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Farm subsidies: The report card
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Devinder Sharma exposes the real beneficiaries of farm subsidies, and explains how approximately 80 per cent of the entire subsidy for agriculture goes to the agri-business companies.

25th Novemebr 2005, Devinder Sharma ~ STWR

Britain’s Queen Elizabeth II is not a farmer, but she is amongst the highest recipient of agricultural subsidies. In 2003-04, she received nearly US $ 1.31 million in farm payments. Her son and heir apparent to the British throne, Prince Charles, received more than US $ 480,000 as agricultural support for his personal estate, the Duchy of Cornwall, and the Duchy's Home Farm.

The Royal Family in Britain is not the only beneficiary of state farm support. In 2003, Prince Joakim of Denmark received subsidies worth US $ 220,000 for his Schackenborg estate in South Jutland. Prince Albert, the ruler of Monaco, received US $ 300,000 as agriculture subsidies last year.

At a time when the World Trade Organisation (WTO) is grappling with the contentious issue of mammoth agricultural subsidies being provided to farmers and agri-business corporations in the rich and developed countries, it becomes apparent why these countries are unable to do away with agricultural subsidies. Not only royalty, but a long list of who’s who has been the beneficiary of agricultural subsidies and therefore the growing resistance to any significant reduction measures.

The richest man in the United Kingdom, the Duke of Westminster, owns about 55,000 hectares of farm estates, received a subsidy of US$ 480,000 as direct payments in 2003-04, and in addition gets US$ 550,000 a year for the 1,200 dairy cows he keeps. Under the Common Agricultural Policy (CAP) reforms, his subsidy entitlement will remain intact except that the subsidy he receives for the cows will now be shifted the grasslands that he maintains.

In the United States, the recipients of the 2001 federal agricultural support included Ted Turner and David Rockefeller.

If royalty topped the list how could the politicians lag behind. Marita Wiggerthale, a German researcher and activist, has in a paper:’What’s wrong with EU agricultural subsidies?’ revealed that in Denmark alone, four of the 18 ministers (or their spouses) received agricultural subsidy from the European Union. Among the recipients for 2003 were the Minister for Food, Agriculture and Fisheries, Mariann Fischer Boel, who received a total of US$ 480,000; Minister for Education, Ulla Tornes (US$ 655,000); and the Minister for Finance, Thor Petersen (US$ 175,000). In the Netherlands, Minister for Agriculture, Cees Veerman, received in 2004 equal to $180,000 in subsidies.

Among the Danish Parliamentarians, a sizeable number, mostly from the Danish Liberal-Democratic Party, received farm subsidy payments. The list includes: Jens Kirk (US$ 273,000) and Jens Vibjerg (US$ 110,000). More significantly, Niels Busk Simonsen, a veteran Liberal-Democratic member of the European Parliament, received a generous subsidy of US$ 382,000, in addition to his annual salary. There are in total 109 people and institutes/organisations in Denmark, who continue to receive more than US$ 165,000 in annual agricultural payments.

Agricultural subsidies are also being shelled out for research and development. Much of this research funding is of course helping countries like Denmark in exporting education to the developing countries as part of the bilateral trade agreements. The Danish Institute of Agricultural Sciences, for instance, receives an annual subsidy of US$ 160 million. In 2003, the Danish Agricultural Centre for Advisory Services received US$ 4.8 million. Interestingly, its Board members (including Peter Gaeelke, Henrik Hoegh and Chairman of the Board Gert Karkov) collectively received US$ 1.5 million as subsidy the same year.

In Spain, 300 families pocket bulk of the farm support, each getting more than US$ 354,000. Of these, just seven big players manage to grab a subsidy of US$ 7,000 every day.

It certainly is an unequal world, and perhaps the most glaring of all the world’s inequalities is the manner in which the cattle in the rich countries are pampered at the cost of several hundred million farmers in the developing world. When I first compared the life of the western cow with that of the developing country farmer, I didn’t realize that this would hit the sensibilities of at least some of the economists and policy makers. It has now been worked out that the Europe provides a daily subsidy of US$ 2.7 per cow, and Japan provides three times more at US$ 8.0 whereas half of India’s 600 million farming families survive on less than US$ 1.50 a day.

There are only 20,000 cotton growers in America, who collectively get a subsidy of US$ 10.1 million every day.

It is essentially because of these subsidies that in many of the high-income developed countries, part of the richest trading block -- Organisation for Economic Cooperation and Development (OECD) -- the average farm household income is higher than the average household incomes. In the Netherlands, for instance, the average farm family income is almost 275 per cent of average household income, 175 per cent in Denmark, 160 per cent in France, and 110 per cent in the United States and Japan. In India, agriculture continues to be negatively taxed and therefore more than 40 per cent of the farming population appears keen to abandon agriculture in search of menial jobs in the urban centres. Farmers occupy the lowest rung in national income chart, only to be outdone by the landless agricultural workers.

Like in India, where bulk of the farm subsidies (all in the form of cheaper inputs) are cornered by big farmers’, small farmers do not benefit from the huge agricultural support -- equivalent to US$ 1 billion a day -- the industrialised countries provide. In Europe, only 2000 big farmers receive a subsidy amount that exceeds US$ 60,000 a year. These big farmers only constitute 0.4 per cent of the farming population. And yet, when the European Commission proposed to cap the maximum limit of direct payments at a figure that is still six times higher -- US$ 360,000 a year -- in what is called as single farm payments, it was met with such a stiff resistance that the proposal had to be withdrawn.

Nearly 65 per cent of the European farmers receive an annual subsidy of less than US$ 6,000. These are the small farmers who are unable to sustain themselves. These are the farmers who are gradually leaving agriculture. In Europe it has been estimated that one farmer quits agriculture every minute.

The real beneficiaries of the agricultural subsidies in the developed countries are therefore not the small farmers. Approximately 80 per cent of the entire subsidy for agriculture goes to the agri-business companies (or big farmers). The sugar giant, Tate& Lyle, received a subsidy of US$ 404 million in 2003-04. Arla Foods of Denmark received a subsidy of US$ 205 million in 2003, In UK alone, multinational Nestle receives an annual subsidy of US$ 20 million. Danish Crown of Denmark received US$ 19 million, 136 dairy companies in Germany receive an export subsidy of US$ 78 million. The list is endless.

Despite such huge state support going into the hands of the bold and beautiful, and the agribusiness corporations and that too in the name of farmers, the fact remains that the developed countries are making no sincere effort to cut down such a wasteful expenditure that harms farming in the Third World. Still worse, it treats these subsidies (much of it goes as direct payments and into the ’green box’) as non trade-distorting and therefore excluded from any reduction commitments. But since these subsidies do not go to small farmers, the developing countries need to seek complete removal of these subsidies before providing any more market access. Developing countries should ask for:

Agricultural subsidies to be classified under two categories: one which benefits small farmers and the remaining which goes to agri-business companies and the big farmers/landowners.

Since less than 20 per cent of the US$ 1 billion farm subsidy being doled out every day genuinenly benefit small farmers, the remaining 80 per cent subsidies need to be outrightly scrapped before proceeding any further on agriculture negotiations.

Devinder Sharma is an award-winning food and agriculture policy analyst and a regular contributor to STWR. His writings focus on the links between biotechnology, intellectual property rights, food trade and poverty.