Farm Subsidies and the WTO

Great Debates
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Lately, in my political science class, we have been discussing globalization and the WTO. Lately, we’ve been speaking about the barriers to trade that the WTO is working on bringing down, such as tariffs and subsidies. One note is that though they do speak out against American and European farm subsidies, and do some sanctioning against them, it’s generally not enough to get countries that can absorb the blow of the sanctions to stop doing this. Though I myself am a liberal politically, my fiscal policy tends towards neoliberal in most cases, and thus, I think of free trade as basically a good thing. My question is, “Should the WTO take further action against subsidies in first world countries.”

My answer would be yes, and the idea for possible sanctions would be to allow all countries to set tariffs to make up for the subsidies or make their own farmers competitive with the first world against all first world countries that subsidize their crops. I think that one of the biggest advantages the third world has in the free market is the lower cost of labor, and thus lower cost of their final products relative to those from the first world. Farm subsidies distort this, and allow first world countries to set their prices at below cost, prices that third world countries, which often can’t afford or are not allowed to set their own subsidies (due to the IMF) cannot compete with, which destroys local industry and further disrupts their trade. I think that even within the country, these subsidies can be a bad thing as they end up forcing consumers to pay for higher prices, and can often insulate companies from the free market. I also do not believe that the majority of these subsidies go to people whom would benefit most from the actual cash, instead going to rather larger corporations for whom it’s just further pork. I think the money would be much better spent (in my liberal opinion) on education, welfare, science grants, police forces, or public art projects, but even if the money was simply not taxed at all (which conservatives would probably prefer), it would be a large benefit all around.

So, what are the opinions of the GD crowd?

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Hell yes. Huge farming companies are using the law to specially privalege themselves, at the expense of virtually everyone else under the sun. Period.

3

Well- subsidies are in general a BAD thing. But why are only “first world” subsidies bad, and other farming subsidies OK?

But then- what IS a “subsidy”? Is allowing ranchers to graze their cattle on government land below “cost” a “subsidy”? How about a tax break? How about a subsidy for “historical & cultural agriculture”? Interest free loans? Disaster relief?

Or for the Third & Second “world” nations- how about forced labor on government run farms? How is that “free market”? Or in some of the subsaharan african nations where they have virtual slavery- is THAT “free market”? Especially in the “second world” like China- how is that anything close to a “free market”? They can make things so cheap by not bothering with silly things like patents, copyrights or labor costs, that there is no competing with them.

Sure- most “farm subsidies” go to the big farming companies- but since the big AG companies do most of the farming, that seems to be fair. Note that they are a very small part of the overall budget, too. However- I would agree to just simply stop the flow of checks for subsidies. All of them. But let’s not fool ourself into beleiving that “first world” subsidies are the only evil ones, or that these subsidies are a force of great evil in the world.

Now- why don’t we do this in the USA? For 2 reasons. 1- public support of farming. From Hollywood to propaganda to “Dick & Jane” books we in American think farming is “Farmer Brown with 40 acres, a tractor, a few cows, some chickens & Lassie”. No- modern Ag is big business. Next- the Ag business has pretty serious political clout in the Midwest. Note that CA (since we didn’t vote for Bush) is being forced into buying ethanol from the Midwest (who did vote for Bush), and this will significantly raise our CA gas prices, and give at best a doubtful ecological benefit. Why is this? Well, look inside the elipses (). :rolleyes: Interesting question then- is THIS a “subsidy”?

4

I would like to clarify that I do not believe that first world subsidies are somehow “worse” than third world ones, I generally don’t like those either. But it seemed to me that either the IMF/WTO was putting measures in place controlling the 3rd world subsidies, or that the sanctions against the countries with such subsidies were severe enough to the third world to cause them to stop.

5

For many countries protecting their farmers is also a security issue. If something happened that disrupted the food import we need to have some domestic farming.

6

Stopping subsidies can also be a huge problem for some countries. IIRC France has tried several farm reforms and gets tens of thousands of protestors marching on Paris not to mention strikes. More than once famers there have defeated reforms that the government intended. Now that the EU is in place such changes may become more possible but I’m not sure about that.

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What other subsidies? Developing countries can’t afford to subsidize their industries at the level the United States and Europe do, and if they tried to, the subsidies would undoubtedly be challenged. Plus, there are lots of justifications for allowing poor countries more leeway here. Many economists point out that industries need special government protection to get off the ground, and developing countries are much more dependent on agricultural exports. Here (warning PDF) is a good analysis of the problems of trade in agriculture for poor countries. (See pages 112-17 (18-23) in particular for a discussion of subsidies.)

