Monday, July 20, 2009

Who Gets E.U. Farm Subsidies (redux)?

. Monday, July 20, 2009

In a previous post, I noted that many E.U. agriculture subsidies went to huge corporate conglomerates rather than the noble family farmer that has captured the imagination of Europeans. But that was only the tip of the iceberg. Others receiving E.U. agriculture subsidies include a Spanish construction company, German gummy bear manufacturers, cruise ship caterers, the Roman Catholic Church, and Her Majesty the Queen of England. The NY Times:

This year for the first time, all of the 27 nations in the European Union were forced to disclose how they distribute the money from farm subsidies, with Germany the only nation failing to comply in full. A computer analysis by The New York Times and the International Herald Tribune of recipients in major countries has provided the first detailed look at who receives the money.

The data underscore the extent to which the subsidy program has evolved beyond its original goals of increasing food production and supporting traditional farmers as they dealt with market fluctuations. It also illustrates how the European Union has moved to emphasize rural development instead of price support and production incentives, and in the process has decentralized the system, giving countries more discretion over the dispersal of subsidies.

Agricultural subsidies have been a frequent topic at IPE@UNC, and we are always quick to point out that the U.S. is guilty of similar distorting subsidies. But the E.U. is the worst offender. They spend roughly four times as much as the U.S. does, and the beneficiaries are even more ludicrous: there are no gravel manufacturers or electrical companies receiving U.S. agricultural aid.

Why does this matter? Besides the fact that it is absurd for E.U. taxpayers to be subsidizing vacation estates for the Queen of England (that isn't even used for farming), these subsidies have a severely negative impact on LDC development. As the Times article says, "European officials and some economists believe that much of the cash from those subsidies ultimately trickles down to local farmers, since without them companies might buy cheaper food elsewhere." The "elsewhere" in that sentence refers to some of the poorest areas in the world, e.g. Africa and (non-E.U.) E. Europe. U.S. price supports undercut agriculture in S. America and Africa. Japanese subsidies have an adverse effect on growers in S.E. Asia. In other words, the burden of the subsidies is not only being borne by the wealthy taxpayers in the developed world; they are quite literally removing one of the few possible sources of income for many of the poorest people in the world.

When we talk about LDC development, we often talk about the effectiveness of aid programs, or the necessity of institution-building, or the economic consequences of war. But one of the biggest steps we could take to encourage economic development in the poorest parts of the world is to simply allow access to our markets. This would benefit consumers in the MDCs by lowering both taxes and the prices of goods. Of course, some major corporations and titled landowners might pitch a fit, but I think it's reasonable to say that we don't owe them anything.

There would be some small-time farmers that would be adversely affected, and I'm sure that Willie Nelson would write a teary song for them, but if we want to provide welfare for the least-fortunate among us, surely a Moroccan cotton farmer or Brazilian sugar grower is more deserving of our sympathy than an Italian multinational corporation or an Iowan corn grower that has been receiving handouts for decades.


Who Gets E.U. Farm Subsidies (redux)?
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