While our focus at the “Free Market Sugar” project has been primarily directed at the market-distorting subsidies of sugar by foreign governments, it’s important to realize that similar global market interference exists for a wide variety of other agricultural commodities, as well.
An extensive report – “Agricultural Subsidies in Key Developing Countries” by DTB Associates last November – outlined the extent of price manipulation policies that create anything but a global free market for U.S. farmers.
What should be of particular concern to Congress is that the full extent of market-distorting subsidies are “obscured by the fact that some of the countries are delinquent in reporting their subsidy programs to the WTO (World Trade Organization), and many have used, in the notifications they have submitted, faulty methodologies that underestimate the true level of support.”
Meaning that as bad as the known foreign subsidy programs are, the reality is even worse.
The DTB report notes that the increase in government support programs “has resulted in significant increases in production,” which has resulted in huge surpluses over and above that which can be consumed domestically. And that, in turn, has led to additional “export subsidies to dump surpluses on world markets.”
While the DTB study focused primarily on longstanding government support programs in India, Brazil, Turkey and Thailand, of growing concern for U.S. policy makers should be the “rapid increase” in agricultural subsidies in China, especially direct cash payment to farmers for wheat, corn and rice.
“China did not declare any trade-distorting domestic subsidies above de minimis level when it joined the World Trade Organization,” DTB notes. However, the report “provides evidence that China’s subsidies for all three commodities covered in the study – corn, wheat and rice – exceed the de minimis level, and therefore violate China’s obligations.”
Similar market-distorting government policies exist in the other four nations studied for a variety of agricultural products, including sugar.
Indeed, the Indian government sets a mandatory price that sugar mills must pay to sugar farmers, and some Indian states set their own mandated prices that are even higher than the price set by the national government “regardless of the market price of sugar.”
Current U.S. agricultural policies are neither ideal nor consistent with any reasonable definition of “free market.” Alas, the global market itself is anything but a government-free free market. And until that changes, it is not in our nation’s interest to lift de minimis protections for U.S. farmers.