Agricultural subsidy issues cause irreconcilable divide
between rich and poor countries at the WTO

Agricultural subsidies are at the core of the irreconcilable divide between the rich and poorer countries. But let's take a quick look at the issue.

For many months, Kathy Ozer, director of the National Family Farm Coalition, a long time partner of the PC(USA) Rural Ministry Office and the Hunger Program, has been trying to explain the subsidies issue to me.

Finally, after more conversations and a presentation by Daniel de la Torre Ugarte, a Peruvian professor at the University of Tennessee - who together with colleagues just completed an excellent study on the real impact of subsidies and the impact on prices once they are removed - I think I got it.

It can get complex, but let me try to explain it briefly. First, let me say that if subsidies are not at the crux of the debate, then they are a diversion from the real issue – namely, the methods used by the oligopoly (for now defined simply as fewer than four companies controlling over 40% of an industry) of agricultural corporations to keep agricultural products below the price of production. When these cheap goods are dumped on other countries, farmers cannot compete and suffer or go bankrupt. So that is one of the punch lines.

Why subsidies alone are not the issue.
As background, (1) understand that most farmers in the U.S. (and anywhere) would rather receive a fair price for their products than receive subsidy payments, which feels akin to living on welfare or food stamps (something to which many U.S. farmers have resorted).
(2) Approximately 80% of the total amount of subsidies (also remember that these are paid for with our tax dollars), goes to large agribusiness operations, not to family farmers. This is the hugest case of corporate welfare we have, reaching about $120 billion over the last ten years (if I remember correctly).
(3) Most farmers outside of the U.S., European Union and Japan have had their subsidies and import restrictions eliminated, and are no longer protected -- which has made them extremely vulnerable and has compromised their nations food security and food sovereignty.

Okay, this is the key point: The data from countries that have phased out and eliminated subsidies on agricultural products shows that prices do not rise. This conclusion comes from other developed nations, such as Canada, and looks at grains, cotton and oil seeds - the primary globally traded commodities.

Why do prices not rise?
Okay, say a small or medium-sized farmer loses his or her subsidy, which previously had made up for the low sale prices of his products. She tries to cut costs, but eventually must sell her land or loses it to the bank. In either case, a neighboring farmer or agribusiness venture buys up the land. What they found was that land mostly stays in production, so the amount of aggregate product grown does not decrease. (They did find that the proportions of different crops were usually slightly affected.)

So, production does not decrease. And here is another punch line. There is a glut of food and feed being produced in the world, and this is what has caused the dramatic drops in prices. Farmers are just too good at what they do and agribusiness has shaped policies that perpetuate the overproduction. Why? You've probably figured that out already. So the raw products that buy are dirt-cheap.

Then, since these agribusinesses are horizontally (buying up other companies engaged in the same business) and vertically integrated (owning all the components and processes from seed, to ag chemicals, to processing and distribution), the profits they can make using cheap raw material is staggering, and accounts for their ability to take over company after company and pay multi-million dollar salaries to their executives. (More on this at http://www.agribusinessaccountability.org/page/data/ )

So, if the elimination of subsidies doesn't raise product prices, what will?

We must return to managing the supply and putting price floors on agricultural goods. The catch is, this must happen internationally, so other major producers of that same product (or those that might enter that market if the price was significantly higher) would increase production and drive the price back down.

So, one of our jobs, then, is to de-emphasize solely cutting subsidies and emphasize the real issues - eliminating farm policy that encourages overproduction. Concurrently, we must develop the will and mechanisms to increase the prices on ag products so family farmers and smaller-scale farmers around the world can survive. Within this, we can create incentives and compensation for farmers of all sizes to implement conservation measures that would save wetlands, topsoil, and forests, and give a boost to organic and non-industrial farmers for the benefit of farmers, farm workers and consumers alike - not to mention organisms from micro to mammals. Again, the key component parts of a farmer oriented policy are:
• Price support mechanisms
• Set-aside/short-term land retirement program
• Elimination of government payments
• Supply management (with national food reserves)

With such practices, not only will farm families prosper, but rural communities as well will be revived. In truth agriculture is the foundation of ours and all cultures, and if it thrives, we all do. For what can be more important or sacred then food, produced and eaten with dignity and reverence?

Andrew Kang Bartlett
Presbyterian Hunger Program
Presbyterian Church USA
Louisville, KY