A Scourge Rooted in Subsidies

In a land without droughts, floods or locusts, the plague that’s wiping out Uruguayan cattle ranchers is called economics.

Their cows produce rivers of milk, their steers grow fat. But ranchers such as Juan Carlos Planchon can find few buyers willing to purchase their products at a worthwhile price. Many have sold off their land and moved to the city, leading the 61-year-old gaucho to show up at protests with a banner emblazoned with the slogan “Profitability or Death.”

In nearly every corner of the developing world -- places as diverse as China, Kenya and Uruguay -- working the land is a way of life that seems perpetually on the verge of disaster, even as food and crops circle the globe as never before. The long-simmering frustrations of these farmers led the representatives of about 90 developing countries to stage a headline-grabbing walkout earlier this month at the World Trade Organization talks in Cancun, Mexico.

At issue was the most powerful tool the wealthier nations wield in the marketplace: $300 billion in subsidies that help their farmers flood the world with cheap corn, cotton and other commodities.

“I’ve been calling Montevideo [Uruguay’s capital] to get the ambassador of the European Union to come out here so she can see what their subsidies are doing to us,” Planchon said on his ranch, fields of clover cut through with shallow streams. “We call it economic terrorism, because they’ve wiped out more people with their subsidies than with any bomb.”

African countries say their cotton sells for a song on the world market because producers in Mississippi and elsewhere get government payouts that lower their costs and make American cotton cheaper. Soybean producers in Argentina and corn growers in Kenya make similar complaints about the subsidies. In Europe, dairy farmers are subsidized to the tune of $2 per animal daily and ship off cheap milk products to Africa and Latin America. In Uruguay, the government seems to raise taxes whenever its farmers and ranchers bring in a bumper crop.

“Our country does not have any minerals or mines, or oil, or anything like that,” Planchon said. Cows are Uruguay’s gold, a main source of export revenue. “So the government has to pay off its debts with the money we farmers make.”

American farmers argue that the subsidy payments are necessary to keep them from being wiped out by consistently low prices for their crops.

Upon signing a 2002 law that substantially increased the payments, President Bush said: “This bill is generous, and will provide a safety net for farmers. And it will do so without encouraging overproduction and depressing prices.”

In most of the developing world, farmers and peasants are the bottom of the political pecking order. While hardships have long been a feature of rural life, those difficulties appear to have increased exponentially as leaders embrace the free markets that the WTO was created to nurture.

“I would love to dream about being a big farmer, but the reality is this,” said Xi Jingen, a farmer in Beimuqiao, China, gesturing across his quarter-acre rice plot set against the hazy bluish backdrop of the Yangshan Mountains. Xi said he has never received a penny in government subsidies.

In California, by contrast, a single rice cooperative near Sacramento received about $27 million in subsidies last year.

“You mean farmers get paid extra money to grow their crops?” Xi said when told of U.S. subsidies. He then allowed himself a moment of fantasy: “Think of what I could do if I had some money to buy better equipment, a better thresher. I could grow so much more.”

When Chinese officials think about investing in production, however, they usually think about industry. In the eyes of many officials, manufacturing is China’s future and farmers are relics of a backward way of life.

Not far from Xi’s rice plot rises the ever-expanding factory town of Suzhou, about 50 miles west of Shanghai. A fiber-optics plant and an electronics factory have opened nearby, and apartment complexes are being built to house workers.

Xi’s small plot has shrunk over the years as the local government subdivides it to make room for other farmers who themselves have been pushed off their land by Suzhou’s growth.

Rice farming has proved especially difficult this year, Xi said, because of a prolonged drought and a road construction project that has blocked most of the creek that he normally uses for irrigation.

“It is harder and harder to make any sort of a living off the land here,” said Xi, a compact, sinewy man with a thick mop of black hair. He’s been farming since he was 11 -- it’s “the only thing I know how to do.” Now he collects scraps from nearby construction sites and sells them to make ends meet.

The U.S. exports $2.5 billion in farm goods to China each year. Under the terms of China’s entry into the WTO in 2001, Beijing negotiated the right to provide limited subsidies to its farmers. But that’s not likely to better the prospects of farmers such as Xi soon.

“At this moment, the Chinese government is unable to subsidize farmers in any major way, and they are unlikely to do so in the near future,” said Shen Minggao, a professor at the China Center for Economic Research at Beijing University.

In Africa, cotton is the main cash crop in many countries. It is also the most heavily subsidized agricultural product in the United States.

African cotton farmers lobbied hard at Cancun for the elimination of about $4 billion in U.S. government payments to cotton farmers, a subsidy they say distorts the global cotton and textile market.

“They argued that world cotton prices have fallen because of U.S. subsidies,” said Peter Draper of the South African Institute of International Affairs. “They wanted the U.S. to address the issue in a separate initiative, but the U.S. refused.”

U.S. and European taxpayers fund a variety of programs to help the rural poor in Africa, but much of that assistance, experts argue, is canceled out by the impact of trade subsidies.

According to the global relief organization Oxfam International, the West African nation of Mali received $37 million in U.S. aid but lost $43 million in export revenue because of American cotton subsidies.

Kenya’s cotton industry was devastated years ago when it cut out its own subsidies and waived most tariffs. Cheap imports flooded the market, and the industry still hasn’t come back.

