Subsidies make rich richer and poor poorer

Updated: Oct 31 2005, 07:45am hrs
There was no forward movement in agricultural negotiations in Geneva last week. The chair of Farm Negotiation Committee, ambassador Crawford Flaconer of New Zealand, and the developed countries are trying to push the negotiating agenda in a different direction, ignoring the most contentious issue of subsidies.

Mr Flaconer wants a draft to be prepared by November 25 for discussions in the Hong Kong Ministerial in December, without bothering much about the trade-distorting subsidies of the developed countries. In such a case WTO will not be doing adequate justice for ushering in fair trade practices.

Several studies have shown that European subsidies are applied more to industry products rather than farmers produce. For instance, there is more support for butter, skimmed milk powder and cheese of the dairy industry and less for milk. Export subsidies benefit the food industry and traders but the farmers get very little. A similar situation prevails in US and Canada.

It is high time that sIn EU, 80% of subsidies are paid to only 20% farmers, most of which are cornered by large farms owned by rich landlords and corporations.

Export subsidies were deliberately instituted to dump the European products in the Third World. European export subsidies amounted to $8-12 billion in the period 1988-94.

Europe, today, is a major exporter of dairy products. The Court of Auditors, in its special report9/2003regarding the system for setting the rates of export subsidy and export refunds, notes for significant periods covered by the audit, the Commissions estimates show that EU price net refund is below the world price for certain milk products.

The European price, after deducting refunds, was found lower than the world price, indicating substantial gains for the dairy industry.

At the same time the dairy farmers did not receive any subsidy under the old Common Agriculture Policy, the report of the Court of Auditors indicates.

Another example of unjust European subsidies is sugar exports. EU on Saturday, with its exports of about 5 million tonne of sugar per year, is second only to Brazil in market share.

Despite the high domestic price of sugar, EU has been able to export through a combination of direct export subsidies and cross-subsidization of exported sugar through a production levy paid by farmers.

European consumers suffer on account of high domestic prices. The major beneficiaries of export subsidies are the corporate houses like Begin Say, Sudzucker, Tate & Lyle, RT, Danisco and Nordzucker. Supermarket chains also reap benefits at the cost of farmers.

Reports of the UKs Competition Commission clearly shows that large supermarket chains procure farmers produce at relatively cheaper rates and reap huge profits.

For long, European subsidies were shrouded in mystery. It was only in June 2004, that Denmark set an example by making public the beneficiaries of subsidies. In 2003, out of the total DKK 10 billion subsidy, the leading dairy processor, Arla Foods, cornered DKK 1.3 billion, Danish Crown had DKK 119.6 million (174.658 million euro) of the share and the Danish Institute of Agricultural Sciences had DKK 111.1 million. Arla Foods got an export subsidy of DKK 1 billion and products-in-production subsidy of DKK 286 million.

In 2003 the Danish Agricultural Centre for Advisory Services received DKK 29.9 million and its Board members, including Peter Gaemelke, Henrik Hoegh and chairman Gert Karkov together received subsidies totalling DKK 8.9 million. A number of members of the Danish Parliament and spouses of ministers were among the beneficiaries.

The Freedom of Information Act compelled the UK government to disclose the beneficiaries of subsidies. The countrys leading sugar company, Tate and Lyle, received the largest payment, more than 233 million pound in export subsidies over the two-year period.

Other major beneficiaries were Eadow Foods, C Czarnikow Sugar, Granox Ltd, Cooperative Centrale Raiffeisen Bank, Philpot Dairy Products, Fayrefield Foods Ireland Ltd, Lisburn Proteins and Nestle UK Ltd.

According to estimates, seven farmers belonging to the nobility and cattle-breeders received 5,700 euro per farm per day or 240 euro per farm per hour in Spain. Agro-industrial firms eg vine sector are also major beneficiaries.

In Denmark, too, the nobility are major beneficiaries. Prince Joakim received subsidies worth DKK 1.4 million for maintenance of his Schackenborg estate in South Jutland. Similarly, in the UK the Queen received 769,000 Prince Charles received 300,000 in 2003-04.

In Canada, agri-business is controlled by Monsanto, Cargil, Weston, ADM and Tyson. Reports show significant consolidation and vertical integration among processors and retailers, eroding farmers bargaining power. A report by Canadas national farmers union shows that a large chunk of subsidy is cornered by MNCs. This state of affairs has persisted over two decades. From 1985 through the 1990s, family farm net income from markets has fallen deep into negative territory.