A head of cattle in rich countries makes a higher daily profit, that is, more food and benefits through government subsidies, than the poorest people in the world, who try to subsist on the equivalent of one US dollar a day. There are 1.2 billion people in extreme poverty in the world.
A typical cow in the European Union receives a government subsidy equivalent to US $ 2.20 per day. This cow "earns" more daily than each of the 1.2 billion poorest people in the world who try to subsist on the equivalent of one US dollar a day. This was expressed by Mr. Mark Vaile, Deputy Prime Minister and Minister of Commerce of Australia in a conference held at the Sydney Institute on October 24, 2005: “A typical cow in the European Union receives a government subsidy of US $ 2.20 a day. The cow earns more than 1.2 billion of the world's poorest people. The Hon. Mark Vaile, Deputy Prime Minister and Minister for Trade, Australia Speech at the Sydney Institute, Sydney, 24 October 2005.
This comparison is useful to realize the importance in international negotiations on agriculture and livestock. Agricultural issues in the World Trade Organization (WTO) concern everyone, but discussions between WTO member countries have been opaque and complex. Subsidies can come in various forms, either directly tied to production levels, or indirectly like subsidies for irrigation water.There are also subsidies for the export of agricultural products. The truth is that all types of subsidies have the same effect, promoting production to sell surpluses in world markets. These actions lead to a decrease in the price of agricultural products, due to their high availability. In this way, by inducing a decrease in prices and flooding international markets with surpluses of agricultural products, "dumping" is caused, which means selling at prices below production costs.
This has been happening for years, mainly in the agricultural sectors of developed countries, led by the European Union and the United States of North America, which are the two countries that most subsidize their agricultural sectors, which allows their agricultural and agro-industrial producers to sell your goods at prices below the cost of production. It is impossible for agricultural producers in developing countries to compete against these prices, because their costs are above the prices of products that are subsidized in rich countries. In this sense, the World Bank (WB) has estimated an annual loss in the agricultural sectors of developing countries equivalent to 30 billion US dollars, due to the fact that agricultural production is heavily subsidized in rich countries.Likewise, it is indicated that, if these subsidies were eliminated, the agricultural sector would earn 250 billion dollars annually, of which 150 billion could go to developing countries and the poorest nations.
Impact of Subsidies
To get a better idea about subsidies, let's look at their historical impact on the Mali cotton sector below:
In the mid-1990s, the World Bank recommended the Malian government to grow cotton, due to the country's comparative advantages in this agricultural branch. The country Mali followed the advice of the World Bank and had great success in this field where it became the second largest producer of cotton in the world, after Egypt. During that period, cotton prices fell, yet US producers grew cotton and obtained a record harvest, which can only be explained by the subsidies they received from their government. Between 1999 and 2003, US cotton producers received subsidies of $ 13.9 billion, which represents a subsidy of 89.5%. They also received support for the export of cotton for 1.6 billion dollars.This is a clear example of "dumping" that had disastrous effects on the Malian economy. Indeed, Mali lost the equivalent of 1.7% of its Gross Domestic Product (GDP) and 8% of its export earnings. At that time, Mali's Finance Minister made the following comment: “The money that the governments of these rich countries put in to subsidize their agricultural sector is five times greater than the aid they offer to developing countries. And we have told those rich countries that they are hypocrites, because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.Mali lost the equivalent of 1.7% of its Gross Domestic Product (GDP) and 8% of its export earnings. At that time, Mali's Finance Minister made the following comment: “The money that the governments of these rich countries put in to subsidize their agricultural sector is five times greater than the aid they offer to developing countries. And we have told those rich countries that they are hypocrites, because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.Mali lost the equivalent of 1.7% of its Gross Domestic Product (GDP) and 8% of its export earnings. At that time, Mali's Finance Minister made the following comment: “The money that the governments of these rich countries put in to subsidize their agricultural sector is five times greater than the aid they offer to developing countries. And we have told those rich countries that they are hypocrites, because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.Mali's Finance Minister made the following comment: “The money that the governments of these rich countries put to subsidize their agricultural sector is five times greater than the aid they offer to developing countries. And we have told those rich countries that they are hypocrites, because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.Mali's Finance Minister made the following comment: “The money that the governments of these rich countries put to subsidize their agricultural sector is five times greater than the aid they offer to developing countries. And we have told those rich countries that they are hypocrites, because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.because they want us to play the rules of free trade while they subsidize their producers. Countless situations similar to this occur worldwide in the production of dairy, sugar, meat, etc., due to subsidies in rich countries, mainly the United States and the European Union.
