Subsidy Arms Race Heating Up

September 30, 2013

by Rene Pastor

The arms race in farm subsidies is heating up outside the U.S.
 
The Organization for Economic Cooperation and Development (OECD), an international body comprised of 34 countries to stimulate the global economy, recently flagged the run-up in global agricultural subsidies.
 
An OECD report released earlier this month said government support for agriculture in the world’s top farming nations increased in 2012, reversing a long-term downtrend amid signs the level of subsidies has continued to rise in 2013.
 
From China to Brazil, Vietnam to Russia, the OECD said backing for producers hit $258.6 billion in 2012. In Japan, already offering high levels of support for its farmers, the level of support went up from $60.4 billion to $64.7 billion, a 7% increase.
 
The United States was not part of this subsidy arms race, according to OECD, and continued its declining support, which places the country on the lower end of subsidization rates.  In fact, of the countries detailed in the OECD report, the U.S. was one of the few to actually decrease its support to producers, falling an additional 8%. 
 
Still, anti-farm groups in the United States have launched a shrill Farm Bill campaign to unilaterally disarm the American farming sector by dismantling the already shrinking level of supports for farmers in the country.
 
The exact opposite is happening abroad. 
 
“[E]merging markets are relying more on border protection and market price support measures that tax consumers,” the OECD report explained.
 
A prime example of the increase in farm supports can be found in Thailand, whose rice subsidy has bled the government budget in Bangkok and is now distorting the world rice market because the Thais are forced to dump at a loss rice stocks that have built up in government warehouses.
 
And, the OECD said farm support in China rose to 17 percent, climbed to 21 percent in Indonesia, and went up to 15percent in Kazakhstan.
 
The reported level level of support is 5 percent in Brazil, however, as this report by DTB Associates details, “The level of agricultural subsidization in Brazil… [has] gone unrecognized in part due to the complexity and in some cases the overlapping nature of the programs.”, which calls into question the accuracy and the ability of OECD to estimate the true level of support given to Brazilian farmers. 
 
Food for thought as U.S. lawmakers chart a course for the future of U.S. policy.