production and production increases exports," Mr. Collins said in an interview.

    This American emphasis on exports has not only increased the size of the farms, but has also limited what is grown on them.

    When Denison's boomers were born in 1945, Iowa's farmers grew 17 commercial crops, including potatoes, cherries, peaches, plums, pears, strawberries, raspberries and wheat. Farmers sold vegetables from their truck gardens at harvest time.

    Now the commercial crops are down to four — feed corn, soybeans, hay and oats — and Denison has a hard time filling a farmer's market one afternoon a week.

    "It's easier to get fresh fruits and vegetables in Des Moines now than it is in Denison," said Cecelia Servoss Arnold, a member of the class of 1963.

    Denison is the birthplace of Iowa Beef Packers, among the first slaughterhouses to use a modern assembly line system that revolutionized the meat industry by eliminating the need for most skilled labor.

    Grain farms like Mr. Argotsinger's literally fed those new slaughterhouses by raising the crops needed to feed the hogs. Soon an industrial system was introduced to raise enough hogs to be killed by the tens of thousands every day.

    Farmers emptied their barnyards and built factory-size sheds in the rolling hills. They pack hundreds of hogs into each building, feeding them with automated tubing and siphoning off their excrement into open vats known as manure lagoons.

    While the odor and pollution are causing political battles in the state, supporters say they are an integral part of the new industrialization of agriculture.

    "We're part of a global protein market," Mr. Argotsinger said. "I'm growing corn for meat that will be sold to China."

    Source: http://www.nytimes.com/2003/09/09/international/europe/09FARM.html

  • Report Reveals Top Farm Subsidies of 2002


    WASHINGTON (AP) -- Almost two-thirds of $12.2 billion in farm subsidies went to the top 10 percent of farmers and businesses that received payments last year, including a chicken company and the insurance firm John Hancock, says an advocacy group.

    According to information released Tuesday, Environmental Working Group said a review of government records showed $8 billion in subsidies went to 170,717 recipients out of 1.7 million overall recipients. The largest payments went to farmer-owned cooperatives, a chicken company, a seed business and a wetlands conservation group.

    The organization, which obtained payment information from the Agriculture Department through Freedom of Information Act requests, said big subsidies consistently have gone to just 10 percent of all recipients in each of the past seven years.

    ``From our standpoint, there ought to be a limit on how much those operations get,'' said Kenneth Cook, president of the organization.

    Payments in 2002 ranged from a few thousand dollars to more than $100 million. Two rice-growing cooperatives from Stuttgart, Ark., received the largest subsidies: Riceland Foods Inc., $110 million, and Producers Rice Mill Inc., $83 million. Third was Farmers Rice Co-op in Sacramento, Calif., with $28 million.

    Chicken giant Pilgrim's Pride Corp., of Pittsburg, Texas, was the fourth largest recipient. It got $15 million from the government, although there is no subsidy program for poultry.

    Ray Atkinson, a Pilgrim's Pride spokesman, said he doesn't know why the money is classified as a subsidy because it was actually an indemnity for farmers who lost flocks of chickens to an outbreak of avian influenza, a bird disease. The infection in Virginia last year forced farmers to cull millions of chickens to prevent the disease from spreading and cost the industry $130 million.

    Cargill Inc., a seed and food company, also got $10.8 million in payments last year for the outbreak.

    John Hancock Mutual Insurance, based in Savoy, Ill., is one of several businesses that received payments from the government for peanuts. A plan passed by Congress last year allowed those who had peanut quotas to sell to the government special licenses once used to support the price of peanuts. John Hancock made nearly $2 million off the buyout. Company officials did not immediately return phone calls seeking comment.

    Some of the largest states in food production received the most subsidies last year. Texas got the most -- $1.2 billion -- followed by Iowa with $740 million, Georgia with $660 million and Arkansas with $659 million. Farms and businesses in Rhode Island took in just $650,992 -- the least of the 50 states.

    When the information is broken down by crops, corn farmers received the largest share of payments. They got nearly $2 billion. Farmers who conserved land got $1.8 billion, followed by cotton farmers with $1.7 billion and peanut growers with $1 billion.

    In addition, famous names still dot the list of people and firms that received payments from 1995 to 2002. Among them is Linda Ebbers, wife of former WorldCom chief executive Bernie Ebbers. She got $3,014 over the course of seven years from the government land conservation program. Records also show that media mogul Ted Turner, National Basketball Association player Scottie Pippen and Sam Donaldson, an ABC newsman, continue to get subsidies.

    Payments are doled out to owners of farmland and are not based on income. This has frustrated many farmers and government watchdog groups, who argue that Congress needs to revamp the subsidy programs to target farmers who need help.

    Last week, a commission established by Congress recommended the Agriculture Department close loopholes that let some farmers collect excessive subsidies by changing eligibility requirements.

