Despite the UN development goal to eliminate world hunger by 2015, tariff rules imposed by the World Trade Organisation continue to allow rich countries to shell out vast agricultural subsidies whilst penalising farmers in developing countries.

Agriculture is the largest employer in most developing countries and food security is a vital issue, making ensuring the income of their farmers an understandably key priority.

Against this background, a fierce discussion is taking place in the World Trade Organisation (WTO) in the run-up to the Bali Ministerial in December on how the global rules on agriculture should be changed in favour of the developing world.

The G33 group of developing countries are asking that their governments be allowed to buy food from their farmers, stockpile and distribute it to poor households, without being limited by the WTO’s rules on agricultural subsidies. However, their proposal is facing resistance mainly from major developed countries, especially the United States, whose view is that such a move would “create a massive new loophole for potentially unlimited trade-distorting subsidies”.

It is well known that the greatest distortions in the trading system lie in agriculture. This is because rich countries asked for, and obtained, a waiver in the 1950s from the GATT, the predecessor of the WTO, which allowed them to give huge subsidies to their farmers, and levy very high tariffs.

When the WTO was set up, its new agriculture agreement allowed this protectionism to continue. Rich countries were obliged only to reduce their “trade distorting subsidies” by 20%, and could change the nature of their subsidies and put them into a “Green Box” containing subsidies that are termed “non trade-distorting or minimally trade-distorting”.

There is no limit to the Green Box subsidies, so rich countries simply move most of their subsidies there despite their trade-distorting nature. Since the creation of the WTO in 1995, OECD countries’ agricultural subsidies have soared from $350 billion in 1996 to $406 billion in 2011.

The effects of these subsidies continue to devastate developing countries. Food products selling at below production costs flood into poorer countries, eating into the incomes and livelihoods of small farmers. Ironically, developing countries are not allowed to subsidise their own farmers even if they can afford it because the WTO rules prohibit the introduction of distorting subsidies by any country who has not previously given subsidies, except for a minimal amount (10% of total production value). Most developing countries had no subsidies when they joined the WTO due to lack of funds.

Developing countries are asking that food bought from poor farmers and given to poor consumers should be considered part of the Green Box. They are simply asking the WTO to remove the unfair conditions that prevent them from securing sufficient food.

India’s parliament has just passed a food bill that entitles the poor (two-thirds of the population) to obtain food from a government scheme that buys the food from small farmers. But the estimated $20 billion-plus the government will spend annually may exceed the small minimum amount of subsidy it is allowed.

For rich countries that are subsidising their farmers to the tune of $407 billion a year to deny poor countries the opportunity to do likewise is grossly hypocritical.

This post is taken from a longer piece by Martin Khor, Executive Director of the South Centre – read the article in full here

 

summary

Despite the UN development goal to eliminate world hunger by 2015, tariff rules imposed by the World Trade Organisation continue to allow rich countries to shell out vast agricultural subsidies whilst penalising farmers in developing countries. A fierce discussion is taking place in the run-up to the WTO’s Ministerial in Bali in December on how the global rules on agriculture should be changed in favour of the developing world.

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