Terminology
In the World Trade Organization (WTO), the following terminology is used:
Domestic supports, such as non-export subsidies, are classified in "boxes." These "boxes" have three different colors: "amber," "blue," and "green." The colors of the boxes represent subsidies ranging from those that distort the market the most (amber) to those that cause the least distortion in the markets (green). The "amber box" contains the domestic support measures that are considered to cause distortion in trade and production. These measures include support for product prices, or subsidies directly related to production levels. The "blue box" contains the support measures that would normally be in the "amber box", but these are tolerated when producers are required to reduce their production. The "green box" contains subsidies that cause little or no distortion in trade, which must be based on government funds that are not involved in price support.
Agro-World
Subsidies to the agricultural sector in the European Union and the United States destroy ways of life in developing countries. This is done by encouraging overproduction and exporting food at prices below production costs (dumping). Subsidies that promote overproduction, favor the decrease in the prices of basic products such as meat, dairy products and cereals, due to the available surpluses. And through the subsidies a minority of companies and individuals are enriched, while the majority of producers suffer the consequences. Agricultural subsidies in rich countries greatly harm producers and destroy domestic markets in developing countries. In this way, the objectives and responsibilities of the rich nations to reduce poverty are rendered useless.World agricultural policy has depressed and destabilized markets for years. And those who make agricultural policies know well who benefits from policies and unfair competition. There are millions of dispersed and ignored agricultural producers who suffer the impact of subsidy policies. In rich countries, the better prices paid to producers, new technologies and high production levels maintain a chronic overproduction that generates surpluses of products to export at low prices.In rich countries, the better prices paid to producers, new technologies and high production levels maintain a chronic overproduction that generates surpluses of products to export at low prices.In rich countries, the better prices paid to producers, new technologies and high production levels maintain a chronic overproduction that generates surpluses of products to export at low prices.
Trade agreements
It is essential to reach trade agreements where agricultural development is presented as the axis for development and sustainability. Although an agreement is essential, so far the proposals and offers of rich countries have not convinced developing countries that they should seek a better agreement, instead of signing a bad negotiation, which could further harm the countries in development, and the poorest nations. The combination of offers from rich countries, in relation to agricultural issues, has been disappointing, and their aggressive demands on the liberalization of industrial and service sectors in developing countries.
An acceptable agreement should include the following: substantial reduction in agricultural subsidies from rich countries; better market access offers; elimination of tariff peaks and tiered tariffs used by rich countries; adoption of norms that regulate the use of non-tariff barriers; special differentiated treatment that includes products and special safeguard mechanisms that guarantee food security and the producers' livelihoods, as well as rural development; elimination of all US cotton subsidies pursuant to the ruling of the WTO dispute settlement body; set a cap on 'green box' subsidies, and carry out a full review of the 'green box', to ensure that these grants do not distort trade;adoption of additional rules to regulate the "blue box"; new norms that prevent the abusive use of food aid destined to flood markets with productive surpluses; and measures to address the impact of a rise in food prices in food importing countries.
In relation to trade agreements, Joseph Stiglitz, Nobel Laureate in Economics, highlights the following in his new book, Fair Trade for All: “An agreement based on the principles of economic analysis and social justice, it would be significantly different from what is currently being discussed. The fear of developing countries that the negotiations in the Doha round will harm them, has certainly been justified.
Tariffs and Arguments
There are two arguments commonly made by rich WTO countries to argue why developing countries should be willing to cut their industrial tariffs to unprecedented levels. The first is that they need to offer something in exchange for agricultural reform in rich countries. These kinds of demands prevail in the negotiations, and they are frequently directed at the so-called "advanced developing countries". The truth is that agricultural reform is what rich countries promised long ago, and it is being overly delayed; it is not an agricultural reform for which developing countries should offer something in return. The second argument made by rich countries indicates that reducing tariffs on non-agricultural products is a positive measure that developing countries do not understand. However,the truth is that tariffs have to be reduced after the countries take off, as the sectors become competitive.
