Source: NCPA
American agricultural subsidies distort market prices and interfere with trade, causing harmful market distortions that adversely affect poor famers in developing countries and burden U.S. taxpayers, as well as causing inadvertent environmental problems, according to a new report from the National Center for Policy Analysis (NCPA).
The federal government offers a wide range of aid to farmers, including: price supports and price floor programs; crop insurance — against both lost crops and lower than expected prices; government purchases of excess food stocks; and promotion of domestic crops through international trade agreements.
“These agricultural subsidies distort trade, which adversely affects poor farmers and environmental protection in developing countries,” says study lead author and NCPA Research Associate Marcelo Ostria. “By reducing, or better yet ending agricultural subsidies in the United States and other developed countries we would help the poor farmers in developing countries, reduce ecosystem degradation and help reduce federal spending.”
Subsidies lead to overproduction of certain crops in developed countries, causing prices to fall, sometimes below the cost of production.
- Oxfam International notes that the more than 10 million people in Central and Western Africa countries who rely on the production and sale of cotton lose up to $250 million every year due to subsidies.
- According to the Congressional Research Service, the United States spent about $24 billion on cotton subsidies over the past 10 years.
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“It is a moral tragedy that we throw billions of dollars in aid at governments in poor countries to help them develop, then enact protectionist measures like farm subsidies that undermine their best shot for development,” said NCPA Senior Fellow, H. Sterling Burnett. “Trade, not aid, is what the citizens in developing countries need. Ending payments and subsidies would both help the developing world to stand on its own, and decrease the staggering debt owed by future generations in developed countries.
The study also notes that overproduction caused by subsidies also results in unintended environmental harms. In pursuit of subsidies, farmers often cultivate marginal farmland, where the thin soil is unable to replace depleted nutrients.
Source: Marcelo Ostria, “How U.S. Agricultural Subsidies Harm the Environment, Taxpayers and the Poor,” National Center for Policy Analysis, August 2013.