There is a big difference between perception and reality when it comes to crop subsidies around the world.
According to a study from the Cotton Economic Research Institute at Texas Tech University, all countries, both industrialized and developing, support their agriculture sectors with vastly divergent policy tools and combinations of tools.
But that’s not what the news media would have the world believe. According to the CERI report, the news media “have linked low farm incomes in the developing world to the subsidies and protection given by the United States and other industrialized countries.
“As a result, an impression has been created that agricultural subsidies and protection are confined to the United States and other developed/industrialized nations.”
One reason for this is that today’s news media is far too cozy with anti-agriculture organizations like Oxfam America and the Environmental Working Group. When has a member of EWG or Oxfam actually stepped on a farm to ask a farmer a few simple questions about his operation?
Apparently, not the writer of this excerpt from a 2008 Oxfam study. “Devised during the Great Depression, the farm bill was designed to assist American farmers when the market bottomed out. But these days, the farm bill’s commodity subsidies do little to help American farmers and rural communities.”
Funny, nowhere in this writer’s assessment could I find a substantiating statement from a cotton producer saying something like, “Sure, I can produce cotton for 50 cents a pound with no subsidies and stay in business. Next question?”
There’s also no mention in the Oxfam study that U.S. agriculture and its related industries account for about 5 percent of the U.S. gross domestic product and about 12 percent of total U.S. employment.
Or that globally, the United States exports more wheat, corn, soybeans, sorghum, and cotton than any other nation. Or that U.S. agriculture is the only sector in the U.S. economy with a trade surplus.
We also don’t read much about other countries’ subsidies in national newspapers. For example, where is coverage of the National Cotton Council report that India, one of the largest critics of U.S. cotton subsidies, is buying cotton from its own producers at inflated prices and selling it to domestic textile mills at deflated prices? As a result of this subsidization, India’s cotton producers have ramped up acreage and have overtaken the United States as the world’s second largest producer of cotton. Gee, you’d think these guys were trying to run us out of business or something.
The Texas Tech study concluded that agriculture has a special status in both developed and developing countries with a wide variety of subsidy and protection instruments in place. While developed countries certainly subsidize and protect their agricultural sectors “developing countries are equally, if not more, prone to protect their agriculture sectors.”
The study found:
• Most countries use guaranteed minimum prices and import tariffs to protect domestic producers. The highest levels of producer support are in South Korea, followed by Japan and the EU. The highest levels of agricultural tariffs were found in Egypt, India and South Korea.
• Industrialized country governments are moving from price supports toward decoupled direct income payments. A decoupled payment of at least 65 percent of the 2000-02 historical payment for cotton began in 2006 in the European Union.
• Developing countries supplement their price support programs with input subsidies, which are excluded from calculations of the aggregate measure of support (AMS) by the World Trade Organization, but are nonetheless trade distorting. For example, $13 billion of the $15 billion that China spent on grain support programs in 2008 went toward subsidies for seed, machinery, fuel and fertilizer.
• Developing countries’ tariff protection is higher than that of industrialized countries.
• The use of sanitary and phytosanitary measures to restrict imports are more frequent among developing countries than in developed countries. For example, corn imports into China require a bio-safety certificate and quarantine permits.
I’d be very surprised if conclusions from this very thorough Texas Tech study found their way into Oxfam or EWG literature anytime soon.