American Farm Act harmful to consumers and developing countries

The U.S. Farm Security and Rural Investment Act of 2002, passed by Congress and signed by President Bush, subsidises the rich, hurts consumers and jeopardises the environment.

The new law raises spending by $73.5 billion over the next decade – an increase of more than 63 percent. Much of it is agribusiness welfare:

Three-fourths of farm aid goes to corporate farmers.

Of $71 billion in aid over the past five years, two-thirds went to just 10 percent of the farms. [See the figure.] http://www.ncpa.org/pub/ba/ba413/images/ba413fig1.gif

In 1999, 47 percent of farm subsidies went to farmers with sales exceeding $500,000.

Billionaires like David Rockefeller of Chase Manhattan Bank and Ted Turner of Time-Warner are leading corporate farm-aid recipients.

These price supports and subsidies for the rich come at the expense of the poor. Price supports lead to higher consumer prices. This will increase of consumer food costs by $271 billion over the next decade, an average of $2,572 per American household.
Moreover, since farmers only receive $0.22 of every dollar spent at the grocery store, the primary beneficiaries will be processors, distributors and retailers, not farmers.

The Act also hurts world trade and the Third World. The United States looks hypocritical when it asks Europe to lower their agricultural subsidies, but increases its own. This may cost American farmers future markets. Furthermore, by subsidising American agriculture, it harms developing countries. Subsidies and trade barriers erected by wealthy developed countries cost the Third World $100 billion a year in lost income –more than twice the amount of aid they receive from the developed world each year.

Finally, the Act harms the environment. The Act encourages environmentally unsound farming by supporting overproduction and the use of marginal farmland.

Source: Heather Lawhon, The Farm Bill: A Twice-Baked Potato, Brief Analysis No. 413, National Center For Policy Analysis, August 15, 2002.

For text: http://www.ncpa.org/pub/ba/ba413/
For more on Federal Agricultural Policy http://www.ncpa.org/iss/env

FMF Policy Bulletin\20 August 2002