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How NOT to Fix the Global Food Crisis — France Says Poor Countries Should Provide EU-Style Farm Subsidies, while U.S. Farm Bill Puts Vested Interests First
April 28, 2008
And now for a really bad idea: according to the Financial Times Michel Barnier, France’s farm minister, told a food crisis summit in Berne that Africa and Latin America should adopt their own versions of Europe’s Common Agricultural Policy — massive trade-distorting subsidies — as a response to rising demand for food.
In fact, as those who have been tracking the crisis know, and as Anthony Faiola is explaining in a five-part series on the global food crisis in the Washington Post, restrictions on agricultural trade are part of the current problem. Instead of export resrictions and subsidies, Nancy Birdsall and Arvind Subramanian argued in an op-ed published in the Asian and European editions of the Wall Street Journal last week, the solution is to…
…promote trade and efficiency while also boosting agricultural production and reducing the vulnerability of the poorest around the world.
Unfortunately, U.S. agricultural policies, like those in Europe, continue to cater to special interests in ways that make the problem worse. Despite record high food prices, the 2008 U.S. Farm Bill, expected to pass Congress soon, would maintain a system that transfers billions of dollars annually to the largest farm operations. Roughly 70 percent of subsidy payments go to just 10 percent of the largest recipients and one version of the farm bill would allow farmers with incomes as high as $1 million to continue receiving subsidies. And this is touted as a “reform” measure because it lowers the income cap from the current $2.4 million (see the Environmental Working Group’s Farm Subsidy Database).
If that were not enough, despite the current global food crisis, the farm bill retains an additional subsidy to U.S. shipowners, as well as farmers, by requiring that U.S. food aid be purchased in the United States, packaged here, and much of it shipped to where it is needed on U.S.-owned ships. That means that roughly half of the already-inadequate U.S. food aid budget goes for distribution and transportation, rather than to feed hungry people in poor countries.
Ensuring that food supplies are adequate and that poor people around the world can meet their basic nutrition needs is a critical problem that governments and international organizations around the world clearly need to address — in both the long-term as well immediately. Replicating the distorting U.S. and European policies that transfer billions in taxpayer and consumer dollars to a handful of farmers in hopes that a little bit will trickle down to hungry people is not the way to go.
3 Responses to “How NOT to Fix the Global Food Crisis — France Says Poor Countries Should Provide EU-Style Farm Subsidies, while U.S. Farm Bill Puts Vested Interests First”
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April 28th, 2008 at 4:56 pm
To encourage poor countries to copy rich world ag subsidies is really perverse. This terrible European advice on bad copying only underlines the cost of rich world perversity. Consider energy production. It’s in sunny countries with land not suitable for staples that biomass-based biofuels and solar thermal energy production have a future (“switchgrass and sun”). This could be the new comparative advantage for Sahelian countries and parts of drought-prone South Asia.
But that inherent comparative advantage will not be realized if India and Brazil start subsidizing production of soya, corn, wheat and other staples whether for food or biofuel production — as the U.S. and Europe are now doing! The lesson is that distortions, including misguided efforts at food autharchy, whether introduced in rich or poor countries, are likely to end up depriving low-income countries of a level playing field where their dynamic comparative advantage can emerge.
The trade distortions embodied in the Farm Bill of U.S. and in the mandates and subsidies and protection for domestic biofuel production in Europe and the U.S. will come back to haunt not only rich world taxpayers but poor and hungry people everywhere.
April 28th, 2008 at 7:10 pm
This sure is a mess. I fully share Nancy Birdsall’s objections but on the other hand it does not look that agricultural subsidies are going to go away any time soon, probably less now when some interests have gotten winds in their sails with the food scare… and so what best advice could we give the poor countries with agricultural potential during the dark-ages!
I do not profess to have any idea about it and I must confess that in those few instances I have been asked by poverty stricken people in poor agricultural areas about what to do I have never been able to muster sufficient reasons to advice them to stay put on their land, much less their children. Exactly the same way that when looking into the eyes of farmer friends in rich countries, I have never been able to think of them as being bad persons for fighting for their subsidies.
Might we be working in vain trying to get rid of agricultural subsidies and would it not be better to start working based on it never happening and take it from there, looking for instance to ascertain maximum production or minimum global harm produced per unit of subsidy wasted.
Also just look at Zimbabwe and we know that there are other things than euro-cap policies that stand in the way.
April 29th, 2008 at 11:35 pm
Interesting piece of writing. I would like to add that in addition to the international factors impacting upon food prices, continuous conversion of prime land in to urban residential settlements in many countries is also retarding global food production. Thanks.