Under the current WTO-brokered global trading system, wealthy countries
spend billions of dollars each year to support their domestic agriculture
sectors. In 2002, direct support to farmers by countries belonging
to the Organisation for Economic Co-operation and Development (OECD)
added up to around US$235 billion -- three quarters of the
total OECD support estimate of US$318 billion. Subsidies by this
group of countries account for over 90 percent of trade-distorting
domestic support and export subsidies reported to the WTO, says
The figure is particularly striking if one considers that in high-income
countries such as those belonging to the OECD, agriculture employs
around 5 percent of the labour force and contributes only 2 percent
to gross domestic product (GDP). In low-income countries, however,
the sector provides around 70 percent of the labour force with work
and contributes 36 percent to GDP.
Subsidies to farmers in the developed world have negative ramifications
for agriculture in the developing world in a number of ways. By
enabling farmers and agro-companies to sell on the international
market at prices far below production value, they leave growers
in the developing world unable to compete. They also encourage excess
supply, which further lowers world agricultural prices -- reducing
the money that poor farmers make, or pushing them out of the business
"Farm subsidies in rich countries distort the global marketplace,"
notes FAO Director-General Jacques Diouf, "making it in many
cases almost impossible for farmers in developing countries to compete
The World Bank estimates that subsidies to OECD agriculture cost
farmers in poor countries more than US$30 billion a year. Other
studies double that figure. Conversely, the Bank has calculated
that removing all subsidies would result in an additional US$250
billion earned each year by the agricultural sector -- with nearly
$150 billion of that total accruing to low- and middle-income countries.
Food imports: questions of security
Subsidies also at least partially underlie a trend towards
increasing food imports by poor countries. FAO research shows that
during the 1990s imports of basic foodstuffs by developing countries
increased at the rate of 5.6 percent a year (the rate rises
to 6.9 percent for Low Income Food Deficit countries) and project
that this tendency will continue in years to come. Overall, the
total food import bill of the developing world has grown by 60 percent
This is a situation with significant implications for food security.
"The contribution of food imports to food security is limited
by the foreign exchange earning capacity of developing countries,
explains Hartwig de Haen, FAO Assistant Director-General and head
of the Organization's Economic and Social Department. Closing
the food gap through commercial imports is not always a realistic
possibility for most countries."
And, adds Alexander Sarris, Director of FAO's Commodities and Trade
Division, the increased profile of cheap food imports can also be
a disincentive to investment in domestic agriculture in importing
countries, leading governments to neglect the sector. "High
import growth can undermine otherwise viable domestic production,"
Sarris says, "with few opportunities for alternative uses of
Tariffs remain an issue
While average tariff rates have generally been reduced following
the Uruguay Round of trade negotiations, high duties continue to
be placed on certain select products by wealthy nations in order
to protect domestic producers. Such "tariff peaks" --
sometimes running as high as 350 percent -- are often concentrated
in products that are of export interest to developing countries.
These include major agricultural staple food products, such as sugar,
cereals and fish; tobacco and certain alcoholic beverages; fruits
and vegetables; and food industry products with high sugar content.
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