There are three kinds of subsidies defined by the WTO Agreements:[ul][li]Prohibited subsidies: subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore likely to hurt other countries’ trade. They can be challenged in the WTO dispute settlement procedure where they are handled under an accelerated timetable. If the dispute settlement procedure confirms that the subsidy is prohibited, it must be withdrawn immediately. Otherwise, the complaining country can take counter measures. If domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed.[]Actionable subsidies: in this category the complaining country has to show that the subsidy has an adverse effect on its interests. Otherwise the subsidy is permitted. The agreement defines three types of damage they can cause. One country’s subsidies can hurt a domestic industry in an importing country. They can hurt rival exporters from another country when the two compete in third markets. And domestic subsidies in one country can hurt exporters trying to compete in the subsidizing country’s domestic market. If the Dispute Settlement Body rules that the subsidy does have an adverse effect, the subsidy must be withdrawn or its adverse effect must be removed. Again, if domestic producers are hurt by imports of subsidized products, countervailing duty can be imposed.[]Non-actionable subsidies: these can either be non-specific subsidies, or specific subsidies for industrial research and pre-competitive development activity, assistance to disadvantaged regions, or certain types of assistance for adapting existing facilities to new environmental laws or regulations. Non-actionable subsidies cannot be challenged in the WTO’s dispute settlement procedure, and countervailing duty cannot be used on subsidized imports. But the subsidies have to meet strict conditions.[/ul]Source[/li]Lots more information on subsidies.

Cite, please.

In some places there is actual slavery, and I don’t think you’re going to find anyone to come out in support of it. If a WTO member wanted to ban imports of products made with slave labor, I think they’d get away with it. (Though Article XX of the GATT only allows members to discriminate against products made with prison labor, but I think a WTO panel wouldn’t have the nerve to act as if prison labor was worse than slave labor.)

WTO members are required to set certain intellectual property standards. I don’t see how anyone can claim that TRIPS is anything but a restriction on trade though. According to free market capitalists, low labor costs are developing countries comparative advantage. How are they supposed to compete in a trading system designed by rich countries if they can’t take advantage of what they have?

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Oh bother, fucked up the above post. Perhaps a moderator may delate it.

Second world does not exist any more, forced labor on farms may be an issue in some areas, e.g. Dom. Rep., in the (private)sugar plantations, but hardly I think a major world wide trade issue. In general forced labor is not as productive as free labor. In general.

What SSA nations are those? Please be specific and recall I am professionally familiar with the region. (As an advance I give you Mauretania with the deeply unclear status of the Haratine, however as Mauretania is almost pure desert and as the Haratine do little economic work for the Beiedoun this seems rather a moot point. I will also point to exploitive relationships elsewhere, but this is a market issue, e.g. in Cote d’Ivoire cafe plantations, but again that is market exploitation of migrant workers, not slavery).

I will let China Guy respond to this.

You are evidently unaware of TRIPS and that TWO assension requires adherence to it.

Certainly of course cheap knock-offs compete in developing world markets, largely below the radar of the copyright holder – e.g. does Adidas care about the (in)famous Adidos brand around here? The people who buy Adidos flip-flops simply do not have the buying power to buy Adidas – well except for me but I buy them for the amusement value they give me. Not really competing in the same space.

Then there is the issue of counterfiting for export to the developed world – again WTO aligns tools which help multilateral cooperation against the same. Already illegal, this is hardly an issue of free trade and subsidies.

Someitmes the logic I find on these items really stuns me.

First fair is not the matter being judged per se, although this standard of fair is intellectually bankrupt. Subsidies are generally sold as helping the little guy, the family farmer out in the big bad world. Alternately there is the security argument, one which might be slightly more respectable were it not so infinitely elastic and were it not so very 19th century in its understanding of trade relations.

Well, let us not fool ourselves into thinking that you have anything approaching a grasp of the subject.

Agricultural subsidies, largely first world by dint of budgets and past trade negotiation patterns, are among the last major free trade barriers not significantly tackled by liberalization. They are a major distortion of trade, and a significant remaining barrier for the rest of the world, for some rather illusory benefits to the main populations of the developed world – indeed real cost – and major benefits to a small group. Typical story in re subsidies actually. They are to be among the major and most acrimonious subjects in this next Doha round.

