U.S. AND EUROPEAN AGRICULTURE SUBSIDIES ARE NOT NECESSARY TO PROTECT DOMESTIC FARMERS FROM CHEAP FOR

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U.S. AND EUROPEAN AGRICULTURE SUBSIDIES ARE NOT
NECESSARY TO PROTECT DOMESTIC FARMERS FROM CHEAP
FOREIGN FARMERS. Group No. 6 Scott Berman

Chris Biggers

Kristy Shanteau
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TOPICS TO BE COVERED

• Background
• The Rich Getting Richer
• The Rounds
• U.S. Proposal
• Case Studies of Success

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BACKGROUND

• Subsidy - Monetary assistance granted by
  
  a government to a person or group in
  support of an enterprise regarded as being in
  the public interest.
• Prop up inefficient producers while forcing the
  efficient ones out of the market
• Use subsidies instead of relying on the free
  market

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BACKGROUND

• President Franklin Roosevelt first began farm
  subsidies to aid family farmers through the Great
  Depression.
• Many nations in the 1970s and 1980s strengthened
  programs to shield their farmers from foreign
  disruption
• There was an overproduction and the countries
  wanted to export freely but limit imports

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BACKGROUND

• Farmers of industrialized countries receive up to
  65 of their income from government support
  programs.
• The European Union Gave out 110 billion to its
  farmers in 2002
• U.S. Gave out 40 billion to its farmers in 2002
• In 2002, George Bush signed a farm bill with a
  record 114 billion in subsidies, including 3
  billion a year for the 25,000 U.S. Cotton
  Farmers, who later used the payments to capture
  40 of the world market

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BACKGROUND

• The Farm Bill is anticipated to cost each U.S.
  household 4,400 over the next 10 years, on
  average.
• Farmers in the EU currently receive approx. 37
  of their income from government subsidies while
  U.S. farmers receive approx. 18 of their income.
• Since 1995, approx. 2.8 million individuals and
  farm corporations have collected subsidies,
  however, 71 of the money went to only 10 of the
  recipients.

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THE RICH GETTING RICHER

• There is a misconception that Farm Subsidies
  exist in order to stabilize the incomes of poor
  family farmers.. THIS IS NOT THE CASE
• The Federal Government could bring the income of
  every full-time farmer in America to approx 200
  of the federal poverty level for just 4 billion
  a year.
• In Actuality, the Government spends nearly 20
  billion on large farms and agribusinesses.
• Farmers who grow Corn, Wheat, Cotton, soybeans
  and rice receive more than 90 of subsidies,
  whereas those who grow the more than 400 other
  domestic crops are completely shut out.

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THE RICH GETTING RICHER

• The more crops a farmer plants, the more of a
  subsidy they receive
• Large Farm and agribusinesses are not only the
  most productive and profitable because of their
  economies of scale, they also receive almost all
  of the government subsidies
• Several of the individuals who receive the large
  majority of farm subsidies are actually Fortune
  500 Companies

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The top 10 of recipents, most of whom actually
earn more than 250, 000 a year, received 73 of
subsidies in 2001
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From 1996 to 2001, Even more subsidies were being
given to the rich farmers (i.e. In 2001,
Arkansas Tyler Farms received 8.1 million,
which is 90,000 time the median farm subsidy)
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Examples of Who Receives Farm Subsidies

• In 2001, David Rockefeller received 134,556
• Basketball Player Scottie Pippen receives approx.
  26,000 a year for farm land he owns in Arkansas
  which has nothing growing on it.
• Ted Turner (one of the wealthiest men in the
  America) receives approx. 13,000
• Former Enron CEO Kenneth Lay Received approx.
  6,000 a year for Farm land he owned but didnt
  farm on

