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TRADE: U.S. Dumping Threatens Small Farmers, Report Warns

Emad Mekay

WASHINGTON, Feb 10 2005 (IPS) - U.S. agricultural companies are selling crops to the world market at prices well below their cost of production, a practice called "dumping" that is one of the most damaging of all anti-competitive trade behaviors, says a new report.

According to the Minneapolis-based Institute for Agriculture and Trade Policy (IATP), 10 years after the passage of the World Trade Organisation (WTO) Agreement on Agriculture, which prohibits dumping, the United States is still engaging in the practice on a large scale, leading to an oversupply that has driven commodity prices down worldwide.

The practice threatens the livelihood of millions of farmers in developing nations and benefits only a select few major transnational agribusiness firms, based mostly in the United States and Europe, the group says.

"It is clear that the WTO Agreement on Agriculture is doing nothing to address agricultural dumping and its severe consequences for farmers around the world," said IATP President Mark Ritchie.

"The low global prices caused by dumping hurt farmers around the world, including U.S. farmers. It’s time for trade negotiators to put this issue front and center."

Once hailed as a victory for farmers around the world, the report says the WTO rules have actually made it more complicated in practice for smaller, poorer countries to establish grounds for anti-dumping duties because of the requirements to demonstrate harm.

"Underlying technical challenges for using the WTO to stop dumping is the political reality of the multilateral trading system that makes it difficult for small countries to challenge powerful economic players like the United States," says the report, titled "WTO Agreement on Agriculture: A Decade of Dumping – United States Dumping on Agricultural Markets."

Meanwhile, the U.S. Chamber of Commerce is pressing the George W. Bush administration to crack down on China for copyright violations.

And in its annual report, the U.S. Trade Representative details what it deems unfair trade barriers, even as Washington urges other nations to ease their own import regulations, especially on U.S. agricultural products.

The United States argues that providing predictable market conditions for key U.S. agricultural commodities to the world is critical to U.S. farmers

The IATP report recommends that importing countries, especially in the developing world, should have the ability to immediately impose anti-dumping duties to bring prices in line with the cost of production.

The report, released Wednesday, looks at prices from 1990-2003 for the five biggest export commodities grown in the U.S. and sold on the world market: wheat, corn, soybeans, rice and cotton.

Using data from the U.S. Department of Agriculture and the Organisation for Economic Cooperation and Development, IATP found that in 2003, agriculture exports from U.S.-based global food companies were sold well below the cost of production.

Wheat was exported at 28 percent below its cost of production and soybeans were sold at 10 percent. Corn, cotton, and rice were also dumped at 10 percent, 47 percent and 26 percent, respectively.

The report warns that the problem could put farmers out of business in developing nations.

"If farmers can’t get a price that covers expenses then it’s difficult to stay in business," says the report. "Farmers in other countries are hurt because dumped exports push them out of local markets and eliminate their ability to export."

U.S. dumping, the report finds, threatens food security, poverty reduction and the ability to generate foreign exchange for developing nations. As domestic production falls, these countries become increasingly vulnerable to fluctuating prices and the availability of imports.

The effects are felt around the world in places as far apart as Jamaica, Burkina Faso and the Philippines.

The report says that the real beneficiaries of dumping are multinational agribusiness firms like Cargill, Bunge Ltd., and Archer Daniels Midland, which dominate agricultural commodity purchasing, transportation and processing in the United States.

These companies are able to buy inputs and commodities at extremely low prices. Low prices in the U.S., along with increased global production, help keep world commodity prices down.

"While global food companies have greatly benefited from the low prices for the raw materials of their products, farmers around the world, including U.S. farmers, are going out of business," said the report.

The United States is now the world’s largest agricultural exporter. The value of agricultural exports equals nearly one-fourth of farm cash receipts in the country. One out of every three acres is planted for exports.

U.S. farmers export 45 percent of their wheat, 34 percent of their soybeans, 71 percent of their almonds, and more than 60 percent of their sunflower oil.