Gold-Plated Farm Programs

The finance ministers of the 24 industrialized nations making up the Organization for Economic Cooperation and Development have provided an extraordinary opportunity for the Venice economic summit to do something about the increasingly onerous farm support programs of the rich nations.

They agreed last month that the time had come for action to begin reducing the subsidies. To substantiate their proposal, they made public an extraordinary study that for the first time reveals the true enormity of the cost of the programs and underscores how counterproductive and inequitable the programs are.

About one-third of all farm income comes from government programs in the industrialized nations studied. An analysis of so-called producer subsidy equivalents showed wide variation among the nations; for example, 16% of farm income in the United States comes from the government, 43% in the European Community, 59% in Japan. An analysis of the cost to consumers showed similar variations and extraordinary burdens on consumers. Consumers of dairy products, one of the most obscenely subsidized products, pay the equivalent of a 24% tax in the European Community, the United States and Canada, and even more, 31%, in Japan.

To make matters even worse, these gold-plated programs are not serving their intended purposes of saving family farmers. The bulk of the benefits go to a small minority of well-to-do farmers, the study found. In the European Community only about one-third of all farmers earn the equivalent of an average industrial job. In the United States less than 20% of farm aid reaches farmers with serious economic problems--those whose debts are more than 40% of their assets.

The result has been embarrassing surpluses in the industrial nations, with carryover stocks almost double what is thought to be a safe and reasonable reserve against emergencies. This has further depressed prices. Governments, notably the United States and the European Community, have resorted to export subsidies to try to reduce the mountains of surpluses, and these in turn have further distorted world markets, often punishing poor nations whose sole means of support is the export of a single commodity.

Reform by a single nation would not work. That is why endorsement of the work of the finance ministers and of the OECD study by the seven industrial nations’ leaders at Venice is so important. It would clear the way for serious work on an international basis, first of all within the new Uruguay Round on the General Agreement on Tariffs and Trade now under way in Geneva.

The OECD study provides a basis on which to negotiate “a multilateral and coordinated reduction in assistance” that would permit a reduction of subsidies without prejudicing the position of any one nation. Taxpayers and consumers would be spared the astronomical expenses of programs that ill-serve most farmers and distort international trade, often at the expense of poor nations.