UK's OneWorld Wrong on Farm Subsidies
By Brad Wilson at Dec 03, 2010
Thank you for your generous invitation of feedback and your open attitude.
As a former U.S. NGO farm program specialist who has served on U.S. regional and national NGO farm policy committees, and as a farmer, I offer the following feedback on your “Trade and Poverty guide (http://us.oneworld.net/guides/trade). [Editor’s note 2010: this was as of May 2008. The same kinds of misunderstandings continue today.]
First, I agree with your values and intentions and much of your analysis of the problems. These are crucial crises. Thanks for working on them.
Unfortunately, I believe your guide contains information that is false and misleading, and I believe I can prove these assertions and direct you toward information for making corrections. [Note 2010: the same holds today.]
These are enormous issues and obviously you must avoid giving out false hopes or sending people off on what we call “wild goose chases.”
My area of specialization is the Commodity Title of the U.S. Farm Program (Farm Bill), and that is the focus of my remarks. I have seen a widespread misunderstanding of the Commodity Title in recent years. These distortions play a major role at WTO, for example. As a result, it is wholly inadequate to “consult cotton growers in Mali, sugar producers in Uganda or chicken farmers in Ghana,” as you say, if they rely on WTO discussions for an understanding of these issues. Most of what I’ve heard cited regarding 3rd world farmers beliefs about the U.S. Farm Bill Commodity Title is false, including that in your link to “cotton growers in Mali.” You must ALSO consult U.S. farmers who understand the implications of the U.S. Commodity Title on world poverty.
The issues I raise here have been almost totally missed by mainstream media in the U.S. (and surely elsewhere as well), and they’ve been missed by important hunger organizations (ie. Bread for the World, Oxfam, Church World Service). For example, the Environmental Working Group has collected hundreds of mainstream media editorials on the 2007-2008 farm bill, and summarized some main themes, which are false, as I’ve documented elsewhere.
These issues are important, even though most dumping has recently ended, due to price spikes. (I’ll discuss that further below.)
What is False
I will first describe what is false, then provide the corrections. Please keep in mind that there are real and effective solutions to the problem. Although I provide evidence that the solutions you advocate don’t work and provide false hopes and false directions of effort and commitment for world anti hunger advocates, in the end I show the direction you can go to get real results and offer true hope. Please bear with me. I believe there is considerable evidence to support what I am saying and direct us toward an end to rural hunger and poverty. Please do not ignore this evidence and line of work.
This is a little complex, but understandable. Here it is. The Commodity Subsidy issue as you (and many others, including WTO) present it is misdirected. You see the subsidies of the European Common Agricultural Policy, (CAP) and the U.S. farm bill, but not the needed solutions. You state, for example, that:
“the Trade and Poverty Guide highlights the links between protective agricultural subsidies in rich countries and chronic malnutrition in South Asia and Africa....” [Brad says: the link is a mere correlation; the cause is the lack of price floors and supply management, especially by the price leader(s), especially the U.S.]
“These gargantuan subsidies in US and EU protect less than 5% of the workforce whilst blocking development in the world’s poorest countries where 68% of livelihoods are derived from agriculture.” [Brad says: The subsidies do not “protect” US farmers from having the value added of livestock taken from them by giant CAFOs receiving multibillion dollar below cost gains from cheap commodities. The total income per bushel, etc. has gone down in constant dollars, except for the recent price spike. See my video, “Michael Pollan Rebuttal,” parts 1 & 2. Yes, 68% of the livelihoods depend upon price floors and supply management. Subsidies do not protect anyone from “the lack of price responsiveness” “on both supply and demand sides.”]
“if a free trade philosophy is to work for poor countries then it must first work for agriculture. The removal of EU and US farm subsidies is the cornerstone for this ambition; all other intricacies of the rules are minutiae by comparison.” [Brad says directly: It won’t work, as farm commodities do not self correct in free markets, since they lack price responsiveness.]
These statements are not accurate. Malnutrition is not caused by subsidies, as I show below. Subsidies are not what block development for the same reasons. The removal of subsidies is a solution of the “minutiae” variety. Other solutions you do not mention are the true “cornerstones.”
Research from a number of sources on the elimination of farm subsidies by the U.S. and others does not support your view. For example, Timothy Wise of Tufts University, in summarizing some of these studies showed that the studies often find only about 3% impact on commodity prices from subsidy elimination. (See Timothy A. Wise, Tufts University, “The Paradox of Agricultural Subsidies,” p. 21, http://www.globalpolicy.org/socecon/trade/subsidies/2004/05wise.pdf. Likewise Daryl Ray of the University of Tennessee, who has analyzed several of these studies (his own, CATO & IFPRI), has concluded that, while Cotton prices would rise slightly, corn prices would fall slightly, as cotton land shifted to corn, for example.
