Exporting Farm Ruin to the World

Despite the hoopla at the end of last week’s big meeting of the General Agreement on Tariffs and Trade in Uruguay, the trade ministers from most of the countries of the world got nowhere on the most important issue of all--agriculture. No other trade issue has quite the potential for such widespread human damage.

Agricultural nations, including Australia, New Zealand, Brazil and Argentina, called on the United States and Western Europe to cease subsidizing their farmers. They were virtually ignored, quieted with promises to discuss the matter in Geneva.

The problem is critical. A savage subsidy-fed competition between the European Community and the United States is driving down grain prices to a point where, before too long, farmers in Africa, Asia and South America will feel that it is no longer worth their while to grow for the market.

Uncannily like the arms’ manufacturers, the farm production lines in Western Europe and the United States are depending on international markets to support their large investments. In recent times the output of half of the cultivated farm acres of North America has been exported, and more than one-third of the European Economic Community’s agricultural expenditures have gone for export subsidies.

The outlook is grim. Over the next five years and beyond the projected increases in farm production will outstrip market demand. Prices are almost certain to remain depressed. And the current fierce competition of subsidized exports among the principal producers will further reduce earnings for all food sellers.

Problems could well accelerate as a result of advances in the biological sciences. For example, a synthesized growth hormone has shown in field trials that it can increase milk production measurably.

Although both the United States and Europe have taken steps to rein in their farmers, it has not been enough to counter the tide of growing productivity.

Part of the crisis in agricultural production in Africa and Latin America is clearly due to the easy availability of cheap imported food. Undoubtedly that helped to bring about the African famine. Too many African countries became complacent about their inadequate agricultural production, feeling that there was always a buffer overseas. What these governments ignored is that if you treat your farmers as a side show for long enough, when drought arrives you are ill prepared to deal with it.

As Maurice Williams, former head of the World Food Council, observes, “Many Third World countries would invest more and increase their own food production if world markets were seen as stable and profitable. Present market circumstances do not provide the right signals.”

While it is with grains that the most damaging pressures are being felt, sugar and beef markets also are being hurt. Agricultural subsidies to sugar substitutes and beet sugar are now so high in the United States and Europe that Caribbean countries are closing down sugar-cane farming. Industrialized countries’ trade barriers to beef and veal imports are now so high that Third World countries lose $5 billion a year in export opportunities.

The United States and Europe have got to come to terms with the damage they are creating. Moreover, these subsidies are an enormous drain on their own exchequers, and a weight on their taxpayers.

There are two ways for Europe and the United States to go. The first is to cut the export subsidies and to use what government funds are available to pay farmers to take land out of production.

The second is to encourage agricultural development around the world, in particular in Africa and Latin America. The agricultural revolution in Asia has shown that as agriculture develops, the economy improves, incomes rise and then agricultural imports rise, in that order.

The experience of successful Third World countries is that higher domestic rates of food and agricultural production stimulate an income-driven demand for foreign foods as spending power rises and tastes widen. That’s how it should be. But present-day export subsidies, together with high debt-service payments and trade barriers, are undermining the potential development of Third World economies. The United States and Europe must come to realize that they are locked into a self-defeating agricultural policy.