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 Lots
of Hypocrisy in Foreign Call to End U.S. Subsidies, Experts Say
AUBURN,
Jan. 29,
2004 ---
Bob Goodman and Jim Novak don’t mince words about the efforts of an
international coalition to limit U.S. cotton subsidies. As far as the
two Alabama Extension economists are concerned, they are self-serving.
The effort, which
pits an informal alliance of developing nations – Brazil, China,
India, South Africa and several others – against the United States,
Europe and much of the developed world, will likely be a
take-no-prisoners fight to the finish. The bone of contention is the
$350 billion the developed world pays out in subsidies to support
their farm and agribusiness sectors. Underdeveloped nations say these
subsidies undermine their ability to compete globally.
Brazil
has the first case challenging these payments before the World Trade
Organization. It is targeting the $1.54 billion in U.S. subsidies
paid to cotton and agribusiness, saying this practice breaks trade
rules.
Goodman and Novak
don’t buy the Brazilian argument. Before
Brazil
and other countries point an accusing finger at the
United States,
they need to take a good, long look in the mirror, the economists
said.
American cotton
producers and agribusinesses, they said, aren’t the only ones who
benefit either directly or indirectly from U.S. subsidies. The
effects work both ways.
A prime example
involves
U.S. export
subsidies for cotton, Goodman said. True, U.S. cotton producers and
cotton merchants benefit tremendously from these subsidies, which are
paid whenever U.S. cotton prices fall below the world market average.
And, yes, these subsidies tend to depress world prices for cotton,
undermining the ability of some foreign producers to compete
effectively. The flipside to this argument is that by depressing
prices, these subsidies benefit foreign textile manufacturers.
“With export
subsidies, we are harming the profitability of foreign countries to
some extent by lowering cotton prices,” said Goodman, who is also an
Auburn University associate professor of agricultural economics, “But
at the same time, we’re also increasing the nation’s industrial
capacity by providing foreign textile mills with cheaper cotton.”
What these
manufacturers receive, in effect, is a subsidy, compliments of the
U.S. taxpayer.
A similar
principle holds true for staple commodities such as grain, Goodman
said.
“True, grain
subsidies depress world prices and crowd out subsistence farming in
many of the developing countries,” he said. “But at the same time
we’re providing the general population with cheaper food --- something
that is simply not possible in an economy based on subsistence
farming.”
Besides, they
argue, the foreign producers clamoring to end U.S. farm subsidies are
not subsistence farmers.
“Brazilian farmers
who brought the suit talk about Third World conditions and the
starvation of subsistence farmers, but these aren’t the subsistence
farmers the cotton subsidies are accused of hurting,” said Novak, who
is also an Auburn University professor of agricultural economics.
“They operate massive farms, not the two to four acre farms that are
being hurt by subsidies.”
Brazilian farmers,
in particular, also have benefited immensely from one other byproduct
of American farm subsidies: technology, especially genetically altered
crops designed to withstand insects and herbicides.
American cotton
producers are required to pay technology fees on an acre-by-acre basis
to grow these crops. Brazilians don’t.
“Their government
has essentially told them that they don’t have to pay for what they
use,” Goodman said. “They say, ‘These Americans have something
unique, so you go ahead and use it and don’t worry about paying for
the technology.’
“This amounts to a
significant subsidy of about $40 an acre – one they’ve essentially
stolen from us.”
The advantages
Brazilian producers derive from transgenic technology is another
example of how the U.S. farm system, which is based on subsidies, has
benefited the entire world. Money provided by government farm
programs allowed these technological changes to occur – changes that
likely wouldn’t have been possible in another system, Goodman said.
“Monsanto knew
that they could develop biotech crops and make money from them because
they knew there were farmers out there who would buy them,” he said.
“To put it another way, farmers were there to buy these crops because
the farm bill kept them in the farming business.”
[Sources:
Dr. Robert Goodman,
Extension Economist and Auburn University Associate Professor of
Agricultural Economics, (334) 884-5633;
Dr. James Novak, Extension
Economist and Auburn University Professor of Agricultural Economics,
() 844-3512; Writer: Jim Langcuster, News and Public Affairs
Specialist, (334) 844-5686.]
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