When Those Farmers Produce An Oversupply

China outlook

When those farmers unsurprisingly produce an oversupply in the home country, the governments of the EU and the US use export subsidies to move their excess on to the international market.

To maintain this system the EU and US shell out an average of more than one billion dollars every day in support for their farmers. And those who pay for the agricultural policies of the US and the EU, and the depressed world prices that they encourage, are efficient producers in countries such as Australia.

Now, in contravention of the spirit, and perhaps the laws, of the Uruguay Round WTO Agreement, the US is considering increasing its agricultural support programs to US$170 billion over ten years, that is A$32 billion every year in direct subsidies.

The argument that this money is required to help struggling US farmers holds little water when held up to the reality of the situation. It was revealed last year several Top 500 American companies received hundreds of thousands of dollars in government subsidies, as did wealthy individuals such as ex-basketball players and media tycoons. Under the new program payments to these companies and individuals will be ramped up by 70 per cent with struggling farmers in the US receiving relatively little.

Meanwhile, in Europe, where there are 13 countries looking to join the European Union, there is now the prospect of the agricultural subsidies provided under the EU's Common Agricultural Policy being extended to millions of new previously unsubsidised farmers.

The Australian economy and Australian taxpayers simply cannot afford to wage a subsidy war with the treasuries of the US and the EU. So instead we must, through the WTO, seek to inject a level of fairness and equity into international agricultural trade.