Trade is the best aid for Africa

Throughout history trade has led to greater productivity and economic growth. Open markets allow countries, companies and regions to specialise in the production of what they do best and import products that can be made more efficiently elsewhere, says Christa Bieker, a policy analyst with the National Center for Policy Analysis.

Unfortunately, the United States discourages freer international trade through its policy of agricultural protection. U.S. subsidies to farmers have reached staggering levels:

In 2006 alone, farm subsidies amounted to $19 billion.

Attempts to limit subsidies – beginning with the Freedom to Farm Act of 1996 – have not been successful; over the past 10 years taxpayers have spent more than $150 billion on farm subsidies.

From 1999 to 2005, U.S. cotton farmers received 86 cents in subsidies for every dollar they received from sales.

Since the 1990s, world cotton prices have fallen by half, much of which is due to U.S. farm subsidies, according to the International Cotton Advisory Committee. Their estimates suggest that world cotton prices would rise by 26 per cent if the United States repealed cotton subsidies. This amounts to an increase of over $300 million per year in income for African cotton farmers.

In many cases the negative economic impact of agricultural subsidies is greater on African countries than the development aid they receive, says Bieker. For example, in 2002:

Burkina Faso received $10 million in U.S. aid, yet lost $13.7 million in export earnings due to depressed cotton prices.

Chad received $5.7 million in U.S. aid but lost nearly the same amount in export earnings.

Togo received $4 million in U.S. aid but lost $7.4 million in export earnings.

Source: Christa Bieker, Trade Is the Best Aid for Africa, National Center for Policy Analysis, Brief Analysis No. 593, September 24, 2007.

For text: http://www.ncpa.org/pub/ba/ba593/

For more on Trade Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=42

FMF Policy Bulletin/ 02 October 2007