A perilous trade imbalance

Two weeks ago, the US Congress approved a $307 billion farm bill that will reward American farmers with hefty subsidies. This amount is 18 times the Philippine agriculture income last year. The US farm bill maintains the old subsidies for agriculture, and raises support levels for wheat and soybeans, while adding several new crops to the list in a way that will make it easier for farmers to get subsidies even when prices are up. Subsidies for rice, cotton, corn, soybeans and wheat amount to $43 billion.

Similarly, the European Union is deliberating an adjustment in the Common Agricultural Policy that seeks to hand out €40 billion, or US$63.1 billion, in subsidies to European farms. This is roughly US$173 million a day.

In 2005, the total subsidy to agriculture in OECD countries (the rich countries club) amounted to US$385 billion, more than double the Philippines' Gross National Product last year, and over US$ 1 billion a day.

These huge domestic support and export subsidies provided by developed countries to their farmers render developing countries' farm products uncompetitive. Developing countries like the Philippines simply cannot afford to provide its farmers the same subsidies that developed countries grant theirs. Developing countries are inherent losers in this kind of trade regime.

About 75 percent of poor people worldwide live in rural areas, and most of them dependent on agriculture. While developing this sector is the most effective weapon against hunger and poverty – it is the largest employer, the largest source of GDP, and the largest source of exports and foreign exchange earnings in most developing countries – it is also in agriculture where the highest level of trade distortions exist.

In addition to giving their farmers huge subsidies, developed countries forced us to open our markets to their industrial goods while they kept their markets closed to our agricultural products with various mechanisms such as tariff and non-tariff barriers. This perpetuates the unfair playing field in agricultural trade.

The long-standing imbalances between rich and poor countries in international agricultural trade – an imbalance that stems from developed countries’ protectionism – is fueling the growing food crisis.

It is critical that the developed countries, led by the US and the EU, make positive efforts to rectify the current agricultural trade imbalances. They should demonstrate a genuine willingness to take into serious account the interests of developing countries, especially the poor countries. Vital reforms in agriculture trade will save us from future, and possibly worse, food shortages and crises.