The Vancouver Sun | By Ben Bradshaw | July 21, 2003
A troubling detail accompanying the release of the UN Human Development Report for 2003 makes it clear why farm subsidies are hard to defend: Every European cow gets a $3-a-day subsidy whereas 40 per cent of Africans live on less than $1 a day.
This inequality might be tolerable were it not for the alleged link between the North's agricultural policies and the South's poverty.
The allegation, expressed by the likes of the World Bank, Oxfam, the New York Times editorial board and Prime Minister Jean Chretien, goes like this: Northern farm subsidies flood international markets with underpriced goods, thereby making it difficult for Southern farmers to sell goods. Subsidies, it is argued, condemn these farmers to poverty.
Undoubtedly, there is truth to this claim. For example, price supports, long used by the Europeans and increasingly by the Americans, encourage farmers to produce more than markets demand, putting downward pressure on prices. Worse, governments regularly assist producers to offload surpluses at below cost.
Export subsidies have a particularly devastating impact on southern farmers, who often find it impossible to compete in their home markets, let alone foreign ones.
Thankfully, these subsidies were targeted in the 1994 WTO Agreement on Agriculture and are gradually being phased out.
But would the elimination of these and other subsidies necessarily enable southern farmers to expand their own production and sales? Is former U.S. assistant secretary of state for African affairs, Dr. Susan Rice, right to suggest that, if President George Bush truly wants to help Africa, he should simply stop subsidizing American farmers?
While this view is hopeful, it's misleading. First, market access is equally important. Subsidies may be cut, but borders may remain closed due to marketing channels, cultural norms or food safety concerns, be they legitimate or not.
Of course, import duties represent an even more blatant form of protectionism and remain common among the world's richest nations. While the OECD recognizes some progress among its member countries in curtailing subsidies, there has been no equivalent change in market access. Indeed, northern farmers have gained the upper hand in capturing new markets under trade liberalization; the UN's Food and Agriculture Organization reports that the growth of agricultural imports in the developing world has outpaced that of exports since 1994.
If access to northern markets can be secured and a more level playing field achieved through policy reforms, opportunities for enrichment may be realized for some competitive producers in the developing world.
However, for the world's poorest farmers, such opportunities will be limited by a number of persistent problems around access to land, capital, technology and transportation.
Additionally, it has long been recognized that the pursuit of wealth based on exporting a limited number of unprocessed commodities is never a safe bet. Not only are such goods prone to wild price fluctuations, but over time they tend to deflate in value relative to manufactured goods.
These declining terms of trade can severely limit long-term economic growth. This warning is supported by data presented in the 2003 UN Human Development Report. Among 61 developing countries that mainly export primary commodities (other than oil), 32 failed to expand their economies over the period 1980-98.
In contrast, just one of 24 manufacturing-based developing countries failed to grow over the same period.
The crisis afflicting the world's coffee-producing regions provides a telling example of this phenomenon. Canadians paying unchanged amounts for their morning cup of java might not have noticed, but world coffee prices are in the dumps and southern producers are struggling to make ends meet.
In this case, the North's agricultural policies cannot be blamed -- the crisis is a product of markets alone.
With or without farm subsidies, the international playing field in agricultural production and trade is uneven. If other sources of this unevenness, such as inequitable access to markets, persistent problems of underdevelopment, and declining terms of trade, are not rectified, the elimination of northern farm subsidies will do little to alleviate poverty in the South.
Ben Bradshaw is an assistant professor of geography at Simon Fraser University.The Vancouver Sun:
