Why the late, lamented Doha round wasn’t really the answer for ag policy.
Harvesting a bit of vintage Reagan-era rhetoric, L.A. Times columnist Jonah Goldberg recently denounced what he called “welfare queens on tractors.”
The right-winger’s target was clear: The U.S. farm subsidy program, which doles out around $14.5 billion per year (depending on market fluctuations), mainly to large producers of corn, cotton, wheat, soybeans, and rice. As Congress opens debate on the 2007 Farm Bill — the omnibus five-year legislation that governs agricultural support — the subsidy program has drawn a chorus of critics.
Goldberg gets it about right when he lists the program’s opponents: “Right-wing economists, left-wing environmentalists and almost anybody in-between who doesn’t receive a check from the Department of Agriculture or depend on a political donation.”
To be sure, the subsidy-haters have a point. A vast literature shows that the real beneficiaries of U.S. ag subsidies aren’t farmers at all, but rather agribusiness giants. Direct government payments encourage farmers to produce as much as possible, which pushes down the prices of ag commodities.
For years now, ag subsidies have helped enable Archer Daniels Midland to buy the corn it transforms into high-fructose corn syrup at well below corn’s production costs. Meat producers like Smithfield Foods use cheap corn as fodder to run their profitable — and socially and environmentally ruinous — feedlot operations.
If the subsidy system bolsters the bottom lines of a few transnationals, it does little for most farmers. Overall, just 10 percent of U.S. farms grab 72 percent of subsidies. A large majority, including fruit and vegetable grwoers, get none at all.
Overseas, as the anti-hunger NGO Oxfam has shown over and over again, the situation is even worse. Giant U.S. corn surpluses has spelled despair for Mexican farmers since Nafta dismantled domestic protection in 1994. In Africa, where farmers have been prodded for decades by the World Bank and other supranational institutions to produce cotton for the global market, cotton farmers must compete with U.S. producers who can sell for well below production cost. Predictably, the African farmers lose.
Many observers had hoped for subsidy reform from the 2007 Farm Bill. The WTO, in its Doha Round of trade talks, has aggressively prodded the U.S. and the European Union to slash ag subsidies. The carrot dangling in front of the two great horses of global ag was this: if you slash subsidies, we, the WTO, will force open developing-world markets to your farm goods.
The talks collapsed two weeks ago, though, and probably won’t resume anytime soon. The mainstream U.S. farm lobby, a force in national politics through the patronage of farm-state senators, had signaled a willingness to let go of subsidies. Essentially, the farm lobby’s agenda for Doha was to ensure a dollar in global trade for every dollar it surrendered in government support. If the WTO could use Doha to force open the markets of more “developing nations” to U.S. farm goods, then the farm lobby would go along with reduced subsidies.
But when Doha failed, the lobby’s willingness for reform tumbled like corn prices after a bumper crop. “You have to look at the negotiating leverage that could be lost if we go ahead and write a farm bill that cuts back on commodity supports,” a lobbyist for American Farm Bureau Federation, the voice of U.S. industrial-scale farming, told Associated Press last week. The Bureau is now pushing for an extension of the generous 2002 Farm Bill.
Despite the Bush Administration’s desire for a less costly Farm Bill, the farm lobby is likely to get its way. The Wall Street Journal reported last week that the “collapse of global free-trade talks is likely to kill any chance of overhauling America’s farm-subsidy program for years,” adding that, “With any Doha obligations now off the political radar, the congressional agriculture committees that will write the next farm bill, which could last five years, are doing business as normal.”
But Doha’s failure isn’t quite as disastrous as Oxfam and other left-wing critics make it out to be. Indeed, Doha’s whole thrust was to boost global trade, not boost local economies. It has always made an odd cause celebre for the likes of Oxfam.
Granted, the U.S. subsidy program is egregious and in need of reform, but slashing it wouldn’t likely do much for southern-hemisphere farmers looking to sell into the global commodity market.
According to Daryll Ray, a University of Tennessee agricultural economist, if the subsidy cash cow dries up, U.S. commodity farmers will initially respond to the drop in income by producing more — thus putting more downward pressure on prices and farm incomes. Ray argues persuasively that for subsidy reform to boost farm incomes worldwide, it will have to be accompanied by a system of price supports in the U.S. — a vintage New Deal program which was crushed by Reagan’s free-market zeal in 1987 and that has zero political traction.
Thus, even if Doha had succeeded, it’s unlikely that African cotton farmers or Mexican corn growers would have gotten much relief anytime soon.
Moreover, it’s a myth that ending a subsidy system that benefits multinationals at the expense of small farmers everywhere will leave a “level playing field” in its place. A half-century of government support for large-scale farming has created a tremendous infrastructure for industrial food production and long-haul distribution. Food processing enterprises — from meat-slaughtering to cooling to dairy-bottling facilities — have consolidated beyond imagination.
Simply put, the infrastructure for producing food for nearby consumption has withered. Farmers markets and community-supported agriculture (CSA) programs have spread dramatically over the past 15 years, but still supply a tiny fraction of the nation’s food. Small-scale farming does not produce sufficient profit to rebuild local infrastructure. Doing so will require significant public investment.
Once the government slashes the multibillions that now go to mega-farming, that money is likely gone for good. Misadventures in the Middle East look set to pressure U.S. fiscal budgets for the foreseeable future. Rather than campaigning to end government support for agriculture, progressives should think in terms of a reform agenda.
Let’s take the cash now burnishing the bottom lines of Archer Daniels Midland, etc., and create a Farm Bill that benefits small-scale producers and consumers alike.
I’ll be laying out such an agenda in the weeks to come.