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World farm subsidies, 2005: $272 billion (OECD)
European Union: $130 billion
Japan: $50 billion
United States: $40 billion
Korea: $20 billion
Canada: $5 billion
Switzerland: $5 billion
What They Mean:
The United States last revised its agricultural subsidies in 2002, sharply increasing payments after a 1990s-era reduction stalled. Five years later, as the U.S. House of Representatives opens debate on a new farm bill, subsidies run at about $17 billion a year. They break down as follows:
Writing for PPI this week, farm-policy reform advocate Rep. Ron Kind (D-Wisconsin) observes that non-subsidized crops account for half of American production, and that only a third of American farmers received subsidies. Highlighting the trade implications of the new farm bill, Kind notes that both program commodities and unsubsidized crops contribute to a likely $78 billion in agricultural exports this year — “we sell 69 million kilos of unsubsidized nuts to Spain, 33 million kilos of unsubsidized oranges to China, and 95 million kilos of unsubsidized grapes to Canada” — and that the scale and nature of some programs (Kind cites cotton in particular) risk violations of American commitments to the WTO and depressing incomes in West African states reliant on cotton exports.
The success of unsubsidized farmers is not unique to the United States. With 2.1 million farms and ranches and 3.5 million farmers and farm-workers, America export $70 billion to $80 billion worth of farm products annually. Meanwhile, New Zealand’s 70,000 unsubsidized farms and 200,000 farmers and farm-workers export $15 billion in dairy, fruit, wine, and other goods a year.
Representative Ron Kind on farm reform:
Questions and definitions:
Subsidies: The $17 billion count for the United States covers direct payments, counter-cyclical loans, and other financial transactions; the WTO’s Aggregate Measure of Support includes price supports, adding dairy, rice, and sugar to the most-protected lists. The OECD also has a widely used international subsidy count which extends to rural infrastructure, conservation payments, price guarantees, and so on. The OECD’s survey, helpful because it is consistent across countries, finds some trends over 20 years:
Subsidies are up in total dollar terms from $242 billion in 1986 to $272 billion in 2005.
Subsidies are down as a percentage of rich-country GDP, from 2.3 percent to 1.1 percent; and as a percentage of farmer income, from 37 percent to 29 percent. Production-linked subsidies, generally thought least justifiable, are down from 91 percent of all subsidies to 72 percent. The biggest declines in subsidies, though, came not in the big three — United States, Europe, and Japan — but in smaller New Zealand, Mexico, and Canada.
OECD subsidy data is at:
Exports: As in subsidies, different sources count differently. (Does wood count as an agricultural product? Frozen pizza and candy?) The WTO, though, says that in 2005, farm trade totaled $852 billion, which is about 7 percent of the $12.5 trillion in total world goods and services exports.
The United States was the largest farm exporter with $83 billion (though the EU as a whole, discarding internal farm trade, was a bit ahead with $84 billion) followed by Canada at $41 billion, Brazil at $35 billion, China at $29 billion, and Australia at $21, with Argentina, Thailand, Russia, and Indonesia rounding out the top 10.
New Zealand was the largest major farm exporter relative to population, with $15 billion in exports coming from 200,000 people on 70,000 farms.
Farm products accounted for 26 percent of South American exports, the highest figure in the world. Sub-saharan Africa was second, at 10 percent.
WTO data (see pp. 8-10 for farm trade):
Background from USDA’s Economic Research Service:
Four West African countries — Mali, Burkina Faso, Benin, Togo — get a fifth of export income from cotton sales. World Bank looks at the effects of cotton-subsidy reform through the WTO, computer models predict that half the benefits would go to these African countries; this would be a fifth of all Africa’s benefits from Doha:
Malian President Amadou Traore offers perspective on West African cotton in a 2003 House Africa subcommittee hearing:
And a different model – New Zealand’s Ministry of Agriculture and Forestry:
About PPI’s Project on Trade & Global Markets:
PPI believes we must manage globalization to reflect our interests and values, through a combination of open trade, international rules to protect the environment and promote labor standards, and efforts to provide Americans with the tools they need to compete and succeed. Learn more about the project.
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