The US Should Abolish Agricultural Subsidies

Government intervention in the marketplace contradicts the values of free-trade advocated by the USA. Our complex series of agricultural subsidies, price supports, regulations and protective tariffs means that farming in the US functions as a command economy – in effect, we have a socialist agricultural system. Furthermore, such subsidies violate international agreements negotiated and signed by the US, such as the World Trade Organization, and the North America Free Trade Act (NAFTA). This tarnishes US credibility.

Subsidies are expensive and represent a burden on the American citizen as taxpayer and consumer. The USA spends $44 billion on farm support payments every year, all of which comes out of the pockets of hard-pressed American families. Factory laborers or service-sector workers don’t get such state hand-outs at public expense – why should farmers?

Subsidies cause poverty, both domestically and internationally by maintaining the prices of goods at an artificial level that does not reflect the cost of production. When these subsidized exports compete on the global market, agricultural companies can sell product for less than production cost. For example, the onion industry in Jamaica once thrived on the domestic level. However, thanks to the artificial economics created by US subsidies, American corporations have flooded the Jamaican market with cheap produce and put the local onion producers out of business.

Artificial pricing also slants international trade against farmers in poor countries. For example, it is much cheaper to grow cotton in West Africa than in the USA. This should enable West African farmers to export their cotton profitably, to the benefit of both themselves and their countries’ developing economies. However, American subsidies encourage overproduction in the United States, and allow US cotton farmers to sell their fiber abroad at a discount. Both these effects drive down the global price of cotton and remove the best chance the West African states have of trading their way out of poverty.

Subsidies are bad for the environment for three reasons. First, because whenever local producers are put out of business, as in the case of the Jamaican onion growers, that country is then reliant on imports for produce previously available domestically. Local produce is always going to be more sustainable than imported produce, which inevitably involves many air-miles and needless pollution.

The second reason subsidies harm the environment is because they encourage large-scale production of specialized produce, known as monoculture. Monoculture is when enormous amounts of land are devoted to one single crop, e.g. wheat, maize or soybeans. This is bad for the land because it absorbs from the earth all the nutrients necessary for that crop, rapidly exhausting the soil. Monoculture is encouraged by our present system of subsidies, but damages the environment which makes this practice unsustainable without the enormous application of artificial fertilizers, which are both wasteful in terms of the energy required to produce them, and damaging to the environment in terms of water-pollution from run-off.

Third, subsidies encourage intensive agricultural production in unsuitable areas. Examples of this include the ploughing up of prairie areas naturally better suited to pastoral grazing, and the cultivation of water-intensive fruit and vegetables in naturally arid areas of southern California that requires wasteful and environmentally damaging irrigation schemes to be viable.

Reform will never effectively turn the tables in subsidy distribution. Large-scale agri-businesses have the power to manipulate policy through lobbying and campaign contributions in order to ensure they can maintain their comfortable government issued subsidy. Small family farms cannot compete with these rich agro-corporations, who can spend millions of dollars lobbying to stop legislation that would reform current problematic subsidy expenditures. This is exactly why the Grossley-Dorgan Bill was never enacted and implemented. As any system aimed at channeling federal money to agriculture will be open to these abuses, it would be far better to end subsidies completely, supporting poorer farming families instead through welfare benefits and tax credits.

Domestic subsidization of agriculture harms international human right to livelihood. Agriculture is the backbone of most developing countries, and ranges from 50%-80% of their economy. In contrast, the USA relies on agribusiness for a mere 1.5% of its economy. If 50-80% of the businesses of a poor country are unable to sell, they are unable to spend, which further exacerbates their financially conundrum. In turn, subsidies deny livelihoods abroad by not allowing local farmers a chance to compete on the market, whereas before subsidies they would be able to, and also since the farmers (50-80% of the economy) have no income, they are being denied the ability to afford education and other job opportunities. Even more negatively, denying poor farmers a legitimate living will only encourage some of them to turn to illegal crops, such as coca and opium poppy, instead.

Unless the United States moves to end agricultural subsidies, there is no chance that a global trade deal can be struck. Already the Doha round of the World Trade Organization (supposedly a priority for the Bush Administration) is years behind schedule, stuck in acrimonious bickering between the US, the EU and a developing world bloc. Any deal will require developed countries to greatly reduce their agricultural protection, including subsidies to their farmers, in exchange for market opening for a wide range of goods and services worldwide. Such a deal is hugely in the wider economic interest of the United States, as more open markets would allow American companies to compete more effectively in many countries where tariffs and other protectionist barriers now restrict them. By promoting greater prosperity in the developing world, it would also benefit the United States, as wealthier consumers will wish to buy high-value goods and services from US companies, boosting our own prosperity in turn. Such a prize is within our grasp, but it will require brave leadership from the US administration.