This contrasts with dumping levels. The Institute for Agriculture and Trade Policy has estimated recent dumping levels have been as high as 61% for cotton, 44% for wheat, 35% for rice, 29% for soybeans, and 32% for corn, (http://www.iatp.org/iatp/publications.cfm?accountID=451&refID=26018, p. 3 & pp. 6-26)
These results are consistent with historical experience with regards to these farm commodities over the past 140 years or so, according to agricultural economist Daryl Ray (see citations & I can find others). Traditional U.S. Farm Programs and Policies had price floors and supply management to keep prices up, and grain reserves with price ceilings to protect consumers, including the hungry. These policies and programs worked well when implemented well (ie 1942-1952 and to a lesser degree, 1953-1995). When they were lowered 1953-1996 prices followed, and when they were eliminated in 1996 prices fell further below costs. What is confusing is that for some of the years when price floors were lowered, subsidies were increased (in order to make it more politically palatable), making it look to some as if subsidies were the cause of the low prices, (and not merely a political result).
Part of the U.S. perspective on this is that we have had such a huge part of the export market (often more than 60% for Corn and up to 90% for Soybeans, for example, or bigger than OPEC in oil,) that we could effectively set world price floors. This has been going down, however, and current proposals are for international supply management agreements, not just U.S. cut backs. The EU has proposed supply management and price floors. (http://www.zcommunications.org/impact-of-gatt-on-world-hunger-by-mark-ritchie) Supply management has also been proposed by the Africa Group at WTO for example. See “On the Right Path to Development: African Countries Pave the Way” at http://www.tradeobservatory.org/genevaupdate.cfm?messageID=120055. The Africa Group proposed supply management at WTO. See their proposal at http://www.tradeobservatory.org/library.cfm?refID=88066.
A key point is that all farm commodity programs and crops must be reformed together. If there are no price floors, (and large US and EU compensatory subsidies,) and then a hypothetical, politically impossible utopian scenario is offered in which subsidies are eliminated ONLY for cotton, then yes, cotton production will crash in the US and Europe, supply will be reduced, and prices will rise. But price will rise only for cotton. All of the land previously used for cotton will go to the production of other crops, causing INCREASED dumping on Africa and elsewhere for these other crops. (Daryll E. Ray, “Errors in methodology can affect policy conclusions,” APAC, 12/16/05, http://agpolicy.org/weekcol/280.html.) Likewise, if you end subsidies on all crops at the same time, corn prices will not go up, they’ll go down slightly, but cotton prices probably go up slightly more (ie. 10% total) [Daryll E. Ray, Chart 25, http://agpolicy.org/blueprint/PresentationAPACReport.pdf], as cotton is the most serverely dumped of the major commodities, But 10% rise in cotton prices is nowhere near enough to compensate for cotton dumping levels (ie. up to 65% below zero, and much more below a fair trade, living wage price). (See more links to sources, Daryll E. Ray’s “Rethinking, [see below,] and IATP’s work on dumping [see below,] in “Michael Pollan Rebuttal 2:
Ok let me try to summarize this point. First, let me agree that the huge Commodity Subsidies are tremendously unfair. Of course that’s true. But getting rid of them won’t raise world commodity prices (ie. reduce “chronic malnutrition,” “[un]block development”). All it will do, under usual market conditions, is more fairly distribute the poverty of low prices. Economic research and historical experience shows that. All it would do ECONOMICALLY is increase poverty among U.S. and EU farmers.
Of course, it would have a major POLITICAL (not economic) impact related to farm policy in developed countries. Possibly that could lead to price floors and other anti dumping measures. But it could also simply lead to a return to subsidies, with nothing for the poor agricultural countries. It would very likely pit US farmers against other farmers, rather than bring them together, as price supports do. After all, all farmers have a shared interest in decent prices.
Ok, a second major point necessary for explaining this is that, ECONOMICALLY, these farm commodities lack “price responsiveness” on both the supply and demand sides. (See See “Are the five oft-cited reasons for farm programs actually symptoms of a more basic reason,” http://agpolicy.org/weekcol/325.html and “It's Price Responsiveness! It's Price Responsiveness!! IT'S PRICE RESPONSIVENESS!!!” http://agpolicy.org/weekcol/248.html.) The current price spikes likely don’t change this. What this means is that “a free trade philosophy,” where “removal of EU and US farm subsidies is the cornerstone” will NOT work for world agriculture. Low commodity prices/dumping, are/is caused economically by the lack of price responsiveness and will prevail under free trade most of the time. Therefore eliminating subsidies won’t help. Our family had 7¢ corn during the Great Depression, with no subsidies, none of the policies and programs I call for. We need price floors and supply management,
Why Has This Issue Been Neglected
You may well wonder why so many groups miss these issues and emphasize what you’ve described online. I think there are several key factors in explaining this. First, many of us believe the subsidy issue is a smokescreen designed to protect Corporate agribusiness, especially commodity buyers, the main (hidden) beneficiaries of subsidy programs (ie. animal feedlots and feedlots, exporters, food and feed mills, ethanol, and other processors). It’s worked well to divide farm interests, divide farm interests from other interests and otherwise confuse the issue for the political benefit of agribusiness. Subsidies are much easier to understand.