    President Bush signed a $190 billion farm bill that covers farmers until 2007. It puts an annual $360,000 ceiling on loans and subsidies that can be collected by an individual farmer or farm.

    Farm groups are split on the issue. The American Farm Bureau is opposed to payment limitations, but other organizations, such as the Center for Rural Affairs, believe a lower ceiling is needed.

    Sen. Charles Grassley, R-Iowa, has said he intends to propose new limits when Congress discusses the 2004 budget for the Agriculture Department.

    Agricultural ministers from around the world are meeting in Cancun, Mexico, to discuss cutting subsidies to improve trade conditions.

    On the Net:

    Environmental Working Group: http://www.ewg.org

  • September 8, 2003
    Bush Works Phones in Quest of WTO Deal

    WASHINGTON/CANCUN, Mexico (Reuters) - President Bush reached out to developing world leaders on Monday to break a deadlock on agriculture that has blocked progress in world trade talks, a White House spokesman said.

    As top trade officials gathered for a World Trade Organization meeting in the Mexican resort of Cancun, Bush worked the phones, calling Brazilian President Luiz Inacio Lula Da Silva, Pakistan President Gen. Pervez Musharraf, South African President Thabo Mbeki and Indian Prime Minister Atal Behari Vajpayee.

    ``The purpose of all these calls was to talk about the importance of the World Trade Organization ministerial in Cancun. The president noted that an ambitious, successful outcome in Cancun, especially in agriculture, would benefit all countries,'' White House spokesman Scott McClellan told reporters during a trip by Bush to Nashville.

    WTO members have missed almost every deadline they set for themselves when they launched talks on a global trade deal 22 months ago in Doha, Qatar.

    World Bank President James Wolfensohn said on Monday he expects no major breakthrough at the Sept. 10-14 trade talks even as senior ministers tried to find common ground on farm subsides seen as a major stumbling block to a deal.

    ``It would be hazardous for anybody to predict that Cancun is going to be a breakthrough. It is our hope that there will be some progress,'' he told reporters in Washington.

    The five-day trade meeting opens on Wednesday but top trade officials from the United States, the European Union and other countries kicked off bilateral talks on Monday morning.

    U.S. Trade Representative Robert Zoellick met separately with South African Trade Minister Alec Erwin, EU Trade Commissioner Pascal Lamy, Indian Commerce Minister Arun Jaitley to see where countries could narrow their differences.


    Both the European Union and the United States face pressure to cut tens of billions of dollars in subsidies to their farmers and open up their agricultural markets. Without progress on agriculture, it will be difficult to narrow major differences in other key areas like industrial tariffs and investment rules.

    Australian Trade Minister Mark Vaile, who was scheduled to meet with Zoellick late on Monday, said agricultural exporters would not accept any weakening of the commitment countries made in Doha to aggressively reduce domestic farm subsidies and tariffs and move toward eliminating export subsidies.

    Officials hope the target for reaching a global trade deal by the end of 2004 can still be achieved if countries can agree on general principles for reforming farm trade -- the issue of greatest importance for most of the WTO's 146 members.

    U.S. negotiators want developing countries to lower their own agricultural tariffs and the EU to agree to a formula that would harmonize the level of farm spending across the Atlantic by requiring Brussels to make deeper cuts.

    As its price for farm trade reform, the EU wants countries to agree to launch negotiations aimed at establishing new international rules in four areas -- investment, competition policy, customs facilitation and government procurement.

    India and many African countries strongly oppose talks on investment and competition. They fear the negotiations could lead to commitments that they would find difficult to implement and then be exposed to legal challenges at the WTO.

    978. About ten years ago, he began a drive for price discovery reform, after becoming disgruntled with the formula agreement his local buyer was using to buy cattle. Since that time, he has spoken out against consolidation of the packing, processing and retail segments of the beef industry, and the devastating effects of captive supply.

  • Elimination of Agricultural Subsidies
    Daryll E. Ray, Director, Agricultural Policy Analysis Center

    One of the bones of contention in trade talk in advance of the World Trade Organization meeting in Cancun, Mexico is the subsidies that the European Union and the U.S. provide to their farmers. The argument is that subsidies depress prices worldwide and if these subsidies were eliminated, farmers in developing countries would enjoy higher prices.

    The International Food Policy Research Institute (IFPRI) recently conducted a study ("Impact of Alternative Agricultural Policies on Developing Countries," April 2, 2003) that examined this hypothesis. They used a model to look at the impact of a policy that required developed countries to remove protectionist measures and trade-distorting subsidies by 2006 while developing countries maintained their existing policies.

    These restrictions are more strict than any that are being talked about in the current round of trade negotiations. As a result one would expect this study to reflect the maximum benefit that might come from the elimination of subsidies.

