In recent days, Ms Rice blamed India and China for higher food consumption and therefore commodity price hikes. President Bush also followed suit, holding developing countries responsible for the food shortages. Their statements reminds one of their claims of the existence of Weapons of Mass Destruction in Iraq
The US Congress is in the process of giving subsidies worth $300 billion to the country’s agricultural sector. The European Union and all other rich countries heavily subsidise their farming sector as well. Such subsidies are the main cause of the destruction of agricultural sectors in poor countries contrary to what President Bush and Secretary of the State Condoleezza Rice have been claiming.
In recent days, Ms Rice blamed India and China for higher food consumption and therefore commodity price hikes. President Bush followed suit, holding developing countries responsible for the food shortages. Their statements reminds one of their claims of the existence of weapons of mass destruction in Iraq, which were never there.
The fact of the matter is that the highly subsidised agriculture sectors of industrialised countries, and the newly opened international markets which have attracted speculative finance, have methodically obliterated farming in many developing poor countries. How?
When rich countries subsidise their agricultural sectors, the cost of production of agro commodities are reduced substantially. For example, if the production cost of wheat was 50 cents per kg, after the subsidy it may be reduced to 25 cents or even less.
Sometimes, even when the market prices are high, the US farming sector still gets the subsidy. As a result, the cost of producing agro commodities may be reduced to zero. And sometimes when there is too much supply of a commodity, the US government pays the farming sector the full cost of production for not growing those crops at all.
It is also interesting to note that the US farming community is not comprised of small farmers struggling to survive. Instead, the agro business has been taken over by huge multi-national corporations. Therefore, most of the agricultural subsidies are given to rich corporations.
The European Union and other rich countries also subsidise their agriculture heavily. Most of the countries of the European Union have no comparative advantage in growing most crops. They would be better off importing many essential commodities and yet they enable their agriculture sector so that they are net exporters of many commodities. Probably, this strategy is adopted to avoid dependence and vulnerability and for the domination of developing countries.
Farmers of developing countries cannot compete with the heavily subsidised commodities thrown in the world market by rich industrialised countries. The farmers of poor countries do not receive any help from their respective government: instead, their produce is taxed and most of the time they are forced to sell below the world market price to keep the urban population satisfied.
Consequently, developing countries’ farmers are beaten by the subsidised commodities from the rich industrialised countries and by their own governments.
It is ironic that the US and other industrialised countries preach free competition and open world markets. By subsidising their agricultural sector they negate the very concept of free competition. The farmers of poor countries are not given a level playing field.
The World Bank, the International Monetary Fund, the World Trade Organisation and many other fronts are used to force poor countries to open their markets. The poor countries, in need of financial help can hardly resist the pressure and allow the US and other industrialised countries to dump their subsidised commodities in their markets.
Within a few years the local farmers, unable to compete, are either driven out of business or shift to a few selected crops in which they can survive. This is the process by which the agricultural sectors of many developing countries have been destroyed by the agricultural subsidies of the rich countries.
Writing about the effects of subsidies on African countries, Prof Richard Mshomba of Tanzania University says: “Agricultural subsidies in developed countries reduce world prices, and thus the incomes of African farmers. World Bank studies suggest that US subsidies alone reduce West Africa’s annual revenue from cotton exports by $250 mn a year.” The effect of rich nations’ subsidies on poor countries’ farmers is well documented but nothing is done about it.
Presently, the poor countries are in double jeopardy. In the last few decades, their own agriculture capacity has been diminished due to cheaper subsidised commodities from rich countries. Now when their markets have become vulnerable to global forces, the commodity speculators of rich countries have hiked the prices. It has left the poor people of the globe defenceless.
The capital in the speculative future markets has risen from 25 billion dollars to 250 billion dollars in 2007. Who is raising the prices then: India and China, or the commodity speculators and rich farmers who will receive 300 billion dollars of subsidies from the US treasury?
May be it is time for the developing countries to ban the entry of subsidised commodities and save their struggling farming communities.
The writer can be reached at email@example.com
Source: Daily Times, 7/5/2008