Another related factor, surely, is that price floors, supply management and other issues were ended in the 1996 U.S. farm bill, and were not even proposed in Congress in 2002 and 2007-8. Therefore, they don’t exist in the farm bill, (except for sugar) only in history. Recent U.S. government documents for Congress (ie. “CRS Report for Congress Previewing a 2007 Farm Bill”) and the public on farm bills barely refer to these measures, influencing many others. For example, Bread for the World linked to the CRS report. That report states, for example, that “The objectives of federal commodity programs are to stabilize and support farm incomes by shifting some of the risks of short term market price instability and longer-term capacity adjustments to the federal government.” Statements like that accurately describe current programs (excepting the real, harsher goals of agribusiness interests that dominate the conclusions) but they ignore actual historical purposes of Price Floors in farm bills, from the 1930s through 1995. There are plenty of other issues from the various titles and the variety of recent proposals to fill the 99 pages.
WTO, a perspective dominated by Corporate agribusiness, has also played a major role in supporting the distortions generally and in U.S. farm bill debates. WTO promises salvation through subsidiy elimination, through free markets and free trade. The One World Guides spread that neoliberal myth.
Winnability is much higher for pretend anti corporate agribusiness proposals (subsidy elimination) than it is for direct oppostion to the agribusiness industrial complex (real price floors) which they insist upon with the lions share of $80 million in lobbying. As I argue in my own unpublished booklet on these issues (Beyond Bread crumbs: Crossing the Red Sea for Distributive Justice in the Commodity Title of the U.S. Farm Bill, forthcoming) many progressive groups think it’s wiser to stay in Egypt and try to win “bigger breadcrumbs for the world” rather than to actively support proposals that will provide a living wage level of commodity prices, (“bread, milk, meat, fruits and vegetables for the world”) in direct defiance of the power complex. Even the Bush administration free traders support subsidy “reforms,” possibly abandoning some Republican large farmer support, but with absolutely no threat to the corporate input and output giants.
Regarding Recent Commodity Price Spikes
Nearly all of the recent discussions about high food prices I’ve seen make no mention that most farm commodity dumping has ended (but not cotton). What that means is that in the longer run, poverty and hunger will be reduced in poor countries, for example, if prices stay high for another 6 years. When farmers make good money powerful economic multipliers kick in stimulating their local and national economies. Of course, with no price floors and supply management, this could easily end.
In the short run, however, the lack of topside reserve supplies and price ceilings has, of course, been disastrous. If you buy wheat bread and corn flakes in the US, the farm share is so small, that the farm component of impact is miniscule even if farm prices triple, but if you’re a poor person buying straight rice or wheat with little “market share,” it is, of course, huge. Both adequate price floors AND ceilings, adequate supply management AND grain reserves are needed for stabilization at fair prices. Subsidy reform alone includes none of this, as we see at OneWorldGuides, and in your link to “The Great Cotton Stitch Up,” where there are none of the needed reforms.
What is True
I see I’ve already covered the positive side of all of this. To repeat and expand these points: although the measures you (and many others) have put forth are inadequate and offer false hopes and wasteful, harmful diversions, positive solutions have long been developed and movements to implement them are gaining worldwide. To stop rural poverty and hunger we need the policy measures I’ve described, and they must be adequately implemented.
International Supply Management
Price Ceilings (release levels)
These measures are not perfect, but they’ve worked well when implemented well, while the alternative policies (free trade or what we call Hooverism, zero price floor programs including mere commodity subsidy reform or elimination) have never worked long range for either U.S. or LDC farmers.
The following resources document some of the growing worldwide support for the kinds of measures I’ve described.
“Principles of Unity on Trade with Central America,” with sign on list http://www.nffc.net/resources/statements/unity.htm
Citizens’ Trade Campaign, Family Farmer Response to Doha Suspension, with sign on list http://www.globalexchange.org/campaigns/wto/4083.html
“Building Sustainable Futures for Farmers Globally: A Call to Action,” http://www.federationsoutherncoop.com/sustain7.htm
Brad Wilson, “Via Campesina with NFFC: Support for Fair Farm Prices,” http://www.zcommunications.org/via-campesina-with-nffc-support-for-fair-farm-prices-by-brad-wilson (see detailed support through references there)
European Community, 1980s, (Mark Ritchie “The Impact of the GATT on World Hunger,” pp. 3-4, IATP, http://www.zcommunications.org/impact-of-gatt-on-world-hunger-by-mark-ritchie.
