When the US government gives away some $4 billion to American cotton farmers in return for a crop that's valued at only $3 billion, something's amiss.Skip to next paragraph
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Not only is this a waste of money, it hurts cotton farmers in poor nations. Thanks to the generous help, the 25,000 US cotton farmers are able to command more than 40 percent of global cotton exports.
And cotton subsidies are just a portion of the $19 billion that the federal government pays to boost US agriculture and its exports each year. This outsized support system depresses global prices in wheat, corn, rice, sugar, and other products, leaving farmers in Africa, Asia, and Latin America in poverty. The UN and World Bank say the elimination of such subsidies would be the largest benefit to third-world nations.
The World Bank estimates that 140 million people could be lifted out of poverty by 2015 if the WTO's 148 members agree to end subsidies and lower barriers to agricultural trade.
Their wish may come partially true. This week, the Geneva-based World Trade Organization made a preliminary ruling that the United States must end cotton subsidies because they distort global trade.
Although the US disputes the WTO's findings, one study from the University of California, which helped Brazil in making its case before the WTO, showed that without cotton subsidies, US cotton exports would have fallen by some 40 percent, and world cotton prices would have gone up nearly 13 percent.
The WTO ruling should force Congress to curb its largess for uncompetitive farmers, especially the larger, corporate ones. Too many members of Congress engage in mutual political back-scratching to support different types of agriculture - from milk to sugar - in their respective states.
The US administration has proposed ending farm subsidies in the latest round of talks to expand global trade, but it awaits a stronger commitment from the European Union to end its even more massive subsidies.
The WTO, which the US helped create as a way for consumers to benefit from open markets, has dealt a blow to the biggest stumbling block to expanded trade. Governments in rich nations need to use this ruling to persuade domestic farm lobbies that they can no longer delay the inevitable: no subsidies, only free competition.