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Farms Fall Apart

Postcard from Europe

By Nicholas F. Josefowitz

EUROPE—There is an old African saying, that when two elephants fight it is the grass that gets hurt. When two economic superpowers lock tusks in an agricultural trade war, not only the grass but the entire African continent that is laid to waste.

Yet in the face of stifling skepticism about Africa’s future that seems to have dogged President Bush’s recent trip to that continent, recent events indicate that Africans may be able to look forward to a brighter future. On June 26, after decades of intransigence, the EU finally took a small but significant step towards reform of its archaic and unjust system of agricultural subsidies.

The EU’s previous system (like the U.S.’s current system) was based on the government guaranteeing a minimum sale price for all domestically-grown crops. This guaranteed price covered the cost of production and left a healthy profit margin for farmers. The obvious consequence of this subsidy was that the amount of crop grown was no longer determined by the demand for that particular crop on the open market; farmers simply grew as much of the most subsidized crops as their farms could handle, regardless of whether anybody would want to buy them. The harvest that couldn’t be sold domestically was “dumped” onto world markets, driving down the price and devastating the non-subsidized farmers in the developing world. The effect was not trivial: Oxfam estimates that the price of wheat has been driven down to 35 percent of what it cost to produce, while cotton and sugar would see a price increase of 26 and 17 percent respectively if subsidies were removed.

Inevitably, those that benefited most from these subsidies were the largest farms that could produce the most crops: the massive industrial farms owned by large agricultural conglomerates. Shockingly, the largest 20 percent of European farms received over 80 percent of the subsidies while the remaining 78 percent received less than $5,500 a year. So even in Europe itself, these subsidies have hastened the demise of the small, individual farmer and decimated the countryside’s unique social fabric which the EU was purportedly trying so hard to preserve. In some countries, such as Spain, Italy and Greece, the subsidy policy has been so pernicious that the active rural population has decreased by 80 percent since the 1950s. The European consumer wasn’t really helped either, and the Economist estimates that EU agricultural subsidies add over $650 a year to the grocery bill of the average European family, not counting the exorbitant amount of taxes paid to keep the $58-billion-a-year racket running.

Now, in a landmark new deal, the EU will begin to move slowly away from production-linked subsidies that it has used since its founding in 1958. In its place, farmers will be paid a fixed subsidy based on the size of their farm, adjusted to discourage industrial farming practices by remunerating efforts to protect the environment and care for the countryside. Since farmers won’t be guaranteed a minimum price for their entire harvest, they will have to pay more attention to market demand and will be motivated to shift from crops that were heavily subsidised to those in which they have a competitive advantage (decoupling, in international-trade-speak). Overproduction will be curtailed, dumping on world markets will be reduced and hopefully world prices will rise to a level that reflects the true costs of production.

Unfortunately, this first step towards reform is rather timid and was hampered by the selfish lobbying of France, Germany, Spain and Portugal (the countries that previously received the most net subsidies). Commodities such as beef, cereals (the single largest recipient of funds) and mutton will only partially decouple, while subsidies for olive oil, tobacco, cotton and sugar will still be determined solely on production.

The new agricultural policy not only fails to decouple all subsidies, but also fails to acknowledge the existence of a potentially more pernicious policy: tariffs. Both the EU and the U.S. impose suffocating import tariffs, often well above 100 percent of the commodity’s value, to block cheaply produced African goods from the lucrative western markets. The Institute of Economic Affairs, a British think tank, estimates that EU agricultural subsidies have reduced African exports of milk products by 90 percent, livestock by almost 70 percent and non-grain crops by 50 percent. Without European tariffs, the Food Policy Research Institute, a Washington-based group that focuses on food needs in developing countries, estimates that agricultural exports of sub-Saharan Africa would double and the average annual income would increase by 13 percent per person. These effects are even more striking when visualized on an individual level. Almost 70 percent of Africans below the Sahara live in rural villages and work on the land. The average income is less than a dollar a day, so even seemingly inconsequential increases in farm revenues of a few dollars a year (a few cents a day) could mean the difference between life-saving food and starvation, or between medicine and disease.

In the midst of a war to control the world’s food supply it is all too easy for governments to use the African continent as a conveniently distant battlefield. But with this new legislation, it seems the EU has begun to acknowledge the appalling recklessness with which it has treated the developing world and the duty it has to stop plunging vast swathes of Africa further into poverty and underdevelopment. While it is wishful thinking that the U.S. will follow Europe’s lead at the Doha trade talks this September, further subsidy reforms within the EU could have a significant enough impact to jump-start African agriculture and provide a hope for a desperate continent.

Nicholas F. Josefowitz ’05, a history concentrator in Mather House, is an associate editorial chair of The Crimson. He is spending his summer wandering Europe trying to find organic, free-range, fair-trade food grown, processed and packaged in Africa.

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