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DEVELOPMENT: Subsidies Dip a Little, But Nowhere Near Decline
By Ravi Kanth Devarakonda
GENEVA, Oct 23 (IPS) - Rich countries have failed to carry out reform of their domestic farm subsidies programmes to reduce distortions in global trade, says a senior official of the Paris-based Organisation for Economic Cooperation and Development (OECD), a grouping of 30 wealthy nations.
The subsidies - estimated at 268 billion dollars last year - penalise competitive farm producing countries in the South.
Stefan Tangermann, a senior agricultural policy analyst at the OECD, says "production-linked measures still dominate producer support in most (OECD) countries" and "there has been limited progress towards policies targeted at clearly defined objectives and beneficiaries.
"Despite a decrease in the overall government support to farmers in the rich countries, which dropped to 27 percent last year from 29 percent in 2005, the producer support programmes continue to depress market access for farmers in the competitive developing countries," he told journalists.
Releasing the OECD's report on 'Agricultural Policies in OECD Countries - Monitoring and Evaluation 2007' Tuesday, he argued that "there has been little change in the level of producer support since the late 1990s for the OECD as a whole."
Known as the rich country club and a think tank for ushering in market-oriented reforms in every economic sector the world over, the OECD has repeatedly pressed for sweeping reforms among its member countries, that include the United States, Japan, Switzerland, Norway, Canada, the European Union, Mexico and Korea.
Unlike the transport, telecommunications and financial sectors, where the OECD has had considerable success in introducing market-driven reforms among member countries, it has singularly failed to do the same in the farm sector, say analysts.
In the latest report, the OECD acknowledged modest reform in farm subsidy programmes in some European Union member countries which shifted from production-linked subsidies to income payments to reduce distortions.
Japan and Korea have also embarked on reform measures, while the United States is in the process of proposing new farm legislation to replace the current farm bill, says the report.
While support has declined in recent years due to prevailing high international prices, wide differences remain in the level of support among OECD member countries. Support to farm producers was 1 percent of farm receipts in New Zealand in 2004-06, it was 14 percent in the United States and Mexico, 22 percent in Canada, 34 percent in the European Union, 55 percent in Japan, and over 60 percent in Iceland, Norway, Korea and Switzerland.
Consequently, progress in reducing the level of overall farm support, that includes a range of subsidies, remains uneven across OECD countries. The share of the most production and trade-distorting forms of support has declined from 86 percent in 1986-88 to 64 percent in 2004-06, according to the report. In effect, nearly two-thirds of farm payment programmes continue to have a trade-distorting impact, says Tangermann.
Further, commodities such as rice, sugar, milk, sheep meat, grains, sunflower and wheat continue to receive substantial subsidies from the OECD governments.
Surprisingly, the report remained silent on subsidies provided to cotton in the rich countries, particularly in the United States. Tangermann admitted that the OECD was unable to include cotton along with commodities because of opposition from its members.
The OECD official said subsidy programmes aimed at discouraging farmers from increasing their production and improving the environment have had modest impact.
He emphasised the need for deep reduction commitments in farm subsidies in the ongoing Doha trade negotiations, which are struggling to make progress.
"I think there has been progress in the farm reform programme in the European Union since implementation of the 2003 Common Agricultural Policy Reform," says Ambassador Clodoaldo Hugheney, the Brazilian trade envoy to the World Trade Organisation.
"But there has not been any reform in the United States, Japan, Switzerland, Norway among others," he told IPS, arguing that "agriculture is the most contentious issue in the Doha agriculture negotiations."
Brazil, which leads the G20 developing country coalition, has pressed for substantial reduction in the subsidies provided by the United States, whose overall payments according to OECD came close to 30 billion dollars.
"The U.S. must really reform its farm subsidies by bringing down the overall trade-distorting support to 13 billion dollars," he said.
In the draft Doha modalities on agriculture that indicate the level of commitments key members must undertake to reduce farm subsidies, the chair for Doha agriculture negotiations Ambassador Crawford Falconer had suggested that the U.S. should reduce its farm subsidies to anywhere between 13 billion and 16.4 billion dollars.
Last week, the U.S. did not indicate what it intends to do in regard to cutting down its farm subsidies during an intensive Doha agriculture negotiating session.
The chief U.S. trade negotiator Ambassador Joe Glauber said the U.S. is willing to consider all the ranges suggested by the chairs for Doha agriculture and industrials negotiations.
The U.S., which had recently submitted its farm payments since 2001 to the World Trade Organisation, had repeatedly maintained that it would be difficult to bring down its farm subsidies below 17 billion dollars.
"Clearly, the U.S. wants to continue with high support for its farmers because of its Congress and special interest groups that want to avail of billions of dollars of subsidies," Dr Abdur Chowdhury, director of the United Nations Economic Commission of Europe told IPS.
"Countries like Brazil and India want the U.S. to do more by cutting down its farm subsidies, but it has not happened until now," he said. (END/2007)
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