Rice farmers and WTO talks

15 October 2001

In a couple of weeks, the WTO holds a ‘ministerial conference’ to restart negotiations on reforms in world trade. The Thai government has welcomed the proposed agenda because it includes talks on agriculture. But it won’t be easy.

Over the last three years, the world price of rice has plunged by almost half. It plunged partly because of the Asian crisis, partly because of unusually good harvests in several countries. In the US and Thailand, the two biggest rice producers in the world, the impact was very different. Thai farmers became more indebted, joined street demonstrations, and threatened to invade Bangkok. They achieved a little price support under a creaky scheme which mostly helps rice traders. There is no doubt most farmers saw their incomes slide, and that the result will be an increase in the numbers below the poverty line.

Meanwhile the US rice farmer just waited for a check to arrive from government. As the price dropped, he automatically got a bigger subsidy. Indeed, by Chang Noi’s rough estimate, the amount of subsidy per acre is now about the same as the Thai rice farmer’s gross income per acre.

The US subsidies not only give their rice farmers a cushion not available to their Thai counterparts. They also directly hurt the Thai farmers. Thailand and the US are the two biggest competitors in the world’s rice market. Thailand exports around 6 million tonnes a year and the US around 2.5 to 3 million tonnes. About half of US exports go to the American continent. But the other half goes to markets in Asia and Africa where it directly competes with Thai rice.

The US subsidies have ballooned in recent years. In 1996, total US farm subsidies were US$ 4.6 billion. In five years they grew seven times to US$ 32.3 billion. With this help, US rice exports trended upwards through the 1990s. The US Congress is currently debating a bill which will create new subsidies worth 160 billion over ten years. A US official said ‘there is no question [these subsidies] fail to meet WTO criteria.’. The US farm lobby is trying to rush this scheme through before the WTO talks. Remember the US enthusiasm for ‘free trade’?

How did this huge increase in subsidies happen? The short answer is: Marion Berry. He is a Democrat Congressman from Arkansas. Half of all the US rice is grown in Arkansas. The Berry family has over 5,000 rai. Marion Berry has campaigned hard for higher subsidies. He wrote to his Congress colleagues: ‘The viability of the American farmer and rancher and all of rural America is seriously threatened.’ He sits on the parliamentary committees which framed the increases in subsidies. In five years, Marion Berry and his family received US$ 750,499 of these subsidies, roughly 35 million baht. But this is not enough. Berry describes the subsidy programme as ‘woefully underfunded.’

Until 1996, Berry and other parliamentarians did not have to disclose they received these payments. Remember the US attitude about cronyism, vested interests, and transparency?

Berry and other use several arguments to justify these subsidies. Berry explained, ‘If you don’t have the ability to feed and clothe your people, then you’re at risk.’ Even after September 11, it’s hard to imagine the US people isolated from world trade and saved from hunger by Arkansas rice, and from nakedness by Iowa cotton.

Another Democrat Congressman who received US$ 39,298 for his cattle farm asked, ‘do we want to move toward total corporate farming with the resulting collapse of rural America?’ But others believe these subsidies favour the big corporate farms which can afford storage. They collect the subsidy when the price falls, wait to sell when the price rises, and use the profit to buy out their smaller neighbours. An environmentalist asked, ‘Why are we continuing to subsidise a system that is building larger and larger farms that are more dependent on subsidies?’ Remember the US enthusiasm for the unfettered operation of the market?

Others have simply argued that subsidies are needed to save farmers from bankruptcy. But surely that indicates these businesses are not competitive in global terms. Why not apply the same sort of logic that the US policy-makers demand in world markets like finance, tobacco, and telecommunications. Let them go bankrupt. Open the borders and let Asian peasants flood into Arkansas. Remember the American enthusiasm for globalization and the ‘creative destruction’ of capitalism?

Much of the anger over globalization in general and over the WTO in particular arose because the results of the Uruguay round were patently unfair. Advanced countries secured freer trade in ‘new industries’ where they have the technological advantage, while retaining barriers in ‘old industries’ where poorer countries have a cost advantage.

The US, Europe and Japan all protect or subsidise their farmers, but each in a different way. They all criticise one another by saying, ‘your system is more trade-distorting than mine’. They will all go into these new WTO negotiations determined to retain their own system, and undermine the others. The US, for example, insists that developing countries' subsidies on inputs like fertilizers should be targeted only at poor and vulnerable farmers. One wonders why the same principle is not applied to the subsidies offered to the wealthy, landed, politically powerful Berry family.

The outcome of the WTO talks have enormous importance for several million Thai farmers. In the past, such negotiations were almost invisible. Those affected did not realise their importance. The officials involved liked to keep things to themselves. But this time the debate needs to be more open. The negotiators need more public support. Because they are up against the power, wealth, cronyism and hypocrisy symbolised by Marion Berry.