Farm subsidies harm agricultural exporters

Rich countries subsidise their agricultural sectors tremendously, depressing the price of agricultural products on world markets. According to the Economist, this hurts poor agricultural exporters, while helping poor agricultural importers.

Most poor countries are net importers of agriculture goods. A study in 1999 found that 33 of the 49 poorest countries import more farm goods than they export. Consequently, ending rich country subsidies would hurt poor countries. The Economist finds that if Organisation for Economic Co-Operation and Development (OECD) countries scrapped their subsidies (but kept their tariffs):

Brazil and Argentina would benefit, but the rest of Latin America would lose $559 million a year (in 1997 dollars).

India would benefit a bit, but the rest of South Asia would be $164 million worse off.

Sub-Saharan Africa would lose $420 million, while North Africa and the Middle East would face a cost of $2.9 billion.

Ironically, the rich countries stand the most to gain from ending the agricultural subsidies, but fight the hardest to keep them in international trade rounds. The Economist concludes that poor countries would do better if rich nations ended their tariffs:

The abolition of agricultural tariffs in rich nations would yield $12.5 billion for poor countries, with no regional losers.

If the poor nations also liberalised their own agricultural trade, they would reap another $21.4 billion.

Source: Punch-up over handouts, Economist, March 23, 2005.

For text (subscription required): http://economist.com/finance/displayStory.cfm?story_id=3786899

For more on Tariffs and Other Trade Barriers: http://www.ncpa.org/iss/tra/

FMF Policy Bulletin/ 17 May 2005