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While Europe was arguing over its new constitution, a shaft of sunlight was visible in the Doha trade talks. And about time too.

New OECD figures show that subsidies to agriculture (direct and indirect), far from declining in the face of global criticism, actually increased - from an unacceptable $314 billion in 2002 to a staggering $349 billion in 2003. That is a rise of 11%, nearly four times the rate of inflation.

It means that public support for farming has risen from 31% of revenues to 32%. If it were suggested that any other industry should be subsidized by 32% it would be laughed out of court.

What's so special about agriculture? Subsidies were vital to cure the postwar food shortage but that was long ago. Their main function now is to prevent developing countries from exploiting one of the few activities where they have a natural advantage.
 
It is difficult to think of a single rational argument why US taxpayers should shell out $3 billion to bribe farmers to grow cotton, a subsidy of 100% of the value of output. As a result the US has captured 40% of the world cotton market, depriving labor-intensive developing countries of countless jobs. Europe is worse.
 
Oxfam claims the EU, scandalously, spends 3.3 euros for every euro of exports of sugar beet (another product better grown in the third world). Japan is even worse. A country desperately short of land, it imposes import tariffs on rice of almost 500%.

Agriculture has become a gravy train without brakes and the subsidies have got to stop. If they did it would be a win-win situation: developing nations would get the biggest economic boost they have ever had and richer OECD countries would have money to spend on other things.
 
There are now two reasons for mild optimism.
 
First it appears that Europe and the US, under pressure from the newly formed G20 group of developing countries, are prepared to take a serious look at their subsidies, particularly export-distorting ones, when the Doha talks resume next month. Second, the World Trade Organization is reported to have upheld its preliminary ruling against US cotton subsidies following a complaint by Brazil.
 
It does not follow that a Bush, or even a Kerry, administration would have the guts to stand up to the farming lobby, but it still marks an important legal as well as moral victory for abolitionists. Developing countries are not blameless. They should reduce their own agricultural barriers that prevent trade between each other.
 
If World Bank estimates are true, freer mutual trade would benefit them by $31 billion a year.

Not to be sneezed at.

Go back, or read the latest opinions:

''Give it a Break''

Business Standard of New Delhi, 12/22/08