To Trade or Tarriff
Another Spinnaker submission:
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Imagine if the leaders of the worlds poorest nations came to the table and expressed their belief that the best things Western nations could do to help them out was not to give more foreign aid, but instead slash wasteful spending inside of their own budgets to the tune of hundreds of billions of dollars. Imagine, then, that the leaders of the richest countries declined their plead. Though the situation is a much more complex, that is what happened last month in Cancun during the latest World Trade Organization (WTO) meeting. A group of 21 poor nations (a.k.a. G-21), representing more than half the world’s population, confronted the group (a.k.a. G-8) of the world’s richest nations with a single demand: stop government handouts to agricultural businesses.
Western nations spend roughly $1 billion dollars a day on these agricultural subsidies, according to WTO Director Mike Moore. Last year, Congress passed a $200b[1] bill for handouts to America’s farmers. Europeans spend roughly $2 per cow a day, more than what half the world’s human population makes [2]. Even through all this, the poorest 6% of American farmers will get less than 1% of these subsidies[3], meaning the money is not being spent to help struggling family farms. This is likely due to the $58m spent by agribusiness in donations during the 2000 elections[4].
All these handouts lead to distortion of market prices. Because these subsidies encourage farmers to produce more by offering minimum price payoffs, Western farmers flood the marketplace driving down worldwide prices that they themselves are protected from. For instance, Oxfam estimates that removing cotton subsidies and protections in Europe and America would create a 25% increase in cotton prices, which would translate into $300m for African farmers,[5] because American and European farmers wouldn’t be able to sell at below-production prices. Another area of concern is the sugar industry, which much of the Caribbean depends on for economic and political stability. American federal guarantees for high minimum prices for farmers and a 15% cap on sugar imports, matched by $1.4b worth of European subsidies and a 140% import tariff,[6] have dropped global sugar prices in half between 1995 and 1999.
The G-21 nations focused the Cancun meeting on these issues and ultimately walked out when Western nations wouldn’t budge, but instead pressed their own issues like intellectual property rights. Economists left and right of the spectrum complain of the corporate welfare that is keeping unemployed much of the Third World. It would seem G-8 leaders would want to see the benefits of a more stable world with fewer nations drowning in debts and teetering on solvency, but alas, campaign contributions have always gotten in the way of logic in politics.
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[1] BusinessWeek (http://www.businessweek.com/magazine/content/02_22/b3785037.htm)
[2] Oxfam
[3] (Wall Street Journal) http://www.opinionjournal.com/columnists/pdupont/?id=110001675
[4] http://www.farmingsolutions.org/
[5] http://www.oxfam.org/eng/pr030501_wto_cotton.htm
[6] http://news.bbc.co.uk/2/hi/business/2285293.stm
Tags: Treyopia Spinnaker Current Events Doha Round WTO World Trade Organization Globalization subsidies
