G-20 Remains Committed to Fighting Ag Subsidies

Over the weekend, the G-20, a group of developing countries adopted a ministerial declaration asking rich countries to eliminate subsidies on farm exports within the next five years.

Agriculture subsidies have been a main stumbling block in World Trade Organization talks. And with Brazil's recent WTO victory against U.S. cotton programs, trade minister of China, India, Brazil and South Africa are expected to come to the negotiating table with more determination to make that happen.

"An early agreement would inject new momentum to the agriculture negotiations and make progress easier in other fronts," said the declaration made at the end of the two-day G-20 meeting.

The biggest issue is export subsidies. Cotton has specific export programs including the Step 2 and export credit guarantee. Robert Thompson, University of Illinois Gardner chair of ag policy, explains that although the 2002 Farm Bill was written as an attempt to be WTO compliant, Congress did not adequately recognize that marketing loans act as an export subsidy. "Marketing loans together with LDP and CCP effectively act as export subsidies, and that's the problem."

"We argued the world should begin decoupling payments, yet, we retreated on decoupling. By allowing bases to be updated, U.S. farmers know that •fixed payments' are not necessarily •fixed'" He says. "And, counter cyclical payments will reduce U.S. farmers' responsiveness to market signals. Marketing loans are effectively export subsidies, as are some forms of food aid and export credits."

Of course, our farm bill starts to look much better when compared to other farm policies around the world. There' s a lot of subsidized ag around the world, distorting markets. "Most high income countries subsidize their agriculture, distorting relative returns to various outputs and inducing larger total investment in ag relative to other sectors," Thompson says.

According to OECD 2003 producer support estimates, percent farmer income from government:

• Switzerland 74%
• Japan 58%
• European Union 37%
• Canada 21%
• Mexico 19%
• U.S. 18%
• Australia 4%
• New Zealand 2%

The G-20's meeting in New Delhi over the weekend was called to determine a "common strategy and position" for the group ahead of the Hong Kong ministerial meeting scheduled for December 2005.

The European Union has already agreed to cut farm subsidies to a minimum by 2012. The United States on the other hand has not agreed to any timeline or substantial reductions without a commitment from the developing countries that they'll reduce their tariffs and increase market access.

The group has actually enlarged to include 21 nations, the admittance of Uruguay. The other countries in the G-20 are Argentina, Bolivia, Chile, Cuba, Egypt, Guatemala, Indonesia, Mexico, Nigeria, Pakistan, Paraguay, Philippines, Tanzania, Thailand, Venezuela and Zimbabwe.