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An agricultural subsidy is a governmental subsidy paid to farmers to supplement their income, help manage the supply of agricultural commodities, and bolster the supply of such commodities on international markets. Examples of such commodities include wheat, feed grains (grain used as fodder, such as maize, sorghum, barley, and oats), cotton, milk, rice, peanuts, sugar, tobacco, and oilseeds such as soybeans.
United States The U.S. Agricultural Department is required by law to subsidize over two dozen commodities. Between 1996 and 2002, an average of $16 billion/year was paid by programs authorized by federal legislation dating back to the Agricultural Adjustment Act of 1933, the Agricultural Act of 1949, and the Commodity Credit Corporation, among others. The beneficiaries of the subsidies have changed as U.S. agriculture changes. In the 1930s, about ΒΌ of the U.S. population resided on the nation's 6,000,000 small farms. By 1997, 157,000 large farms accounted for 72% of farm sales, with only 2% of the U.S. population residing on farms. Congress has made dozens of changes to the program over the years, as agricultural policy and the economy has changed. One of the more recent acts was the Farm Security and Rural Investment Act of 2002, which is in effect until 2007. As of November, 2005 the USDA forecast for the fiscal year 2005 is for a trade surplus of $4.5 billion with $62 billion in exports. European Union Japan Japan is best known for having agricultural subsidies put on its rice industry, with the reasoning behind such moves being cultural. Agricultural subsidies by crop The New York Times reported on December 8, 2005 that corn subsidies had reached $20 billion per year in the United States and as much as $85 billion per year in the European Union. In the United States, growers of corn, wheat, cotton, soybeans, and rice receive more than 90 percent of all farm subsidies.* Criticism Critics of agricultural subsidies argue that they promote poverty in developing countries, by artificially driving world agricultural prices below the production costs of third world farmers. * For example, the Bush administration has imposed quotas or duties on virtually all imports from Afghanistan, as well as Nepal, Bangladesh, and Cambodia. As a result, Afghani farmers can make more money growing poppies, and helping the war lords make heroin, than if the farmers simply grew cotton or corn. * At the same time, both critics and proponents of the WTO have noted that export subsidies, by driving down the price of commodities, can provide cheap food for urban consumers in poor countries. * * However, this makes developing countries into dependent buyers of food from wealthy countries, causing local farmers to lose their land rather then allowing them to develop their own agriculture and therefore self-sufficiency. Critics also point out that agricultural subsidies incentivise overuse of water, drawdown of aquifers, and pollution of aquifers and surface water with nitrates, phosphates, and pesticides. Agriculture uses 75% of the world's available fresh water, and it is argued that, given the seriousness of the world's crisis in fresh water, incentives should be reversed to encourage less use of water. Without these subsidies, farmers would pay the proper price for the increasingly scarce vital resources of clean water, and would grow crops which are appropriate to the area's natural rainfall levels. Author Vandana Shiva and the front page of the New York Times have shown that ground water is running out in India, which could lead to a drastic disaster if sustainable changes are not made. Agricultural subsidies are also said to incentivise overuse of land, encouraging destruction of forests and wetlands to produce unneeded commodities. For example, the Amazon rainforest is subject to disastrous destruction due to new soybean farms. Advocates of fiscal responsibility observe that these subsidies unnecessarily exacerbate public debt when the budget deficit is already enormous. * These programs are also said to run counter to the spirit of the free market. By design, agricultural subsidies protect uneconomic producers and impede fair competition. Thus, agricultural subsidies are a common stumbling block in trade negotiations, including the current Doha round of WTO trade negotiations. Financial Times See also Reference | ||||||||
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