Under the recently implemented Africa Growth and Opportunity Act, the United States has offered sub-Saharan nations a piece of the American market in corn and other commodities. But for the past five years, Kenya’s hardscrabble farmers have failed to grow enough corn to feed their own people, much less for export.

At the same time, corn prices have dropped drastically -- from 14 cents a pound to as little as 3 cents. Farmers and agricultural officials in Kenya believe that subsidized European, American and Australian corn is entering the country through Tanzania and Uganda, lowering the prices in local markets.

“It is impossible that Uganda has so much corn,” said David Wafula Sitati, a corn farmer in western Kenya’s fertile Rift Valley. “We are in a very bad way. I’m quite discouraged.”

Sitati has a wife, two children and another one on the way. He scratches out a living on an eight-acre farm of red clay soil that only seems to get him deeper and deeper into debt. He lost money last year and expects to lose more this year.

Sitati’s water was cut off last month because he couldn’t pay the bill, and he had to take his younger son out of school because he couldn’t afford the fees. Sitati applied for a loan, even offering the deed to his house as collateral, but the bank turned him down.

“We won’t be able to sustain ourselves like this,” he said. “We’re just living hand to mouth.”

Negotiators for developing nations pressed the case of farmers such as Sitati and ranchers like Planchon during five days of frenetic meetings and protests in Cancun.

Ernest Liboreiro attended the WTO conference as the representative of a group of Argentine farmers and as an advisor to Argentina’s government.

“We returned from Cancun feeling completely defeated,” Liboreiro said. “We thought the developed countries would agree in principle to substantially reduce the subsidies which have caused so much damage to us. Instead, it seems they only want to leave us poor and excluded.”

The talks collapsed Sept. 14 when an alliance of developing nations known as the Group of 21 declared that the wealthier nations’ concessions on subsidies were insufficient. Although the richer countries were prepared to give up some of the subsidies, in return they wanted to push forward a new set of trade agreements that would, among other things, open up foreign markets to U.S. and European financial companies. The poorer nations remained adamantly opposed to considering the financial issues until an agricultural pact was reached.

At his last news conference in Cancun, U.S. Trade Representative Robert B. Zoellick lashed out at the defiant alliance.

“Whether developed or developing, there were ‘can do’ countries here and there were ‘won’t do’ countries,” he said. “The harsh rhetoric of the ‘won’t do’ overwhelmed the concerted efforts of the ‘can do.’

“In my opinion, some spent too much time with tactics of inflexibility and inflammatory rhetoric before getting down to negotiate.”

In Pergamino, Argentina, about 130 miles northwest of Buenos Aires, soybean farmer Alejandro Calderon looks to the north and his U.S. competitors with a hint of envy. He believes the subsidies paid to producers in places such as Illinois allow them to weather the vagaries of farming that can destroy soybean farmers in South America.

“They can plan easier for the long term,” he said. “When they plant, their profits are guaranteed. We, on the other hand, are vulnerable to these falling prices that are being manipulated by the developed countries with their subsidies. It’s a lottery. But they know the winning numbers beforehand, and we don’t.”

Dwight Allen, a global economist with Deloitte & Touche in Washington, said that developing countries have a point.

“Most economists agree that the system of agricultural subsidies that exist in the United States, Europe and Japan is contrary to best practices and current thinking as to what makes sense in a world market,” Allen said. “The only justification for the subsidies is the political concerns in protecting domestic farmers.”

In Mexico, the North American Free Trade Agreement has brought farmers into direct competition with counterparts in Iowa and Nebraska. The result has been traumatic for Mexico’s small farmers, who make up nearly a quarter of the country’s work force.

Once upon a time, Mexican farmers enjoyed significant subsidies and protections from their government. The elimination of those preferences, as stipulated in NAFTA, found them unable to compete, mainly because their farms typically are smaller and less technologically advanced than those of their U.S. and Canadian counterparts.

Since NAFTA became law in 1994, Mexican farmers have been overwhelmed by a flood of U.S. imports.

Farmers such as Felix Rubinos, a corn farmer in Xalatlaco, an agricultural town southwest of Mexico City, say they are on the ropes.

“Costs for fertilizer and seed have gone up, but corn prices haven’t moved in 10 years. Before, we were able to support ourselves, but now I’m just getting by with barely enough to eat with,” Rubinos said, standing on his 15-acre farm.

Many of his neighbors have quit the land to take up jobs in nearby textile and car factories, and Rubinos said he is thinking of doing the same.

“I hear that Americans get two or three corn harvests a year with their machines, irrigation and more fertile farms,” Rubinos said. “We are isolated here, very far from technological improvements. The government should protect us, not watch us fall down.”

Mexican farmers of livestock, including pigs and cattle, have also been hard hit by cheaper imports. “You don’t make out by farming in Mexico. I’m doing this only because I would suffocate doing any other job. My sons are all taxi drivers and bus drivers,” said Facundo Sanchez, 70, an oat farmer in Xalatlaco. “I work like an animal, but it’s not profitable. But at least I’m breathing the air of the countryside.”

Tobar reported from Tarariras, Verhovek from Beimuqiao and Moore from Kitali, Kenya. Times staff writers Chris Kraul in Xalatlaco and Andres D’Alessandro in Pergamino contributed to this report.