Dumping And The Subsidy Debate In Wto
By Dr. Vandana Shiva
28th June 2003
The subsidy issue has been at the centre
of W.T.O. conflicts in agriculture. On 26th June 2003, the European
Union agreed on what is projected as the most "sweeping reform in the
history of its Euro 43bn farm subsidy regime. The reform "decoupled"
CAP's subsidy link to production. It is being hailed as removing the cause of
dumping. As Mr. Fischler stated,
"This decision marks the beginning
of a new era. This reform sends out a strong message to the world. We are saying
good-bye to the old subsidy system which significantly distorts international
trade and harms developing countries."
Supachai Panitchpakti, WTO Director
General said the reforms would help the agriculture negotiations in WTO.
However, "decoupled" subsidies
can continue to harm developing countries as dumping by the U.S. clearly
establishes. The U.S. has decoupled support to agriculture from production
targets. However, the U.S. dumping of subsidized agricultural produce on the
Third World is the biggest threat to the livelihoods of the poorest people in
the developing world. Dumping on the Third World has in fact increased after
the W.T.O. Agreement on Agriculture came into force, establishing clearly that
decoupled subsidies which are allowed in the W.T.O. Agreement are not a
solution to dumping. Dumping is an
issue of price, not just production. Decoupled subsidies, subsidies that
provide export incentives, and other indirect subsidies are not linked to
production, but they distort trade by distorting prices. In 2000, the U.S. used
$5.5 billion in export credits. Direct payments to farmers in U.S. went up from
$9 billion in 1989 to $15.3 billion in 1995.
A recently released paper from the
International Agriculture and Trade Policy Institute has shown that in four
major U.S. commodities, the level of dumping has increased since 1995 when the
W.T.O. came into force, even though the proclaimed aim of W.T.O. is to
"reduce distortions in trade." While the full cost of U.S. wheat in
2001 was $ 6.24/bushel, its export price is $ 3.5/bushel. In the case of soya
bean, the cost was $6.98/bushel; the export price was $4.93/bushel. For maize,
the full cost was $3.47/bushel; export price was $2.28/bushel. In the case of
cotton, the cost was $0.9313/bushel and the export price was $ 0.3968/bushel, a
dumping of 57%. The cost of production of rice was $18.66/bushel and it was
sold internationally at bushel $14.55/bushel.
From 1995 to 2001 dumping jumped from 23%
to 44% in the case of wheat, 9% to 29% in
the case of soya beans, 11% to 33% in the case of maize, from 17% to 57% in the
case of cotton.
While the W.T.O. Agreement on Agriculture
claimed to achieve reduction of rich country subsidies, the $ 248.6 billion
farm Bill of 2002 has increased farm subsidies by $83 billion. This dramatic
increase threatens the livelihoods of Third World farmers. According to the
World Bank, low cotton prices in U.S. resulting from high subsidies are costing
African countries $250 million each year.
The CAP reform will maintain subsidy
levels, merely decouple subsidies from production. This will in fact create new
price distortions in European Agriculture misusing the agribusiness led U.S.
subsidy policy. The harm to the Third
World will in fact increase.
One of the biggest myths about
contemporary agriculture is that it has led to higher production and surpluses.
Overproduction leads to low global prices which are then exported and dumped.
However, the "surpluses" in Europe are pseudo surpluses.
The so-called oceans of milk and
mountains of butter in Europe are not absolute surpluses but surpluses
resulting from imports. As Tracy Worcester points out in Resurgence
(March/April 2000):
In 1996, Britain exported 111 million
litres of milk and imported 173 million litres. It imported 49 million
kilograms of butter, but it exported 47 million. Why didn't just consume its
own 47 million kilos and import the shortfall of 2 million, thus saving all the
transportation costs? Why? Because not importing and exporting on a grand scale
produces no profits for the transnational and their transport fleets. The food giants
will fly apples to Britain from 14,000 miles away in New Zealand and bring
green beans 4,000 miles from Kenya, although British farmers can easily grow
both.
This process of mutual dumping will
continue with decoupled subsidies, as long the "green box" and
"blue box" mechanisms continue to allow rich counties to artificially
lower prices through price distorting subsidies. The U.S. farm bill makes such price distortions worse. Low prices
of agricultural commodities have no relationship to production. They are more intimately
linked to subsidies and agribusiness monopolies.
In 1999 global wheat production fell by 2
per cent from 1998. However, contrary to the logic of supply and demand, prices
of wheat also fell by $10 to $18 per tonne.
The low prices are clearly not a result
of higher production. In fact prices are falling in spite of lower production,
countering all supply and demand theories. Collapsing prices have more to do
with concentration of control than with over supply. Farm prices are low because
they are being "fixed" by corporate monopolies. Industrialization and
globalization lead to increased control over input supply and commodity
purchase by global agribusiness. The corporate giants can determine the prices
because farmers are locked into dependency relations for buying inputs and
selling their produce.
As the Business Week of Oct 23, 2000
states,
"Price fixing an ugly issue that led
to recently stiffened jail terms for a couple of former ADM executives, is far
easier when fewer players are in the business. For smaller players, the result
of reduced competition could be higher costs for feed and supplies and,
arguably, lower prices for their goods."
Monopolies usually imply high prices. But
in the case of agriculture they imply low prices for farmers in all countries
because the corporations are not the producers but traders in agricultural commodities.
As a result of vertical integration, corporations control inputs such as seeds
and agri-chemicals sold to farmers as well as purchase of commodities. They
sell inputs at high costs and buy commodities at the lowest possible price.
American farmers are already victims of such corporate serfdom. This is the
corporate serfdom that the new Agriculture Policy has announced through
contract Farming and Corporatization of Agriculture.
And this corporatized agriculture would
well be promoted by CAP reform that fails to look at prices, and only addresses
production.
The solution to dumping and artificially
low prices that distort trade and wipe out poor farmers in poor countries is
regulation of prices and removal of all subsidies that distort export prices
and lead to dumping. CAP subsidies
being repackaged in the camouflage of green and blue boxes of the W.T.O.
agriculture agreement will not protect the livelihoods of Third World farmers.
A radical reform of W.T.O. rules is needed.
Research Foundation for Science
Technology & Ecology (RFTSE)