Posted on 19-12-2003

Cottonheads

Victor Keegan

In refusing to concede on agricultural subsidies during world trade talks, the west is harming itself as well as the developing world.

You may not have noticed, but attempts to rekindle the burnt-out international trade talks in Geneva have been postponed yet again until next year.
Who cares? Boring old talks, complicated issues, things happening far away; pass the channel switcher.

Actually, the talks are hugely important. They offer not only the usual galvanising benefits arising from lowering tariff barriers but also - and much more important - a way of giving developing countries the biggest boost they have ever had and at no cost to ourselves.

Indeed, the west would gain many billions of dollars in return. How? By abolishing agricultural subsidies. This is the simple, but highly charged issue holding up the talks, and it is worth repeating some oft-quoted statistics.

The numbers do not have general currency, maybe because people find them difficult to believe, but they illustrate a simple fact. Not to beat about the bush, they show that the maintenance of agricultural subsidies is the biggest scam in the world inflicted by the rich on the poor.

Farmers in industrialised countries receive over $300bn (£169.9bn) a year in direct and indirect subsidies to grow crops much of which - if it was a level playing field - could be done more profitably by developing countries and thereby employing millions more workers.

Subsidies have been removed from practically every other business activity but not in the one area where they could do the greatest good because of formidable political power of a tiny minority of farmers.

The biggest obstacle to progress is the EU, and France in particular (Britain and Germany are angels in this respect). But the most glaring abuse is in the grotesque way that US cotton farmers are featherbedded.

Growing cotton is not a strategic thing like being self-sufficient in food. By its nature it is better done in places such as Africa where the climate is good and where literally millions more could be employed.

Yet in 1992 the US government (that's the one with the whacking budget deficit) paid out $12.9bn - yes billion - to its cotton farmers. As a result, the US improved its share of world exports from 25% to 40% between 1999 and 2002 despite falling world prices.

As an editorial in the New York Times put it last week: "The United States was in effect paying the rest of the world to buy American products rather than the cheaper cotton grown in Africa and South America."

Try as I do, I cannot think of a single argument to justify subsidies on this gargantuan scale beyond the cynical need to preserve jobs at any cost to gain votes. Am I missing something?

The issue of agricultural subsidies is important not just because it is the most cost-effective way of helping developing countries to help themselves, but for another reason as well. Progress would give a big boost to world governance at a time when self-interest is preventing progress in other arenas like the development of a European constitution.

The world trade talks are being held up because industrialised countries won't respond to the newly acquired determination of poorer countries to make the abolition or severe reduction of farming subsidies a sticking point in the negotiations.

Yet abolition would give the west over $300bn to spend on other things, including rehabilitation schemes for farmers. Developing countries are holding a gun to the west's head to persuade it to pay itself a bonus of $300bn. It's like highway robbery - in reverse.