Economics: WorldÂ’s farm subsidies rising: wake up Australiaby Patrick J. ByrneNews Weekly
, July 1, 2000
Australia and the US may both preach free trade, but only Australian politicians and bureaucrats seriously practise it.
As the table below shows, US assistance to farmers has remained high over the last decade, as have subsidies to farmers in the 29 most advanced nations that make up the Organisation for Economic Cooperation and Development (OECD).
Lower world commodity prices and the ensuing pressure on farm incomes pushed support payments to farmers in industrial countries to a record $362 billion, according to the recent annual Agricultural Policies in OECD Countries: Monitoring and Evaluation 2000.
The three percent increase in 1999 represents the second consecutive rise in agricultural subsidies, and it is likely that the trend will continue through 2000-01, Ken Ash, OECD deputy director for food, agriculture and fisheries, said on June 8 in Washington.
Total support to agriculture in 1999 was approximately 1.4 percent of the gross domestic product (GDP) of the 29-member OECD, the report said:
â€śSupport to producers has mounted steadily over the last three years, rising from 31 percent of total gross farm receipts in 1997 to 40 percent in 1999 â€” and is now, in percentage terms, back to where it was in the mid-1980s.
â€śFalling world prices for the main agricultural commodities, which were only partially matched by reductions in domestic prices, explain most of the increase, although direct payments also increased somewhat.â€ť
The support rates are reported by OECD as producer support estimates, or PSE, which is an indicator of the annual subsidies from consumers, through prices, and taxpayers, through budgetary payments, to support agricultural producers. The PSE is reported as a percent of gross farm receipts.
The US rate of farm support rose in 1999 to 24 percent of total gross farm receipts from 22 percent in 1998 â€” based on an increase in payments from historical entitlements and overall farming income, and a doubling in payments based on output.
The increase in the rate of farm subsidies for the United States over the past two years, Ash said, is in part due to absorbing agricultural exports as a result of the financial crisis that afflicted parts of Asia, Latin America and Russia.
Elsewhere in 1999, New Zealand posted a two percent PSE in farm subsidies, followed by Australia, six percent; Hungary, 20 percent; Mexico, 22 percent; the Czech Republic and Poland, each 25 percent; Turkey, 36 percent; the EU, 49 percent; Japan, 65 percent; Iceland, 68 percent; Norway, 69 percent; Switzerland, 73 percent, and South Korea, 74 percent, the OECD report said.
The OECD average was 40 percent.
Overall, Ash said the OECD is encouraging its member countries to return to a pattern of agricultural policy reform outlined in OECD Council meetings in 1998 and 1999, which emphasised reducing distortions to trade and production. It doesnâ€™t seem to be happening.