Free Trade

Cancun Delusions

Subsidizing the poor to death


Cancun, Mexico—The World Trade Organization's fifth ministerial meeting will get under way tomorrow here in this Caribbean resort fringed with white sand beaches. Hopping off of the airplane, I immediately rushed through police blockades to get to the anti-globalization "teach-in" being run by the International Forum on Globalization (IFG). I was anxious to hear what these passionate anti-globalizers would have to say about agricultural subsidies. Why?

Because the most important achievement of this WTO ministerial would be substantial progress toward truly free trade in agricultural goods. This is the central commitment of the so-called Development Round that was launched in Doha, Qatar two years ago. Freeing up global agricultural trade is vital because the majority of people living in the poorest countries are still farmers. Bringing these poor farmers into the world trading system will enable them to take the first steps up the ladder of economic development. Of the 2 billion or so of the world's people who live on less than $2 per day, most live in rural communities.

However, access to world markets is blocked by the protectionist policies of the world's richest countries, the European Union, the United States and Japan. These countries shovel out over $300 billion per year in subsidies to their farmers. Such largesse means that the average European cow receives an infamous subsidy averaging $2.50 per day. Consequently, farmers in developing countries and least-developed countries suffer a double whammy—rich country subsidies keep world prices artificially low so poor farmers can't compete in world markets; rich countries then turn around and dump their subsidized agricultural surpluses in the poor farmers' local markets. The New York Times recently and correctly editorialized that this situation is not only unfair, it is also "immoral".

It is indeed immoral. Lack of free trade and developed country agricultural subsidies are literally killing people, according to a recent report by the Brussels-based Center for a New Europe (CNE). The CNE finds, "6,600 people die every day in the world because of the trading rules of the European Union (EU). That is 275 people every hour." Think of it like crashing a Boeing 747 filled with people every hour, 24 hours per day.

The EU is far from alone in deserving blame for this trade tragedy. When crop prices sank, the Bush Administration dumped the Freedom to Farm program that was eliminating most US agricultural subsidies. To satisfy the electorally important US farm lobby, Bush bumped up farm subsidies by $175 billion over the next ten years.

The Washington, DC-based International Food Policy Research Institute recently concluded, "Protectionism and subsidies by industrialized nations cost developing countries about $24 billion annually in lost agricultural and agro-industrial income." To put this figure in perspective, WTO figures show that the world's 40 or so least developed countries exported a total of only $38 billion worth of all goods in 2002. This is a drop in the bucket; in 2002, total world merchandise exports were $6,240 billion (or $6.24 trillion in American English).

The CNE report concludes that Africa in particular suffers from the developed countries' agricultural subsidies. Just how desperate the situation is in sub-Saharan Africa is made clear by British demographer Angus Maddison's calculation that the average annual gross domestic product in the region is just $450 per person. Maddison points out that that was the average income of a citizen of the Roman Empire. In other words, sub-Saharan Africa has made essentially no economic progress in the past 2000 years.

Given this background, one would think that the environmental activists at the IFG meeting would join together with free trade activists in advocating that the trade ministers gathering in Cancun work to eliminate these harmful rich country subsidies. Instead, several participants in the IFG conference urged that the world move back toward low technology and subsistence farming. Indian political environmentalist Vandana Shiva insightfully told the IFG activists, "Domestic agriculture in India has been destroyed by developed country farm subsidies and dumping." Then she quickly veered from this reasonable observation to unthinking environmentalist dogma. Her solution is not to eliminate the subsidies and open up food trade. Instead she wants Indian farmers to reject the Green Revolution which boosted Indian grain production four-fold over the past four decades and move back toward small-scale agricultural production. This is a recipe for famine.

Will Allen, an American organic farmer, noted at the IFG meeting that in the United States, only 9 percent of the farmers receive nearly 80 percent of the subsidies, so the subsidies aren't really helping small farmers in the U.S. either. But instead of calling for the end of subsidies, Allen declared, "We advocate there be subsidies all over the world to convert agriculture into sustainable agriculture." Sustainable agriculture for Allen is organic agriculture, which is less productive than conventional or biotech farming. Lower productivity means more food insecurity and more natural lands like forests chopped down to create farm fields. According to the Consultative Group on International Agricultural Research, the chief factor that drives deforestation in developing countries is "poor farmers who have no other option to feeding their families other than slashing and burning a patch of forest… Slash-and-burn agriculture results in the loss or degradation of some 25 million acres of land per year."

Apparently, many environmental activists prefer that poor farmers and their families remain doing the backbreaking, mind-numbing labor of subsistence farming. U.S. organic farmer Allen recounted with evident nostalgia the fact that in 1848, when chemists had finally learned how to use fertilizers to boost crop production, 90 percent of Americans lived on farms. According to Allen, a century later, 37 percent of Americans still worked on farms. Today, only 1 percent of Americans are farmers. Did Americans become poorer because they fled the farm? Hardly. They moved up from farming to become the richest, most technologically sophisticated economy in history. It is past time that the richest countries remove the barriers that block the poorest countries from following this same trajectory to prosperity. The Cancun WTO conference is the place to begin.