Farm Subsidies Common Globally, Bypass Small Farms

CHARLES ABBOTT / Reuters 6aug03

WASHINGTON—The United States has plenty of company in paying farm subsidies—the industrialized world spends about $235 billion a year to support local food production.

Most of the money goes to the largest, and usually richest, farms rather than growers who most need help, says the Organization for Economic Cooperation and Development, because payments are based on output. The more a farm produces, the more money it gets.

The European Union spent $100.6 billion, Japan $43.9 billion and the United States $39.6 billion in 2002, together three-fourths of outlays among OECD's 30 member nations, who range from Mexico and Turkey to South Korea and Canada.

"The basic story is the same," said agricultural economist David Orden of Virginia Polytechnic Institute and State University. "It's a highly organized lobby that has a stake in continuing their policies."

Supports often are initiated to help impoverished farmers or to avert food shortages, Orden said. They persist because of the political acumen of farm lobbyists and because subsidies become a traditional and comparatively small part of a government's outlays.

Farm subsidies are one of the most contentious issues in the current round of world trade talks, just as they were in the preceding round. Nations are reluctant to whittle their centuries-old tie to the land.

The OECD's conclusion that small and poor farmers often are bypassed mirrored complaints about U.S. subsidies. Two-thirds of U.S. crop supports go to 10 percent of cotton, grain and oilseed growers.

In January, the OECD said only 25 percent of government spending on market-price supports registered as a net income gain to farmers. Price supports account for two-thirds of farm subsidy spending in OECD nations.

Subsidies provide a notable portion of farm receipts—31 percent for the OECD on average, ranging from 1 percent in New Zealand to more than 60 percent in Iceland, South Korea, Norway and Switzerland.

U.S. agricultural economists say land values reflect the expectation of subsidy payments. Land prices and rental rates would drop if subsidies were curtailed sharply, they say.

source: http://biz.yahoo.com/rm/030806/food_subsidies_world_1.html 7aug03