U.S. Support and Information
As might be suggested from the links above, here in the U.S. the National Family Farm Coalition has been the key leader in putting these proposals to end dumping through the U.S. Farm Bill. The Institute for Agriculture and Trade Policy has also played a huge role. The key documents on the 2007-2008 farm bill debate related to my concerns are as follows:
“A Farm Bill that works: the Food from Family Farms Act (FFFA)” http://www.nffc.net/issues/fnf/fnf_13.html
See supporting reports at: http://www.nffc.net/resources/reports.html.
Institute for Agriculture and Trade Policy, Fair Farm Bill series, http://www.agobservatory.org/; and trade publications on dumping, WTO, and other issues at http://www.tradeobservatory.org/.
IATP, WTO Agreement on Agriculture: A Decade of Dumping,” Sophia Murphy, Ben Lilliston, & Mary Beth Lake, February 2005, http://www.iatp.org/iatp/publications.cfm?accountID=451&refID=48532
Also see the one commodity crop for which U.S. price floors and supply management have remained, along with some international cooperation among commodity exporting countries. See “Sweet or Sour? The U.S. sugar program and the Threats Posed by the Dominican Republic-Central America Free Trade Agreement,” (DR-CAFTA), R. Dennis Olsen, Institute for Agriculture and Trade Policy, April 2005, http://www.tradeobservatory.org/library.cfm?refid=72784
Food and Water Watch, The Farm Bill: Food Policy in an Era of Corporate Power, http://documents.foodandwaterwatch.org/FarmBill.pdf.
Dr. Daryl Ray at APAC at the University of Tennessee has numerous excellent policy columns dealing with all of that. http://www.agpolicy.org/articles08.html I’ve selected some in footnotes (especially #15, & #25,) here (http://www.zcommunications.org/farm-subsidies-rebutting-europe-s-kickaas-by-brad-wilson) and in my “Farm Bill Primer” here (http://www.zcommunications.org/zspace/bradwilson). See more below.
Given things I’ve seen on your web site, you should especially see:
“Notice to Mali Farmers: Forget Subsidy Levels; Focus on Lack of Policies to Limit Production,” Darrell Ray, Agricultural Policy Analysis Center (APAC), University of Tennessee, Knoxville, 7/26/02, http://apacweb.ag.utk.edu/weekcol/103.html.
“When is $318 Billion Not $318 Billion, Darrell Ray, Agricultural Policy Analysis Center (APAC), University of Tennessee, Knoxville, 5/14/04, http://apacweb.ag.utk.edu/weekcol/197.html.
“Low Prices Here and Abroad: Are Subsidies the Cause or the Result,” Darrell Ray, Agricultural Policy Analysis Center (APAC), University of Tennessee, Knoxville, 10/11/02, http://apacweb.ag.utk.edu/weekcol/114.html.
His major report (et al) is:
Rethinking U.S. Agricultural Policy:
Changing Course to Secure Farmer Livelihoods Worldwide, http://www.agpolicy.org/blueprint.html
Here is an excellent article of his giving greater depth on the economic issues I’ve raised in the context of U.S. Farm Bill history:
“Agricultural Policy for the Twenty-First Century and the Legacy of the Wallaces,” http://www.agpolicy.org/ppap/doc/2004/RayLecture2004FromGretchen1st.pdf
Here are two excellent historical documents from the late 1980s that are available online. The first is by George Naylor (et al), recent President of the National Family Farm Coalition and former Education Director for the North American Farm Alliance.
For Naylor, I recommended the online version of 2 key parts (but it doesn’t include everything):
Farm Bill Basics: Formula for Prosperity and Fairness, http://www.inmotionmagazine.com/ra07/farmbill_86.html
“A Legacy of Crisis: Farmer Solutions, Corporate Resistance,” http://www.inmotionmagazine.com/ra07/crisis_86.html
Whole booklet: http://www.inmotionmagazine.com/ra07/ufrc_all_lo.pdf
See more good materials put online by the Missouri Rural Crisis Center at http://www.inmotionmagazine.com/rural.html#Anchor-2007-23240
The second key historical piece is by Mark Ritchie, formerly of the League of Rural Voters and recently President of the Institute for Agriculture and Trade Policy. It is in pdf: Crisis by Design: A Brief Review of U.S. Farm Policy, http://www.iatp.org/iatp/publications.cfm?accountID=258&refID=48644
This is all I can send for now, but I welcome further correspondence.
PS. I now have videos at YouTube: FireweedFarm: Farm Bill and Food Bill: http://www.youtube.com/user/FireweedFarm#p/c/A1E706EFA90D1767/1/QagTBTQe2jg
World Food Crisis: http://www.youtube.com/user/FireweedFarm#p/c/FC72A86C908D808F/0/UQyxnVoFiO4