Asia Pulse | January 15, 2002
340 billion S175.47 billion) subsidy package for farmers in the United States would depress world agricultural prices and hurt Australian producers, according to new study by the Australian Bureau of Agricultural and Resource Economics (ABARE).
ABARE said the US farm bill threatened world trade talks as well as the hip pockets of farmers everywhere.
It warned the US would lose its legitimacy to argue for tariff and subsidy cuts in areas such as the European Union and Asia if it went ahead with its own protective measures. The US Senate will next month consider the farm bill, which extends subsidies and protection to American farmers for the next decade.
American farmers are pushing for the measures, which would extend protection to broadacre crop farmers as well as maintain subsidies for sugar and dairy producers.
But ABARE, in a wide ranging study of the farm bill, said it would not only do long-term harm to American farmers, but to the world's producers.
It said Australian farmers were at particular risk as around 37 per cent of their production was at threat from the American protective measures.
"The protective and support measures are bound to result in continued misallocation of resources in the US economy," it found.
"They will depress and destabilise world agricultural prices, reduce aggregate US and world incomes and harm overseas producers."
There has been controversy in the US over the farm bill since a non-government organisation listed on a website the names of farmers and the amount of assistance they have received under the old farm bill.
ABARE said under the new bill, rich farmers would continue to be the biggest beneficiaries of government support.
"It is the wealthy farmers with family incomes well above the average who receive the highest farm support payments in the US," ABARE said.
The forecaster said support of the farm bill would harm America's standing in future World Trade Organisation talks.
It said neither the EU nor Japan would lead the way on trade talks, but the US would be hamstrung if it support the farm bill.
"Its credibility will be compromised if ... it provides massive, market distorting subsidies to its own producers and tightly restricts access to its own market for sensitive products," it said.
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