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That’s certainly true for Japan subsidizing rice farmers. But for countries like the USA or France (and more generally the EU, but since france is by far the largest producer and receives the lion’s share of the EU subsidies, it’s a good example), the domestic production is way higher than the domestic consumption and subsidies, for a large part go to products which will be exported. It’s not a safety issue.
(and though it could appear unlikely that in the foreseeable future our nations will have to live in autarcy, I don’t just ignore this issue. Farming is the basis of everything. You can live without lawyers, without plumbers, without people operating power plants, without doctors, but you just can’t live without farmers and fishers…So, as unlikely as the risk might be, I think that a country should indeed have the right to protect/subsidize enough farming to be able to rely on self-consumption if need be)

By the way, I’m not strongly opposed to farm subsidies because I’ve been brought up in a remote place which was a couple decade late agriculturaly wise, and I was surrounded by these kind of really little farmers who owned 20-30 cows, some chickens, a couple of pigs they they slaughtered for their own consumption, some acres of potatoes, some acres where they grew whatever their cattle ate, some pastures, who sold their eggs, milk and home-made butter to the neighbors, etc…(and several were relatives of mine). IOW, your typical old-style farmer. And I’m not that old, but I lived then in a really out of the way place.
So, I still have a soft spot for little farmers, and even tough there’s none left which are that little (in my region of origin which is reputated for its free-range beef, they just don’t care about doing something else than raising cattle…and they all own at least 50 cows), they are still very little by modern standards, and they are simply doomed without subsidies because they just can’t compete. So, it’s not a rational argument, but I wouldn’t want to see my remote cousins and their little herds going out of business. Had I been brought up in a region where large-scale and modern farming was the norm, I would most probably feel very differently. Because the position one takes on various issues are highly dependant on one’s feelings.

11

Farming subsidies are immoral and I would almost say criminal as they deny poor countries the chance to compete in the one field where they might have a chance of success. They should be illegal everywhere.

12

Farmers are highly organized in France, and their unions are probably the most efficient in this country. They’re all very well informed about any vote cast by a parliament member about a farming issue, and they vote might be absolutely necessary for the election of many of them. And they also organize very strong protests, sometimes violent ones, and always get away with it to avoid more uproar, though what they do would bring most other kind of protestors directly to the nearest jail.
So, indeed, sometimes reformers can play with the EU by saying “It’s all the EU fault, we just couldn’t do otherwise”, but most of the time, the farmers get their way. And actually, the french governments (plural) are always strong supporters of the farm subsidies (and France is the largest recipient of them, incidentally). Without the french lobbying, EU farm subsidies would be much lower, since several european countries in which farming isn’t as important economically, politically and sociologically are quite tired to essentially pay to subsidize french farmers. Farms subsidies are quite always part of any major bargain within the EU (We’ll agree to lower/not to lower/to modify farm subsidies and in exchange…etc…).

And by the way, some countries which are going to join soon the EU won’t benefit from the same subsidies, which were deemed to costly, at least during the first years of membership. It’s particulary an issue for Poland where farming is technically totally outdated but still gives a job to a lot of people and is, like in France (and probably even more so), extremely important from a political (one of the main political parties is quite simply the farmer’s party) and sociological point of view.

So, I don’t know how it will evolve, but probably, on the long run toward a (slow) lowering of the subsidies, but it will be a long fight. Actually, the farming policies have always been a major issue inside the EU, and caused a lot of problems and rifes during the last 30 years.

13

Any restraint of free trade is against WTO regs, including boycotts. Any expropriation or anything “tantamount to expropriation” must be compensated. I thought a good way to make money would be to form an organization called OCEC–The Organization of Cocaine Exporting Countries–and then sue the US government for the trillions of $s of lost profits due to the US governments ban on cocaine, which is illegal under WTO regs. OHEC could follow suit.

14

Roger, I like your idea, because I don’t like the United States’ drug policies, or many of its trade policies, for that matter. But there’s a little thing called Article XX of the GATT, which allows governments to ban products that are dangerous to public health, among other things.

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Damn! There’s always some little ARticle X or XX that foils my dastardly plans. I wonder why Article XX didn’t surface when the Methanex Corp. sued the State of California when it banned MTBE, a carcinogenic gas additive that was seeping into the groundwater. That suit was later thrown out by the WTO tribunal, but Methanex came back and said that Gray Davis was conspiring with ADM to replace MTBE with corn-derived gasohol in exchange for campaign contributions. I haven’t heard the results of that suit, but I think I am hijacking this thread, unless we want to expand to general discussion of WTO, steel tariffs, foreign contractors taking over the postal service and all the other free trade absurdities.

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'Cause that case was brought under NAFTA. The WTO doesn’t allow private parties to bring cases, only governments.