Written by Alice Calder
- Subsidies are forming a key part of the UK-EU Brexit negotiations.
- Japan’s agricultural subsidies as a share of gross farm revenues are two times above the OECD average, at 41.3 percent.
- The United States has borne the brunt of criticism for its agricultural subsidies
$700 billion every year – that’s how much governments worldwide provide in some form of subsidy to their agricultural sectors. Researchers behind the OECD’s “Agricultural Policy Monitoring and Evaluation 2020” report found that the 54 countries studied (all OECD and EU countries, plus 12 key emerging economies) provide over $700 billion a year in total support to the agricultural sector. The vast majority of this, $536 billion, is in the form of payments to producers; the rest takes the form of consumer support and enabling services such as infrastructure investment or research and development.
Subsidies are in part, a recognition of the unique challenges that the agriculture sector faces – and the important role it plays in our society by ensuring food security. Farming is highly weather dependent and extremely vulnerable to uncontrollable events such as natural disaster. Agriculture also requires significant investment from producers in expensive equipment, inputs and labor before any profit can be made, and faces an obvious time delay between shifts in demand and supply.
However, agricultural subsidies can also have trade-distorting effects. For this reason, they are the basis of many international disputes. In the recently negotiated U.S.-Mexico-Canada Agreement agricultural subsidies played a key role: Canadian dairy subsidies were perhaps the biggest agriculture-related sticking point for the U.S., and Mexican tomato subsidies continue to cause tensions. Across the globe Brazil, Australia and Guatemala have disputed India’s subsidies to its sugar industry.
The complaint from least developed countries is that global subsidies disproportionately disadvantage their small producers, whose own governments cannot provide the same support, leaving them unable to compete with the heavily-subsidized farms of richer countries. Communities say that foreign products, such as European milk, are flooding their markets, crippling local herders and farmers and leaving consumers vulnerable to price changes.
The United States has borne the brunt of criticism for its agricultural subsidies. American farmers receive billions in support. However, when measured as a percentage of total farm revenues, South Korea, Japan, China, Indonesia and the EU all provide producer support above the global average of 12 percent, whereas the United States, along with Russia, Canada, and Mexico have historically been at or below this average.
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