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HEADLINE: U.S. Farm Bill Finds Few Fans Abroad; Increased Subsidies Flout Consensus on Helping Third World Agriculture

BYLINE: Paul Blustein, Washington Post Staff Writer

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Of all the problems that plague the world's poor in the age of globalization, few are so widely condemned as the subsidies that rich countries provide their farmers. Poor nations suffer because their crop prices are pushed down on global markets when relatively prosperous farmers receive government incentives to increase production.

The European Union's farm subsidies have drawn the harshest attacks from critics, who include left-wing activists, academic economists, World Bank officials and right-wing free-marketers. But thanks to the farm bill that President Bush has promised to sign once it passes the Senate this week, U.S. agriculture policy may rival Europe's as the most reviled among experts on Third World economies, especially since it runs counter to the Bush administration's free-trade rhetoric. The farm bill, which substantially increases price guarantees for crops such as corn and wheat and creates new subsidies for others such as soybeans, "is very discouraging for developing countries," said Nancy Birdsall, director of the Center for Global Development, a Washington think tank. "It's a very strong signal that our politics dominates our policies and when there are unintended consequences for countries that don't have much power in the world, that's too bad."

The bill's cost, officially estimated at $ 180 billion over 10 years, though many budget experts believe it will be much higher, would add to the $ 350 billion in farm subsidies that the world's richest countries provide each year. World Bank President James D. Wolfensohn has been particularly outspoken in castigating wealthy nations for lavishing so much on their agricultural sectors, noting that the sum is about equal to the entire gross domestic product of sub-Saharan Africa and seven times the rich countries' total foreign-aid budgets.

A forthcoming study by the World Bank and the International Monetary Fund illustrates some of the distorting effects of subsidies on markets such as cotton. If world cotton prices were not depressed by subsidies, the number of people living in poverty in the African nation of Burkina Faso could be cut in half within six years, according to the study, which notes that subsidies account for about one-third of the $ 35,000 average annual income of U.S. cotton farmers. The per capita income in Burkina Faso is less than $ 1 a day.

Accordingly, World Bank staffers were scathing in their assessments of the farm bill, though they refused to be quoted by name given the political clout that Washington exercises as the institution's dominant shareholder.

"This is pretty galling," a senior World Bank official said. "A few American farmers will benefit, but at the expense of a very large number of poor people in developing countries."

The bill's writers, of course, were concerned primarily with protecting America's politically powerful farmers against the fluctuations in commodity prices that can make farming such a risky undertaking.

"This is for rural America," Rep. Larry Combest (R-Tex.), chairman of the House Agriculture Committee, said in dismissing criticism from Europe, Australia, Canada, Brazil and elsewhere around the world. "This is not for rural Mexico. This is not for rural Canada, and this is not for rural Europe."

But the bill dismays many free-trade advocates who fear that by affronting the developing world, the United States has significantly reduced its chances of negotiating major deals to lower trade barriers.

At a World Trade Organization meeting in November in Doha, Qatar, where member nations began a three-year round of global trade talks, poor countries agreed to negotiate in part because of promises by the Bush administration that a top priority for the talks would be phasing out subsidies and other moves to increase access for poor-country agricultural products in rich-country markets. Similar pledges have helped secure agreement by Latin American countries to negotiate an accord by 2005 that would extend the North American Free Trade Agreement to Central and South America.

"In terms of trade policy, they just stepped on a big land mine," said Jeffrey Schott, a trade specialist at the Institute for International Economics. "We have spent all this time and effort to pursue trade promotion authority [legislation to enable the White House to negotiate broad trade deals], only to let a farm bill pass that will greatly complicate the ability of our trade negotiators to conclude a trade agreement, whether it be in Geneva [WTO headquarters] or in the Western Hemisphere."

European trade officials echoed that view, asserting that the U.S. farm bill will make it tougher to overcome the resistance of farmers in countries such as France to giving up their subsidies.

U.S. policymakers maintained, however, that the bill would not hamper their efforts to strike a deal with Europe or other trading partners because Washington will be able to offer a cutback in its farm spending in exchange for similar concessions, and American farmers will presumably go along to obtain benefits from market-opening measures by other countries.

"We won't be asking them to do anything we're not doing," a senior U.S. trade official said of other countries. "When we come back with an agreement at the end of the [WTO] round, we'll all be coming back to our ag communities and saying, 'Here's the agreement; these are the disciplines we're taking on, and these are the opportunities we're creating.' And obviously we think that at the end of the day we'll have an agreement that will be a net positive for the ag community."

Some trade experts saw some merit to that strategy. Ed Gresser, director of trade policy at the Progressive Policy Institute, said that by the time the WTO negotiations are supposed to end in 2004, "the end of the [six-year] farm bill may be in sight, and we'll be in a good position to say,'We'll phase all this out.' "

The initial signs suggest that the bill will first prompt rich countries to follow the U.S. lead, to the detriment of the poor.

Canada's agriculture minister, Lyle Vanclief, said on Friday that Ottawa is considering increasing aid to Canadian farmers to counter new U.S. subsidies. "We're looking at ways in which we can mitigate the disastrous effects of the U.S. farm bill -- ridiculous policy that they have extended and even increased," Vanclief said, according to Reuters News Service.



LOAD-DATE: May 05, 2002