Thursday, July 10, 2014

Forgotten Posts from the Past : Support Free Trade: End agricultural export subsidies

While some on the left push the increasingly discredited "Fair Trade" propaganda against both economic theory and practice, it is appropriate to argue for free trade and highlight what protectionism means (and noting that the Oxfam, Fairtrade, left/green economic deluders tend to spend little time on these issues) and what it does.

Export subsidies are one of the more obvious and stupid forms of protectionism.  The WTO prohibits export subsidies for industrial products, but it is not prohibited for agricultural exports, which is unsurprising since both the EU and the US apply them.

Export subsidies undermine the international market prices of goods, whilst stimulating production by the less efficient producers in the countries providing the subsidies to their producers, but undermining the production and the revenue of the more efficient producers in countries unable or unwilling to take money from other taxpayers to prop up agriculture.  In short, export subsidies in agriculture undermine agricultural production in the developing world and so undermine their economies, which typically are more reliant on primary production than the countries with export subsidies.

By enabling inefficient producers to undercut efficient ones, it wastes resources, which any environmentalist ought to oppose, as well as being fundamentally inequitable.  Not only does it take from taxpayers in the countries that pay the subsidies to rent-seeking agricultural producers (and it is the larger and wealthier producers that get the biggest subsidies), but it mean efficient producers lose out in poorer countries.

Before you blame the USA for it, the EU's current WTO commitments on agricultural export subsidies are for subsidies 15 times greater than that of the USA.  

This is a European Union led problem - it is the European Union using its taxpayers' money in a way that impoverishes farmers in poorer countries, whilst calling on its Member States to increase official aid to developing countries.

It's a simple step, it should be the first priority in any new WTO trade round (if the Obama Administration bothered to care), it should be a priority for those activists, who think poverty actually matters.  Not trendy, slogan driven, producer rent-seeking schemes like "Fair Trade".   Oddly enough, they get agitated by the "unfairness" of prices set by demand and supply, not the "unfairness" of state intervention to favour their own.

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