|
Even though Agriculture
represents only 8% of world trade, during the last few years there has
been a rise in international pressure against subsidies paid out to
farmers in rich nations, which total more than $300 billion annually,
for all crops. Such subsidies are seen as unjust towards the world's
poorest farmers, who do not receive similar handouts. The farm supports
also depress world prices, costing developing countries millions of
dollars in lost revenue.
Producers in developed countries are not worried about the legalities of the removal of Agricultural Subsidies. A resolution in the deadlock over Agricultural Subsidies cases will play out over several years as countries develop the information necessary to mount a case, and then as attorneys battle over the law at the WTO. |
 |
THE QUESTION OF SUBSIDIES
The United States paid farmers almost $15.7 billion in subsidies during 2002,
and $18.7 billion for 2003. Subsidies, which rise and fall opposite market
prices, peaked in 2000 at $32.3 billion, according to the USDA.
The 15-nation European Union annually spends roughly $50 billion, nearly half
its annual budget, on its common agricultural policy and rural development.
Japan is another heavy subsidizer, but U.S. and EU payments are widely
considered to have the harshest impact abroad.
BUT WHAT ARE SUBSIDIES AND WHY ARE THEY OFFERED?
 |
Subsidies are financial assistance, either through direct payments or
through indirect means such as price cuts and favorable contracts, to a
person or group in order to promote a public objective. Agricultural subsidies supplement the income of recipient farmers to help manage the supply of agricultural commodities such as wheat, food grains, cotton, rice, peanuts and oil seeds such as soy-beans; bolstering the market price of commodities. |
WHAT WE MEAN BY DISTORTED
Trade is distorted if prices are higher or lower than normal, and if quantities
produced, bought, and sold are also higher or lower than normal — i.e. than the
levels that would usually exist in a competitive market.
For example, import barriers and domestic subsidies can make crops more expensive on a country’s internal market. The higher prices can encourage over-production. If the surplus is to be sold on world markets, where prices are lower, then export subsidies are needed. As a result, the subsidizing countries can be producing and exporting considerably more than they normally would.
Governments usually give three reasons for supporting and protecting their farmers, even if this distorts agricultural trade:
- to make sure that enough food is produced to meet the country’s needs
- to shield farmers from the effects of the weather and swings in world prices
- to preserve rural society.
But the policies have often been expensive, and they have created gluts leading to export subsidy wars. Countries with less money for subsidies have suffered. The debate in the negotiations is whether these objectives can be met without distorting trade
