This map tells us of US farmers who received more than one million dollar in farm subsidies in the ten year period between 2008 and 2017
-- Pic courtesy Forbes
At a time when the US President Donald Trump has slammed India for its “high tariffs” even going to the extent of calling it a “tariff king”, which in other words is a pointer to the protection being accorded against cheaper imports, the massive American and European farm subsidies that not only distorts global trade but in the process hit millions of farm livelihoods as well as food security of the majority world have remained far away from the political glare.
Farm subsidies have remained a bone of contention ever since the World Trade Organisation (WTO) came into existence. But the rules of the game for domestic support have been so well defined by the rich countries, by very cleverly packing most agricultural subsidies under the ‘green box’ in trade parlance. Green box subsidies are considered to be non-trade distorting. Nearly 88 per cent of the US farm subsidies and 85 per cent of EU subsidies are bracketed under the ‘green box’ and therefore remain unchallenged. Except for the celebrated case wherein Brazil had taken to the US to the dispute panel on cotton subsidies (which US lost), there have not been any serious attempt to open up green box subsidies to fresh scrutiny. The US/EU remains stubborn on renegotiating the Agreement on Agriculture, wherein the subsidy issue falls.
With the farm subsidies issue in limbo, and amidst the US-China trade war, the US passed the 2018 Farm Bill making a budgetary provision for $ 867 billion support in the next ten years for farm subsidies, Supplementary Nutrition Assistance Programme (earlier called as ‘food stamps’ programme), crop insurance and conservation programmes among other specified categories like international trade, rural development, local food systems, beginning farmers and farm research. Roughly 80 per cent of the support is for the supplementary nutrition programme, which in 2018 had ensured that food be made available to 42 million Americans who couldn’t afford it.
The US Farm Bill is a comprehensive piece of legislation enacted every five years. It was introduced in 1933 in the backdrop of the Great Depression, and is aimed at providing financial support to farmers to stay economically viable. Since 1965 the Farm Bills have been passed with regular frequency, mostly confining to five years period. In Europe, the Common Agricultural Policy (CAP) was introduced in 1962 and like in the US it is aimed at supporting farmers through a mechanism of income support, market measures and rural development initiatives. Admitting that farmers generally get 40 per cent less income than the average household, the CAP programme in 2018 provided Euro 41.74 billion for income support and another Euro 17.07 for market interventions and rural development.
Broadening the definition of a family farm, the 2018 US Farm Bill has included not only children and their spouses but also nephews, nieces, cousins and other members of the extended family of a farmer as recipient of agricultural subsidies. All they need to do is to establish their participation in farm management and that can be even without these members being actually on the farm. Although the stated objective is to attract the younger generation in farming, the move has evoked strong reactions. While India has questioned the rationale behind the new definition, many experts believe that it is designed to help the bigger players stay big.
While high tariffs remain under attack, over the years a complicated and veiled system of subsidies and non-tariff barriers have kept US/EU farmers protected. Writing in the Forbes magazine, Adam Andrazewe detailed how since 2008, for over 10 years now, top 10 recipients of US farm subsidies have pocketed an average of $ 18.2 million, which comes to $35,000 a week. There are 6,618 farmers, corporations and agri-business that have made $ 1 million or more in farm subsidy support since 2008. While the rich have got richer, surprisingly a large number of recipients were people living in the cities. In addition, 12 members of the Congress too walked away with $637,059 as subsidy in 2017 alone. A subsidy of $1.08 billion in 2017 went to farmers for not producing anything under the Conservation Reserve Programme.
How the richest US farmers are becoming more rich.
Under the CAP reform in Europe, between the period 2021 and 2027 farmers will receive a total of Euro 365 billion ($438 billion), a reduction in support by 5 per cent, over the current level of funding. In 2016, the EU provided on an average a direct income support of Euro 259 per hectare, with a low of Euro 118 to a high of Euro 622 per hectare. Based on the farm structure, nearly 80 per cent of direct income support goes to 20 per cent of farmers. In addition there are basic payments targeting specific types of beneficiaries. Another Euro 365 million was earmarked for the young entrants in farming, below the age of 40 years. In India, on the other hand, farmers receive an average of $ 250 as subsidy, much of it by way of indirect support.
While India’s miniscule farm subsidies are under consistent attack from the US/EU as well as from some other countries, the rich countries are not willing to reduce their farm support. Even when the WTO Dispute panel had ruled against the US on cotton subsidies, a case that was filed by Brazil, the US didn’t reduce the subsidy support being given to its farmers. It instead reached an agreement with Brazil to provide a support of $ 147million over a period of ten years to Brazilian cotton growers. Such are the high stakes involved that without reducing its own subsidies, the US (along with EU and others) is building pressure on India to do away with support for public stockholding of foodgrains, primarily targeting the MSP regime for wheat, rice and pulses. What needs to be understood is the continuing massive support to US cotton farmers depresses global prices as a result of which the Indian cotton farmers are priced out. This is true for other agricultural commodities as well.
With the US-China trade war is expected to escalate, the time is ripe for India and other emerging economies to shift the focus to the more pressing need to cut back farm subsidy support in the rich countries. As long as these subsidies (both explicit and implicit) remain, there can never be a fair and equitable trade. #
Staking it on subsidies. The Tribune. July 4, 2019
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