The Final Call

Emulating the U.S. opposed by the U.S.

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ROME (IPS)—The U.S. once led the post-war global effort against hunger and food insecurity, but corporate influence on government trade negotiators now seek to prevent other countries from using some of the very measures it pioneered.

Seven decades ago, the U.S. led international initiatives to eradicate hunger. This was the intention of the Roosevelts when they initiated the creation of the Food and Agriculture Organization of the United Nations as World War II drew to a close. Three decades later, the same spirit ensured bipartisan support for the 1974 World Food Summit.

India’s food security and stockholding programs use the same policies that the United States used in its early farm policy from the Great Depression, utilizing price supports, food reserves, administered markets and subsidies.

Historically, the U.S. farm and other related programs have done much to raise productivity, as intended by the Indian and many other developing country efforts. The U.S. used these measures because they work, but now seeks to prevent other countries from using them.

Food security

The U.S. spends about $75 billion per year for its Supplemental Nutrition Assistance Program (SNAP), the main domestic food aid program. SNAP entitles about 47 million beneficiaries to buy, on average, 240 kg of grain valued at $1,608 per year.

Before expanding its food security program, India was reaching 475 million much hungrier people with food aid of just 58 kg of grain per person, valued at roughly $27 per year. Compared to the U.S. program, India’s food security program has 10 times as many beneficiaries, and provides less than a quarter of the amount of grain per capita, valued at a sixth of the cost per person.

India’s food distribution system was introduced decades ago. In 2009-10, the program was responsible for taking 38 million people out of poverty. India’s procurement and stockholding program is for domestic consumption, and does not subsidize exports. But just to be on the safe side, restrictions on subsidized Indian food exports can be imposed.

Trade liberalization

The main difference has been compliance with the two decade old WTO regulations, with its Agreement on Agriculture. WTO-led trade liberalization has not only undermined industrialization, but also food production in many countries. Hence, most developing countries have seen at least some of their existing productive capacities and capabilities eroded, partly accounting for the slower growth since the 1980s.

The subsidy element in India’s administered prices is calculated by comparing them to an international “reference price” for 1986-88, not to market prices in India. The 1986-88 reference prices were especially low because the U.S. and the EU were then “dumping” huge food surpluses on the international market, pushing down prices.

Despite the recent decline of cereal prices internationally, food price inflation since 1986-88 has been very considerable, so any price support today looks very high, involving huge subsidies. India has asked that the reference prices be updated for inflation, so its administered prices can be reasonably compared to current market prices.

The allowed levels of trade-distorting support for the U.S. is about $19 billion. The level was set in 1994, based on prevailing high levels of trade-distorting support in the West and Japan, and has been reduced by only a fifth since then.

In contrast, like 61 of the 71 developing country WTO members in 1994, India’s allowance was zero. Most developing countries then were under considerable pressure to cut government spending after facing fiscal and debt crises from the early 1980s.

The U.S. has also been underreporting its trade-distorting subsidies for years. For example, a WTO dispute panel has ruled that insurance subsidies and direct payments should count as trade-distorting subsidies. If corrected, U.S. notifications for 2010 should have risen from $4 billion to $15 billion.

The WTO’s “Green Box” includes permissible, supposedly non-trade-distorting subsidies. About $120 billion of the U.S.’s $130 billion in food programs and farm supports qualify, much more than for other countries with larger populations.

Most U.S. subsidies go to crops like maize, soybeans, wheat and cotton that are heavily exported. As maize and soybeans are used for livestock feed, maize is the main input for U.S. bio-ethanol and the U.S. exports both meat and ethanol, such input subsidies should be declared as trade-distorting, but are still treated as non-trade-distorting subsidies.

Over the last two decades, World Trade Organization restrictions and pressures from international finance institutions have forced many developing countries to cut their food subsidies, with dire consequences for its mainly poor and hungry beneficiaries.