Farm subsidies to wealthy country farmers total $280 billion

July 5, 2006

Free Market Foundation

This week’s U.S.-EU summit did little to end the finger pointing over who is more at fault for endangering the Doha trade talks by refusing to budge on farm subsidies. The real answer is everybody, as a report released this week by the Organisation for Economic Co-operation and Development (OECD) shows, says the Wall Street Journal.

The Paris-based outfit’s study shows that developed countries continue to prop up uncompetitive farmers, to the tune of $280 billion in 2005.

The European Union spent the most last year, $133.8 billion. Next was Japan at $47.4 billion, and then the United States at $42.7 billion. Those three account for four-fifths of the rich world’s farm subsidies.

Moreover:

In relative terms Switzerland, which is not an EU member, spent the most. Subsidies made up a remarkable 68 per cent of its farm economy.

Next is Iceland at 67 per cent and Norway at 64 per cent. EU subsidies equalled 32 per cent of the bloc’s farm economy last year; in the United States, the figure was 16 per cent.

More than two-thirds of this support comes in government payments that rise as a farmer’s production rises (irrespective of market demand) or that help buy water, seed, machinery and other “inputs” at below-market prices. These are the subsidies that most distort global trade and punish poor farmers in the developing world, says the Journal. They also raise prices for domestic consumers. The OECD estimates that 57 per cent of farm subsidies were “provided through policies that raise prices in the domestic market.”

Source: Editorial, A Mere $280 Billion, Wall Street Journal, June 23, 2006.

For text (subscription required): http://online.wsj.com/article/SB115102465316788296.html

For OECD report: http://www.oecd.org/document/55/0,2340,en_2649_201185_36965367_1_1_1_1,00.html

For more on Trade: http://www.ncpa.org/pd/trade/trade.html

FMF Policy Bulletin 27 June 2006