Global Trade Mailing List Archive

["Ruchi Tripathi" <<address removed>>]

Northern Influence ..... 

Are policy makers and trade negotiators exaggerating the impact of northern 
subsidies? The answer is no (but again it may be a question of emphasis and 
perhaps policy makers should  be giving equal attention to other issues, such 
as supply side constraints). Northern subsidies are having a detrimental impact 
on world prices as well as facilitating dumping and surges of large volumes (of 
low priced) imports. 

Some northern policy makers appear to believe that many, if not all the 
problems associated with current northern subsidies - such as dumping - will be 
cured by the progressive movement of subsidies away from amber and blue boxes 
(trade distorting) to the green box (which they believe are non-trade 
distorting). The evidence to support this assertion is at best poor and at 
worst non-existent. 

Many NGOs support the principle of fully decoupled payments if they are given 
in support of public goods in the North - support to small-scale producers, 
conserving the environment, enhancing rural development or promoting 
sustainable agriculture. But the evidence supports the claim that the new breed 
of decoupled direct payments (as introduced in the US in 1996 and in the EU 
from 2005/6) do few of these things but remain targeted at maintaining 
production. The evidence from the US is fairly compelling.[1] 
<outbind://53/#_ftn1> ,[2] <outbind://53/#_ftn2>  

A recent paper on decoupling by the World Bank and Cornell University concludes 
that "[t]he outcome of [decoupling] programs has not been encouraging. The 
primary motivation for decoupling is to compensate farmers with transitional 
assistance to free markets while at the same time making it politically 
palatable and transparent."[3] <outbind://53/#_ftn3>  As the paper concludes, 
politics play an important role in the move towards decoupling. It would be 
politically unpalatable for Northern countries to take away all support from 
farmers given their political importance (and the fact that much of northern 
agriculture - particularly in the EU would be unprofitable without subsidies). 
In addition, governments are simply re arranging subsidies between boxes to 
make them WTO compatible.

However, ActionAid is also increasingly concerned that as liberalisation, 
deregulation and privatisation has taken hold across the globe, as IDS puts it, 
"the potential significance of remaining distortions, including private actions 
grows." There is now a wealth of evidence to show how the activities of TNCs 
have resulted in, for example, predatory investment, the abuse of their 
dominant position, the depression of farm gate prices, increasing costs of 
inputs, and the exclusion of small-scale farmers all to the detriment of 
poverty alleviation and agriculture in developing countries (see below).

________________________________

[1] <outbind://53/#_ftnref1>  Gardner, B., 2002. North American Agricultural 
Policies and Effects on Western Hemisphere Markets since 1995, with a Focus on 
Grains and Oilseeds. Department of Agricultural and Resource Economics. 
University of Maryland, page 18. 
http://www.arec.umd.edu/Publications/papers/Working-Papers-PDF-files/02-12.pdf

[2] <outbind://53/#_ftnref2>  Andrews, N., R. Nelson, S Hagi Hirad and I. Shaw, 
2002. Grains Policies in a Global Market. Abare Research Project, Report 02.8.

[3] <outbind://53/#_ftnref3>  Baffes, J. and H. de Gorter, 2003. Decoupling 
Support to Agriculture: An Economic Analysis of Recent Experience. World Bank 
and Cornell University, second draft, May 2003. 
http://wbln0018.worldbank.org/eurvp/web.nsf/Pages/Paper+by+De+Gorter/$File/DE+GORTER.PDF

Tim Rice

Food Rights Policy Officer
ActionAid International UK
Hamlyn House 
MacDonald Road 
London N19 5PG 
Ph: 44 207 561 7560 

 


ActionAid's vision is a world without poverty in which every person can 
exercise their right to a life of dignity. Registered Charity No. 274467
www.actionaid.org.uk 

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