John McKisaan

return for tariff cut commitments). India argues offering three options is a ploy to divide emerging economies. This is important for India because emerging economies are a power bloc in WTO now. Together they can and have blocked negotiations. India has objected to the text on farm trade as well. But, and this is the most interesting point about WTO now, rich country farm policies are no longer the deal breaker in trade talks. Proof of this comes in square brackets. Square brackets in WTO jargon are issues that require serious negotiations — they are put in square brackets in WTO drafts. In the farm trade text, the number of square brackets has dropped from 130 in the earlier draft to 30 now. That’s climactic, if you are a trade negotiator.

High global farm prices have a role to play in this. Farm subsidies are being seen as not so bad in that high food prices may get higher if subsidies are eliminated or reduced. More than 90 per cent of American farm subsidies go to crops like rice, wheat, corn, cotton and soybean, and these subsidies act as price depressants in global markets. Take out subsidies, the argument goes, and another source for price increase is created. But this is a short-termist argument and a dangerous one to use in global trade negotiations.

Farm subsidy reduction in rich countries remains the most important objective because government handouts to Western farmers make developing country farm products price-unattractive. This is grossly regressive. Plus, let’s always remember that for all the talk about food crisis now, the point is not at all that the world can’t grow more food. It can. India, for example, can almost double its output with small increases in productivity. So batting for rich country farm subsidy because food prices are high now is bad economics. What’s more, high farm prices offer an economic argument for reform as well.

The farm policy regime in some rich countries depends on high tariffs to keep out other countries’ farm output. The EU is the best example of this. Consumers in rich countries are wondering or will start wondering why cheap imports are inaccessible when they are paying more for food. On an average, a British family pays more than £450 per year to keep EU farmers in government support. That money starts hurting when food bills for families go up. If their consumers start complaining, rich countries will take farm reform seriously.

Even some farm producers are warming up to reforms. America was taken to WTO by Brazil over corn subsidies. Brazil won. American subsidies on rice, wheat, soybean, etc are vulnerable to WTO litigation as well.

Of course, what ultimately matters in farm policy is politics. How conducive American politics is to farm reform will determine in a large part how quickly and effectively global farm trade reforms itself. The US legislature has finalised the farm bill. Farm bills are five-yearly affairs in America — subsidies are fixed for five years. Two-term presidents like George Bush therefore can get to have two shots at influencing the farm support regime. In 2002, Bush buried his free trader credentials under a heap of subsidies and signed on a huge farm support bill. This time he’s being a reformer. But that’s partly politics as well. He wants to make it tough for Democrats, who are in legislative majority and who do not have any intention of doing anything as radical as reforming farm policy in an election year. The Senate and the Congress have sent a huge farm subsidy bill to Bush. Bush has said he will veto it. But it’s probably an empty threat because the bill was passed with big legislative majorities. Whatever his motives though, Bush is sending a message to Democrats — it’s time to reform.

A few details of America’s farm subsidy regime will make it clear why it’s a gargantuan scandal in public policy. What do you think is the income cut-off point for American farmers to be eligible for subsidy? Until recently, anyone earning less than $2.6 million a year could get handouts. Bush wanted the cut-off to be $200,000 annually. This farm bill allows any farmer earning less than $1.5 million annually to receive help. Subsidy per American farmer right now works out to more than $50,000 and almost 75 per cent of the subsidy goes to the top 10 per cent of the largest farm enterprises. Farm subsidy politics is the reason Iowa, a sparsely populated farming-dominated state, is such a big item in the US presidential nomination calendar.

Major action on global farm trade reform is realistically expected to start from 2010. So the next US president, not Bush, will influence farm trade talks and therefore the welfare of developing country farmers. Who’s the presidential candidate we can expect to be least anti-reformist on farm subsidies?

John McCain has opposed farm subsidies long before he became the de facto Republican nominee and he continues to do so. Recently in Illinois, Barack Obama’s home state and a state where farm grandees hold a lot of political influence, McCain bluntly opposed big farm handouts.

“Billions of dollars in subsidies [are] served up every five years to corporate farmers,” McCain said. He also took on fellow legislators, saying the US Congress subsidises some of the “biggest and richest agribusiness corporations in America”.

Now, politics can change a lot of positions. But there’s a remarkable consistency in McCain’s, unlike Bush’s, position on farm subsidies. It’s almost heartwarming to see a candidate in election season repeatedly taking on a powerful special interest group.

What does Obama say? Well, nothing much. The candidate who’s redefining presidential campaign by eloquently arguing against old politics is, as a recent Boston Herald report says, mostly silent on farm subsidy, the worst example of old-style politics.

So here’s a simple message from the horribly complicated WTO negotiations. Poor farmers of the world probably need the old Republican candidate and not the inspirational, young Democrat to be in the White House.

saubhik.chakrabarti@expressindia.com