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URUGUAY ROUND

• July 1986
• U.S. asked member countries of GATT to begin
  eliminating farm subsidies and other policies
  that distort farm prices, production, and trade
• U.S. asked member countries of GATT to begin
  elimination of farm subsidies and other policies
  that distort farm prices, production, and trade
• Specifically, we wanted commitment from Europe
• Pledged to curb their farm and export subsidies

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DOHA ROUND

• Held in 2001
• An overall goal to cut tariffs and reduce other
  government interference
• The U.S. insisted that Agriculture be put on the
  Agenda
• Participating Countries made a Commitment to work
  Towards another World Trade Round that will keep
  in Focus Concerns of Developing Countries

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CANCUN ROUND

• Held in September 2003
• The U.S. Presented its Proposal to Equalize Farm
  Subsidies Among Countries and then bring them
  down
• The Meeting collapsed amid rancor between rich
  countries and developing countries about
  subsidies paid to farmers in the U.S. and E.U.

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U.S. PROPOSAL

• Two Phase Approach
• First Phase
• Eliminate export subsidies
• Reduce worldwide tariffs and trade-distorting
  support over a five year period
• Second Phase
• Elimination of all tariffs and trade-distorting
  domestic support

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U.S. PROPOSAL

• Five year implementation period for Phase One
• Reductions would begin in 2006 and complete in
  2010
• The elimination of all tariffs and
  trade-distorting support would be negotiated
  during the Cancun Ministerial

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WHAT HAS THE U.S. AGREED TO?

• Substantially improve market access
• Reduce export subsidies, eventually phasing them
  out
• Substantially reduce trade-distorting domestic
  support

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WHY DOES THE U.S. CARE?

• U.S. Agriculture depends on world trade more than
  any other sector of the U.S. Economy
• 25 of all Cash receipts for agriculture come
  from export markets
• U.S. agriculture exports generated jobs and
  expand economic activity beyond the actual farm

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EXPORT SUBSIDIES

• Eliminate Subsidies
• Eliminate Export Monopolies
• Prohibit Export taxes on Agricultural Products
• Establish Specific Rules to Govern Export Credit
  Activity
• Expand Reporting Requirements in the WTO
  regarding food aid activities

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MARKET ACCESS / DOMESTIC SUPPORT

• Reduce all Agricultural Tariffs
• Expand trading rights to allow any interested
  entity to import products
• Create a Formula to limit all countries use of
  trade-distorting support

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HOW IS THE U.S. PROPOSAL BENEFICIAL?

• Developing Countries will Benefit from
• Tariff Reductions
• Elimination of Export Subsidies
• Continuation of Export Credit and Food Aid
  Programs
• Reducing Trade-Distorting Domestic Support

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CASE OF SUCCESS NEW ZEALAND

• 1984 Approx. 40 of sheep and beef farmer
  income in New Zealand came from the
  Government
• Reforms were implemented very quickly with almost
  complete elimination of subsidies by 1987
• Only about 1 of farmers lost their farms as a
  result of the reforms
• They were able to survive by reducing spending,
  purchasing only essentials, implementing more
  efficient methods and through diversification.
• Today Government spending accounts for only
  1 of the income of farmers

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CASE OF SUCCESS AUSTRALIA

• 1980s Underwent reforms to eliminate
  government subsidies
• Farmers survived by diversifying into other crops
  based on market demands.
• In the 1980s, major exports were wheat, beef and
  wool, whereas, today cotton, wine, oilseeds,
  dairy products, and rice dominate
• Education and training programs helped farmers
  adjust, giving farmers increased skills in
  production, business management, and risk
  management
• Today Government spending accounts for only
  4 of the income of farmers

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IS TRADE LIBERALIZATION A GOOD IDEA?

• Yes, It will benefit all Countries through
  increase market Opportunities
• Increased Exports
• Increased Imports
• Research shows that Global Exports will Increase
  by nearly 30 if barriers to trade are removed
• The current system of Subsidies is Simply making
  the rich richer, while leaving the Poor Farmers
  out

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QUESTIONS?