The Truth About Foreign Ag Subsidies

June 7, 2007

WASHINGTON (June 7, 2007)—Every member of the U.S. Senate today received a handbook highlighting the billions of dollars in subsidies foreign agricultural producers receive around the world.

The research, compiled in the Guide to Foreign Crop Subsidies and Tariffs, shows that compared to other major global producers—developing and developed alike—the U.S. ranks near the bottom of the subsidization and tariff scale. This document contains a country-by-country and commodity-by-commodity breakdown of foreign agricultural subsidies and tariffs.

This study, which was conducted by researchers at Texas Tech University, was distributed on Capitol Hill by agriculture committee member Sen. Norm Coleman (R-Minn.).

“With WTO talks ongoing and the farm bill under consideration, it’s important for us to recognize that all countries, both developing and developed, protect their agricultural producers—and do so infinitely more than we do in the United States,” he wrote to his colleagues.

“The study clearly points out that the U.S. falls near the bottom of the heap in terms of the use of tariffs and in the bottom half relative to domestic support,” the letter continued. “Given these realities, it is obvious that Congress must not unilaterally disarm America’s farmers and ranchers by weakening U.S. farm policy.”

American farmers’ biggest competitor for export markets, the European Union, still far outpaces the U.S. in subsidization, according to the study.

Samarendu Mohanty, the Texas Tech researcher who authored the report, was recently on Capitol Hill to brief House and Senate Agriculture Committee staff on his findings (see briefing information Foreign Crop Subsidies and Tariffs PowerPoint Presentation).

“All countries, both developed and developing, protect their agriculture but use vastly different policy tools. Developing countries’ tariff protection is substantially higher than that of developed countries,” he told the group.

Mohanty also pointed out that input subsidies are a favorite among countries like China, Brazil and India, which have sophisticated farming industries but still classify themselves as “developing.” A clear benefit of being labeled so is to avoid having to make reforms in the WTO.

Examples of these subsidies include:

  • A pending proposal in Brazil to provide $26.1 billion in various forms of agricultural credit assistance, including debt forgiveness.
  • China’s $43 billion support to agriculture and rural development in 2006.
  • India’s current agricultural credit outlays of approximately $52 billion in low interest rates on loans that are frequently forgiven.

But Mohanty says protective tariffs are still the subsidies of choice amongst developing countries.

These tariffs took center stage in an April 12 letter (PDF 1MB) from 58 U.S. Senators to President George W. Bush that noted:

“As discussions in the Doha Round resume, we urge you to direct your negotiations not to make further concessions on domestic support but instead to insist that our trading partners put forward ambitious market access principles that will produce sufficient market opening to ensure that any final deal will generate increased net income for America’s farmers and ranchers.”

Texas Tech also plans to send copies of the handbook to the U.S. Trade Representative for use by America’s trade negotiators in future trade talks.

Average Bound Agricultural Tariffs
Average Applied Agricultural Tariffs