In rich countries characterized by the presence of fully transferable economic resources, it is argued that free trade translates directly into growth, and that low tariff rates are the best approach to promote growth. However, history contradicts this argument, because the rich countries that today advocate rapid trade liberalization used tariffs and other economic policy tools to stimulate and achieve their current growth. Likewise, China and Vietnam are examples of successful development driven by trade, tariffs and widely used State intervention. These countries also resorted to State regulation and control to discourage imports that could compete with domestic products.
Unlike countries that retained state autonomy, and chose to use tariffs as part of their development strategy, countries that have liberalized their markets too hastily have been the most negatively affected. In some cases, trade liberalization in developing countries was a condition imposed by loans from the International Monetary Fund (IMF) and the World Bank. In this sense, it is worth mentioning that there are cases in which the inappropriate use of tariffs can cause inefficiency and slow development in countries, but this is not a reason to deprive developing countries of their tariffs when there are fewer options every day. about.The fundamental thing is that a country is able to use its tariffs to promote agricultural development and manage the period of liberalization of its markets.
Key factor
The agricultural sector is considered by most experts worldwide as a key factor to avoid poverty and underdevelopment. For this simple reason, rich countries support their agricultural sector. Agriculture has always been a central issue in international negotiations, because it is the medium in which life is sustained. In this way, trade agreements focused on development consider agrarian issues as a priority. However, very little progress has been made on this issue in the last four years. The lack of progress in the field of agriculture can be mainly attributed to the fact that rich countries are reluctant to reduce their aid that distorts markets, as they provide large-scale benefits to their large-scale producers in the agri-food sector.It is necessary that subsidies from the North do not harm producers from the South.
Bibliography and References
Oxfam International, Claire Godfrey. Trade Observatory. USDA. Anderson, Kym, and Ernesto Valenzuela (2005) WTO's Cotton Doha Initiative: Who Would Gain from Subsidy and Tariff Cuts Washington DC: World Bank. Esther Bares / Peter N. Prove, Geneva, Switzerland. The Lutheran World Federation Letter from Australia to the G33, "Special Products: Australian Comments on G33 paper", February 2006. UNDP (2005) Human Development Report. World Bank World Development Indicators. Food and Agriculture Organization (FAO) WTO Agreement on Agriculture: The Implementation Experience Developing Country Case Studies; Rome: FAO. Yilmaz Akyüz (2005) The WTO Negotiations on Industrial Tariffs: What is at Stake for Developing Countries, TWN; Ha Joon Chang (2005) Why Developing Countries Need Tariffs, South Center;Paul Bairoch Economics of World History: Myths and Paradoxes, University of Chicago Press; Kevin O'Rourke and Jeffrey Williamson Globalization and History: The Evolution of a Nineteenth Century Atlantic Economy, MIT Press. Ha Joon Chang (2005) Why Developing Countries Need Tariffs. Ibid. Communication from the Commission to the Council and the European Parliament. Mid-term Review of the Common Agricultural Policy. See 'The Great Sugar Scam: How Europe's Sugar Regime is Devastating Livelihoods in the Developing World', Oxfam. Mosse, Marcelo, 'Interviews with Sugar Cane Workers in Mozambique'. Report for Oxfam GB. UN FAO. WTO Agreement on Agriculture, covering analysis of the 'Development Box'. European Commission indicative figures on the distribution of direct farm aid. EC website. WTO website. Rigged Rules and Double Standards: Trade,Globalization, and the Fight Against Poverty 'Oxfam. European Commission website. OECD Agricultural Outlook. OECD Database. 'Cultivating Poverty: The Impact of US Cotton Subsidies on Africa', Oxfam. OECD 'Agricultural Policies in OECD Countries: Monitoring and Evaluation. The US also subsidizes agricultural exports, although through different instruments such as export credit schemes. US Department of Agriculture website. Food and Agricultural Policy Research Institute (FAPRI). World Agricultural Outlook. European Commission indicative figures on the distribution of direct farm aid.The US also subsidizes agricultural exports, although through different instruments such as export credit schemes. US Department of Agriculture website. Food and Agricultural Policy Research Institute (FAPRI). World Agricultural Outlook. European Commission indicative figures on the distribution of direct farm aid.The US also subsidizes agricultural exports, although through different instruments such as export credit schemes. US Department of Agriculture website. Food and Agricultural Policy Research Institute (FAPRI). World Agricultural Outlook. European Commission indicative figures on the distribution of direct farm aid.
