What will agriculture in the North look like if rich governments stop subsidising their farmers? And what do developing countries stand to gain?
Resumption of the world trade talks, suspended on 24 July 2006 amid mutual recrimination, will depend on whether the rich North cuts its farm subsidies and allows the developing South greater access to Northern markets.
The so-called 'Doha Round' of talks collapsed in Geneva after irreconcilable differences among six key negotiators – Australia, Brazil, the European Union, India, Japan and the United States – over agricultural liberalisation.
By all accounts, the best case scenario for the South would be for the North to dismantle the policies that lead to the dumping of food below cost price on world markets, sending millions of farmers into destitution. This in turn would require Northern governments to end their export subsidies to farmers – they gave an in-principle commitment to do so by 2013 at last December's Hong Kong world trade summit but even this is now in question now the Doha talks have collapsed – and to scale down their other, much more substantial, forms of agricultural support as well.
Government support for agriculture includes imposing tariffs on imports, and paying out huge export and domestic subsidies. The high level of agricultural support in the North – an astounding US$283 billion in 2005 – encourages overproduction and dumping in poor countries. This support may take the form of direct payments for producers, subsidies to buy inputs for their farming, and market price supports, with Northern consumers footing the bill in taxes and higher prices.
Southern balance sheet
British Prime Minister Tony Blair claimed in November 2005 that the benefits of a successful Doha Round would be that "developing countries could gain US$47 billion in increased agricultural exports".
But that claim is disputed. Even if the talks eventually resume, and are judged successful, any figure is speculation.
"When huge gains are attributable to trade reforms," says ex-World Bank economist Jeffrey Sachs, "we need to look at the fine print: almost all those gains accrue to the richest countries and the middle income countries, not the poorest countries and especially not the poorest countries in Africa."
In terms of market access, the gains from agricultural liberalisation would go largely to traders and not to the poorest countries or farmers. However, the larger developing countries, such as Argentina, Brazil and Thailand, stand to gain.
Poor farmers do not trade directly on world markets – two-thirds of world trade is conducted between multinational corporations.
Many international aid agencies are now doubtful if the poor would gain from 'increased market access.'
"Poor countries don't have stock-piles of exports waiting to flood into our country as soon as we allow them to," points out the Britain-based Trade Justice Movement that has led public campaigns in Britain for changes in Northern trade policies. Genuine food surpluses in developing countries are rare.
Lack of infrastructure hampers farming in many developing countries. Roads and transport facilities may be poor, making it difficult for farmers to get their produce to market. They may lack credit facilities, irrigation and warehousing for storing crops.
The shape of things to come
Experts differ over the shape that reforms should take if agricultural supports in the North are to remain. There is, however, growing support for the idea that smaller farms should receive far more support that they do at present, but that it should not lead to dumping.
"Public support to agriculture may well be legitimate, for instance for sustainable family farming to exist in every region, provided that this support is not used for low-price exports," believes La Coordination Paysanne Europeenne (CPE). Representing 18 small farmer organisations in 11 European countries, CPE sees a case for agricultural subsidies.
David King, Secretary General of the Paris-based International Federation of Agricultural Producers, says that farmers everywhere would prefer not to have subsidies but get their income from the market instead.
"To benefit small farmers, family farms, a system is needed that benefits them directly – such as social payments for producing public goods," says David King.
Farmers in the North would prefer the market to work in a way that gave them a better price. "But too much power is now in few hands at the retail end of the food chain," said Michael Hart of the Britain-based Small and Family Farms Alliance, claiming the big supermarkets have the power to dictate the prices they pay to farmers.
A cap on CAP?
One of the largest consumers' associations in Britain – Which? – wants to replace the European Union's Common Agricultural Policy (CAP), through which subsidies are channelled, with a policy "driven by consumer-needs rather than payments linked to farm size or previous subsidies."
It recommends that "all price support, subsidies (including export subsidies and import tariffs), quotas and the set-aside system (under which farmers receive payments for not using land) – should be phased out and replaced with new food, rural, and environmental strategies."
Agricultural subsidies should be more heavily weighted towards the smaller farmer, said English dairy farmer Andy Welford. This could be done, he suggests, by introducing a system that would pay EU farmers a higher rate per hectare for their first 100 hectares of land, less for the next 100 ha. and so on, until an upper limit of 1,000 ha., beyond which no payment is made. (A small-scale farm in the North can be anything from a few hectares to 1,000 ha.)
"This would help to maintain the rural social environment and at the same time end the transfer of scarce public funds to extremely wealthy individuals and corporations," said Welford.
But such a policy is opposed by governments and large farmers. One large-scale English farmer doubted if it would work in practice, "as large farmers could break down their farms into a number of smaller units in order to qualify for payment".
He also pointed out that large-scale farmers provide employment and that "farm workers would lose if their employer was not receiving any supports".
Oxfam, the international nongovernmental aid agency, has its own wish list, which includes:
* An early phase-out by the EU of the direct and indirect subsidies that finance export dumping;
* A cap on CAP payments to individual producers, set at £50,000 with immediate effect;
* Increased spending on social and environmental priorities; and
* Stronger compliance conditions: "within five years, all CAP support should be geared towards well-defined social and environmental objectives."
Despite coming under pressure, Northern countries still cling to their subsidy regimes. France, for example, does not favour any changes in CAP until 2013. Ireland too opposes change.
Ireland's agriculture and food development agency, Teagasc, claims that the majority of Irish farmers would be put out of business if EU export subsidies were abolished and there were major reductions in import tariffs.
But as long as Northern countries heavily protect their agriculture, the countries of the South will see ample justification for protecting sectors of their economies. And the South's case is stronger: whereas the North's agriculture is well developed, many sectors of Southern economies are vulnerable and need safeguards in order to develop.
And the North's protection could fiercely rebound. As long as it continues, Northern countries have little hope of gaining improved access to markets in the South for their manufactures and services.
For small-scale farmers in the South, the benefit of the North ending farm supports that cause dumping would be the opportunity to practice agriculture on a sustainable basis.
John Madeley is a UK-based author, journalist and broadcaster specialising in international trade, food and agriculture.