Decline and Fall of Cotton Subsidies?

European Union trade negotiators were the first to blink recently in a toe-to-toe confrontation with counterparts in underdeveloped countries over the thorny issue of farm subsidies, particularly cotton subsidies.

EU has unveiled an ambitious plan for a new system that weakens the link between subsidies and production. Supporters of the trade measure claim the new measures will be less trade distorting, though some negotiators in developing countries aren’t convinced.

While only slightly reducing the amount of money producers receive, the measure, in theory at least, will reduce EU cotton production by 10 to 20 percent. A similar measure is on the table for tobacco production.

The thinking behind this new proposal is based on a simple premise: Forcing farmers to base their production decisions on market prices will prompt many of them to diversify.

Developing countries aren’t the only critics of Western farm subsidies. Appealing to the U.S. government to increase spending on high-tech research, Intel Corp. CEO Craig Barnett called on policymakers to reduce subsidies for “industries of the 19th century” --- agriculture and highways.

Posted by Jim Langcuster at April 23, 2004 09:03 AM | TrackBack