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Last Updated: Wednesday, 27 August, 2003, 09:27 GMT 10:27 UK
Adding up farming subsidies
By Rachel Clarke
BBC News Online in Washington

Harrison Amukoyi, a Kenyan farmer (pic: IFPRI)
Kenyan farmers like Harrison Amukoyi could find new markets
The world's poorer countries lose a total of $24bn (15.3bn) a year because of the subsidies paid to farmers by rich nations, according to new research by economists in Washington.

The figures are likely to fuel the growing controversy over agricultural trade policies ahead of world trade talks in Cancun next month.

"It is time to remove the trade-distorting measures that hurt poor people in developing countries," said Eugenio Diaz-Bonilla, a researcher at the International Food Policy Research Institute (IFPRI) which calculated possible agricultural trade if there was complete liberalisation.

In addition to the $24bn lost by poor countries, a further $40bn in agricultural exports could be generated by developing countries if protectionist policies were abandoned by developed nations, the Institute argues.

Key issues at the trade talks

Many trade representatives from developing nations have recently expressed anger about how much Western farming subsidies are hurting their economies.

And some have said they are not prepared to negotiate new free trade agreements unless the thorny issue of agriculture is sorted out first.

Sharing out the blame

Sugar is one of the most controversial areas. The IFPRI says that, if subsidies to European Union sugar-growers were abandoned, sugar-growers in Kenya or Guatemala might be able to sell more of their produce.

The same could be said of "displaced exports" arising from subsidised cotton-growing in the US or rice cultivation in Japan, added the Washington-based group which is partially funded by 62 world governments and seeks solutions to ending hunger and poverty.

Vegetable seller in wet market in the Philippines (IFPRI photo)
Increasing farm income could help other Philippines communities
" The IFPRI research says policies of the European Union are to blame for more than half of the world's displaced exports, with US rules responsible for about one-third with Japan and other high-income Asian countries causing a further 10%.

IFPRI economist David Orden said September's ministerial meeting of the World Trade Organisation could make real progress on the issue of agricultural subsidies which, along with drug costs, is set to be at the heart of the debate.

Long-term goals

Negotiators from the EU and US are sketching out a possible agreement on lowering their protectionist policies but much depends on how far any reductions in subsidies and tariffs go, along with the reaction of other nations.

A Kenyan hillside farm (pic: IFPRI)
Asia: 85%
Latin America: 47%
Sub-Saharan Africa: 45%
All developing countries: 198%
Meanwhile, critics have grown increasingly cynical about the West's recent efforts to reform its subsidies that, in reality, amount to little more than reshuffling of the money allocated to western farmers.

For the sake of low-income farmers and consumers across the globe, negotiators from the industrialised countries should move beyond rhetoric and gestures," said Mr Diaz-Bonilla.

One of the problems, Mr Diaz-Bonilla explained, is that developing nations believed that, in terms of agriculture production, rich countries had awarded themselves the "special and differential treatment" promised in WTO-speak for the poorest.

He said that, if subsidies were removed, the greatest increase in value of exports would be seen in countries such as Brazil and China which could be called "middle-income nations".

But the greatest proportional benefit would come to the poorest which rely more heavily on agricultural sectors than more developed nations.

Mr Diaz-Bonilla acknowledged that ending subsidies and tariffs would not generate wealth in developing countries overnight and said other measures were needed, such as greater investment in agricultural areas.

But he said that the benefits of trade liberalisation would be long-term: "This is an increase that will continue year in and year out if the rest of the conditions are kept constant - it's not just one shot."

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