* Dan Minette ([EMAIL PROTECTED]) wrote:
> It seems paradoxical, if Africa has starvation, why sell food. But, the
It does seem odd. But what if most poor countries are net importers of
food? The subsidies obviously hurt the food exporters, since subsidies
depress prices, but if the country as a whole is a net importer of food,
then the subsidies would actually benefit the country by making their
food cheaper.
> very little foreign exchange. This food subsidy has been called the single
> greatest impediment to African development. Protectionism and subsidies by
> rich nations helps no one but those getting the payments and those able to
> charge high prices in the absence of competition.
From what I've read, it is the tariffs ("protectionism") that is the
most damaging to most poor countries. The subsidies may not be hurting
them so much (if they are net food importers, which would make more
sense for a hungry country)
> It would be awesome because what would be considered slave wages
> here would be an enormous boon to Zambia. Saying that this is
> exploitation, when the alternative is worse is self-serving.
Now that makes more sense than exporting food. I wonder what it would
take to start a lot of the offshore manufacturing jobs going to Africa
instead of Asia. I guess anything that causes wages and manufacturing
in Asia to get more expensive (rising renminbi, maybe) would tend to
send more manufacturing to Africa. Incidentally, I think it is ironic
that the industry I work in (semiconductor laser packaging) COULD make
products using little manual labor (the technology for nearly full
automation is almost ready to go, and has been for several years) but
it is better to outsource the work to the Far East than to invest in
the machinery to automate the processes. From what I've heard, many
manufacturing industries are in a similar rut. Until everyone in the
world has progressed to sufficiently high living standards (so that
manual labor is more expensive than automation), it seems progress in
automated manufacturing will be a lot slower than it could be.
***
http://www.economist.com/PrinterFriendly.cfm?Story_ID=3786899
Punch-up over handouts
Mar 23rd 2005
From The Economist print edition
Rich countries are under pressure to end their farm subsidies. Might
some poor countries be sorry to see them go?
BURKINA FASO, in west Africa, depends on cotton for about 40% of its
merchandise exports. Alas, prices are not always what they might be.
According to the International Cotton Advisory Committee, a body that
advises governments, world prices would have been about 26% higher in
the 2001-02 season were it not for the $4 billion in subsidies America
lavished on its cotton growers. Farming upland cotton in the United
States was once about separating lint from seed. Now, it is a convenient
method for parting the American taxpayer from his money.
The pickings may soon become less rich (see article). This month the
World Trade Organisation (WTO) upheld its ruling that such subsidies
distorted trade and breached limits agreed in 1994. Mr Bush's budget
for the coming fiscal year proposes deep cuts in farm subsidies.
Furthermore, a promise to eliminate rich countries' export subsidies
(eventually) and to make a .substantial. cut in other kinds of handouts
was vital to reviving the Doha round of global trade talks last
summer. It was also agreed that the grievances of Burkina Faso and
its neighbours should be addressed .ambitiously, expeditiously and
specifically..
But as the round inches forward, some free-traders are troubled. Jagdish
Bhagwati, an economist at Columbia University and author of a book
defending globalisation, is one of them. Agricultural subsidies are
certainly undesirable, he wrote recently in the Far Eastern Economic
Review. But the claim that removing them will help the poorest countries
is .dangerous nonsense. and a .pernicious. fallacy.
Arvind Panagariya, a colleague of Mr Bhagwati's at Columbia University,
agrees*. His argument rests on a surprising observation: most poor
countries are net importers of agricultural goods. A study in 1999
found that 33 of the 49 poorest countries import more farm goods than
they export; 45 of them are net importers of food. Subsidies depress
the price of agricultural products on world markets. That hurts rival
exporters, as Burkina Faso can testify. But importers gain.
By the same logic, the repeal of subsidies should benefit exporters but
hurt importers. In a paper published in 2003., Stephen Tokarick, of the
International Monetary Fund, estimated by how much. He reckoned that, if
OECD countries were to scrap their subsidies (but keep their tariffs),
Brazil and Argentina, both strong agricultural exporters, would gain.
But the rest of Latin America would lose $559m a year (in 1997 dollars).
India would benefit a bit, but the rest of South Asia would be $164m
worse off. Sub-Saharan Africa would lose $420m, while North Africa and
the Middle East would face a cost of $2.9 billion.
The impact on different households within a poor country is another
question. In a recent book., William Cline, of the Centre for Global
Development, an American think-tank, points out that poor households
tend to be rural, and rural households tend to sell more food than they
eat. For them, rising farm prices are to be welcomed. It is the urban
poor that should worry.and maybe the rulers of poor and fragile nations,
who have traditionally striven to keep food prices low. Hard-pressed
peasants are less of a threat than disgruntled city folk within a
stone's throw of the presidential palace. An end to OECD farm subsidies,
however, would transfer money from town to countryside.
If such a transfer is to be welcomed, Mr Panagariya asks, why wait
for OECD countries to cut their subsidies? Poor countries could take
matters into their own hands by slapping a countervailing tariff on
the subsidised produce. That would raise the domestic price of food,
benefiting rural households. It would also be a neat way of raising
revenue at rich countries' expense.
Such a tariff would only raise farm prices at home, of course. Mr
Cline thinks most poor countries would benefit from a rise in the
relative price of agricultural goods in the world market. He argues
that many poor countries possess an underlying comparative advantage
in farm goods. Yes, they tend to be net importers of food. But that is
deceptive. Thanks to the large aid flows such countries receive, they
tend to be net importers of everything.
The privilege is mine
Mr Panagariya again demurs. He points out that many poor countries enjoy
privileged access to the sheltered markets of the European Union. Thus
they already enjoy higher prices for their exports than they could
expect to find on the open market.
The sugar producers of Mauritius, for example, sell their produce behind
the EU's steep import barriers at three times the market rate. By
some estimates, the island owes almost 30% of its export earnings to
the preferences the EU bestows upon it. But these privileges are not
without cost. The World Bank reckons that every $1 that a country such
as Mauritius gains from its trade privileges costs the EU and the United
States $6. As an aid programme, it is not terribly efficient.
The paradox of the Doha round is that the members fighting hardest to
retain subsidies, such as the EU, are those with most to gain from
abolition. Poor countries, on the other hand, stand to gain more from
cuts in tariffs. According to Mr Tokarick, the abolition of rich-world
tariffs would yield $12.5 billion for poor countries, with no regional
losers. If they also liberalised their own agricultural trade, they
would reap another $21.4 billion.
America's cotton subsidies deserve to be addressed .ambitiously,
expeditiously and specifically., as the WTO agreed last summer. But no
less ambition and expedition must also be mustered in the fight against
tariffs.
* .Agricultural liberalisation and the developing countries: debunking
* the fallacies.. Available at http://www.columbia.edu/~ap2231/
. .Measuring the impact of distortions in agricultural trade in partial
and general equilibrium.. IMF working paper 03/110
. .Trade Policy and Global Poverty.. Centre for Global Development and
Institute for International Economics, 2004
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