Friday, October 21, 2011


The term "subsidy" is a dirty word for many countries in the developing world because huge agricultural subsidies being doled out by the affluent countries in Europe and American continent are pushing the farmers of the developing world into a quagmire because of artificially low prices in the global market for many commodities. As far as the consumers in these wealthy countries are concerned, the subsidies enable them to have access to cheap foods while the farmers, mostly large players enjoy "free" money without toiling for it! The trade negotiations under the umbrella of WTO are going no where as the developed world stubbornly refuse to eliminate these irksome subsidies for fear of hurting the powerful farm lobby. It is not comprehensible why rich farmers need subsidies when their large firms, employing most modern farming technologies and with favorable scale of viable economic operations while their counterparts in poor countries are highly handicapped with their low technological base, limited resources and tiny land holdings. Any hope that better sense will prevail among the rich nations is dashed by the current subsidy proposal under the EU budget which constitutes a major share of the budget! Here is a take on this troubling news coming from Europe.

"The EU has also come under criticism by lobby groups who say corporate mega farms are getting too much support. A quarter of the largest farms receive 74% of the money. With the new proposals, which will be the basis for wrangling to shape reforms that will be implemented after 2013, the EU is trying to address some complaints. Figuring prominently is a proposal to cap payments at €300,000 ($409,170) a year for each farm, which would save €2.5 billion a year on direct subsidies. Farm subsidies are paid out of the European Union's budget but managed by its 27 member states. The subsidies make up two-fifths of the EU annual budget and are hotly debated when the EU writes its budget every seven years. The tenuous state of the region's economy has heightened those tensions.
The priorities in the plan are "food security, sustainable use of natural resources and growth," said Dacian Ciolos, the EU's agriculture commissioner. Mr. Ciolos's proposal will raise CAP spending by about €15 billion overall in 2014-2020, a move lawmakers say represents a cut of up to 15% in real terms. The commission also wants to make a third of direct payments contingent on farmers following new rules on protecting the environment. Among them are proposed obligations to set aside at least 7% of arable land to "ecological focus areas," such as forests or buffer strips, and to grow at least three different crops at any one time. Some critics said the 7% rule risked being largely symbolic because it would keep subsidy money flowing to farmers. "They're dressed up in green," but they're still farm subsidies, said Charlotte Hedebrand of the International Food and Agricultural Trade Policy Council.. The Paris-based Organization for Economic Cooperation and Development made a similar point in a recent report, amid public discussions held by the commission leading to the release of the proposals on Wednesday. Farmers criticize any rules limiting how they can use their land. "It's a recipe for making sure that European agriculture gets stuck in a siding rather than being one of the most productive regions in the world," says William Martin, a 50-year-old who farms wheat, sugar beet, potatoes and beans near Littleport, U.K. Mr. Martin, who receives £100,000 ($158,000) a year in EU subsidies, says direct payments, with as few conditions and little paperwork as possible, help farmers fulfill a "moral responsibility as the world is short of food."

What is reprehensible is the argument by the consumer group and the farm industry that such subsidies help increase food production to meet "world's" needs in the coming years! It may be true that Europe has exceptionally high productivity in the farm sector but the output from these farms are dumped in the global market at low prices, uneconomical for any other country to compete with. Does this serve the real purpose of achieving consensus on free trade? It is synonymous with the argument that a high GDP of a country ensures high quality life for every body while the truth is that the proportion of poor people is still significant in these countries also. Figures like total production, average consumption, per capita availability etc do not mean much and the fact still remains that there will be many people outside the food safety net. If there has to be a world free from inequities and poverty, rich countries must abolish such subsidies and allow developing countries to compete with them on a level playing field.


No comments: