Subsidizing Poverty


Rome -- In July, the presidents and prime ministers of the world's most exclusive club meet in London for their annual summit. Last year, they said the Uruguay Round, meant supposedly to negotiate a major reduction in trade barriers, "had the highest priority on the international economic agenda."

This year, after 12 months of mainly bureaucratic and some political obstruction, will they have anything better to say, in particular on the gross system of agricultural support, which hurts the hard-pressed at home, savages the poor in the Third World, closes off one of the few economic options the newly-liberated East Europeans have and costs an exploding bomb?

Last year, agricultural subsidies billed the taxpayer of the wealthy industrial economies $300 billion, a giant 2 percent of their entire economic output. Europe, the worst culprit, saw its farm subsidies rise by more than a third.

Who do these subventions help? Not the small European and North American farmer, who keeps the countryside looking pretty -- he gets only a fraction of what the big tear-down-the-hedgerows, pump-the-ground-with-fertilizer commercial farmer receives. And not the Third World, despite the food aid for famine relief and cheap dumping.

Last year, European Community beef was being sold to Egypt at a negative price -- that is, Egyptians were being paid to take the meat away. What chance does that give the Egyptian herder? Or what about the 80,000 tons of beef sold to Brazil last October for $1,200 a ton, under-cutting by a third Brazil's regular supplier, Uruguay? Yet beef and wool account for two-thirds of desperate Uruguay's exports.

Or what about the Mexican exports to Canada of oilseed rape? Mexico's market for this was recently destroyed by the flooding of Canada with subsidized European Community cereal.

Even a developed agricultural economy, New Zealand, has been pushed to the wall by recent European Community decisions. The increase in export subsidies to dairy exports has slashed New Zealand's income by at least $250 million, negating millions of dollars worth of investment and years of development, innovation and carefully-planned initiatives by the New Zealand marketing board.

America wants a deal. Europe doesn't. This, stripped of embellishment, is the truth of the problem. Yet do big farmers in Europe, who fatten on subsidies and pull the politicians by the tail, thanks to their distorted voting strength, really have any idea of the damage they are doing?

Do European voters know that, while their farmers receive the equivalent of $4,000 per ton for butter, the rest of the world is competing against European Community prices as low as $1,300 per ton?

Do Europeans know that, since April last year, when European Community negotiators agreed that no further trade-distorting action should take place, the European Community has increased its export subsidies on a whole range of dairy products by up to $200 a ton?

Do U.S. farmers know, for their part, that the 1985 farm bill put them in the same league as European beet farmers, destroying the wherewithal of tropical sugar cane growers? The reduction in U.S. sugar quotas practically canceled out all the American aid going to the Caribbean and Central America. In the Philippines, it put the island of Negros out of work, leading to many deaths from starvation.

Agricultural protection depresses world prices by a good

quarter. In the short term, some Third World countries benefit, as they are able to import cereals at low prices. But the majority of Third World countries are agricultural economies, so the losses to their farmers from competition of dumped subsidized production from wealthy countries is nothing less than crippling.

One Western country has, in fact, drastically reformed its agriculture so that its economy, which depends on agricultural exports, is now slim-line, non-subsidized, competitive. It is New Zealand. If New Zealand, more a rural than an industrialized state, can do it, with its limited resources and no sugar daddy to bail it out, there's no question that Europe or North America, with their immense financial power, can.

The whole wretched subsidy business has gone on for so long people have almost given up complaining. The Third World occasionally makes the odd noise, but rightly has concluded, who listens unless there's actually starving children for the TV. Consumers in the West, who pay 20 percent more than they should for food, are so used to getting the bad end of the stick they keep their heads down.

As for the chattering classes they, like the politicians, prefer to talk about "heavy" subjects, the war with Iraq, the chances of Mikhail Gorbachev versus Boris Yeltsin, European unity, anything but bread and butter. How boring. Farmers. Support prices. Give me a break. It just happens to be a $300-billion indulgence, continued for the narrowest of reasons, at the cost of world-wide suffering and the loss of honest opportunity.

Syndicated columnist Jonathan Power writes regularly on Third World affairs.

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