    How did corn do? You might be surprised at the answer. Corn producers in developing countries would experience a price increase of 2.9% after twenty years. These mere traces of price movement, less than a nickel a bushel in 20 years, would be of little help in improving incomes of farmers in developing countries. By 2020, the price to U.S. farmers would decline by 9.5%.

    The price gain for other crops in developing countries was even less than it was for corn. Producers in developing countries would gain 1.6% in the price of rice, 0.8% for wheat, and 1.1% for other coarse grains.

    The picture for meat and dairy commodities is completely different. Baseline policies cause larger trade distortions for meat and milk compared to cereal. Thus it is no surprise that the complete removal of all protective barriers results in significant price impacts for some products.

    World dairy prices experienced the largest change, increasing 19.2% by 2020. World price gains of beef, sheep, and goats were more modest, increasing 5.2% by 2020 while the gains for poultry and pork were 3.8% and 0.4% respectively. Notice the year here - 2020! If the trade negotiators making changes in the subsidy levels in developed countries are expecting strong benefits for developing countries, they may be disappointed in the results of their efforts.

    Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT's Agricultural Policy Analysis Center. dray@utk.edu; http://www.agpolicy.org

  • Price matters: New report shows that subsidy elimination alone won't cure world agriculture woes, says farm, rural coalition

    (Wednesday, Sept. 3, 2003 -- CropChoice news) -- WASHINGTON-- A coalition of family farm, agricultural commodity and rural organizations used a new study released today to begin its public push, nationally and internationally, to rethink a U.S. farm policy built over almost 20 years on the theory of free trade and exports as a cure-all.

    "We stand here united to tell the world's farmers, their governments and their trade negotiators that U.S. farm policy is not working for farmers anywhere in the world," said John Dittrich, senior policy analyst of the American Corn Growers Association and a farmer from Tilden, Neb.

    Dittrich introduced the study, "Rethinking U.S. Agriculture Policy: Changing Course to Secure Farmer Livelihoods Worldwide," by the Agriculture Policy Analysis Center (APAC), part of the University of Tennessee, a land-grant university. "This report goes comprehensively to the heart of the ever more contentious trade issues of farm subsidies in developed countries, low world commodity prices, and global poverty," Dittrich said. "We are united in our message and will be traveling to the World Trade Organization (WTO) ministerial in Cancún [Mexico] to participate in the agriculture policy negotiations scheduled for next week. At that time we will also present an open letter to farmers, farmworkers and rural people of the world calling for a dialogue with our counterparts across the globe based on the findings in this research."

    John Hansen, secretary of the National Farmers Union, said the report provided a critical tool that policymakers should use in constructing farm policy: "We ask the world community to thoughtfully review this research. It concludes that even if the difficult task of negotiating the elimination of global farm subsidies is completed, family-based agriculture will continue to spiral downward as a result of continued low commodity prices. Farmer-oriented policies and international cooperation are the real solutions."

    Dittrich and Hansen were joined by Katherine Ozer of the National Family Farm Coalition, Lorette Picciano of the Rural Coalition/Coalición Rural, Ben Lilliston of the Institute for Agriculture and Trade Policy, and Bill Christison of the Missouri Rural Crisis Center. In addition, other organizations present and supportive of the initiative included the Federation of Southern Cooperatives/Land Assistance Fund, the National Farmers Organization, the Soybean Producers of America, and the American Agriculture Movement.

    Professor Daryll E. Ray, Blasingame Chair of Excellence in Agricultural Policy and APAC director, followed the news conference with a detailed presentation of the study.

    "U.S. policies heavily influence the fate of farmers well beyond our borders," Ray said. "Therefore, policy addressing the needs of U.S. farmers also should recognize our larger global influence. We have found conclusive evidence through our analysis that international trade policies have indeed led the way for the global downward spiral of farm prices and farm income. However, we can also predict with a significant degree of accuracy that the elimination of U.S. farm subsidies without real price-enhancing reform of U.S. policy will destroy our farm and rural economy, and---surprisingly---would perpetuate the problems facing farmers in developing counties rather than alleviate them. We offer a blueprint of one example of how U.S. farm policy could be reformed. This is not a farm bill proposal, but an analysis and discussion of one possible solution to the serious problems facing farm families and their communities worldwide."

    APAC's analysis and blueprint for discussion includes acreage diversion through short-term conservation uses and longer-term acreage reserves, a farmer-owned food security reserve, and price supports as a replacement for the current and expensive policy of direct government subsidies. It also explores the use of non-tradable energy crops as a viable alternative to short and long-term acreage diversion options.

    A presentation of the study and its background will be given during the WTO ministerial in Cancún at Casa Maya on Thursday, Sept. 11 at 8:00 p.m. MEX. For more information contact Dennis Olson at (612)870-3412.

    For more information about the study or Dr. Ray's presentation, please go to http://agpolicy.org/blueprint.html or call the Agricultural Policy and Analysis Center (APAC) at (865) 974-7407.<,p>