Our competitors in international trade continue to subsidize their farmers at truly astonishing levels.
According to the WorldWatch Institute, in 2012, the most recent year with data, agricultural subsidies totaled an estimated $486 billion in the top 21 food-producing countries in the world. These countries include the members of the Organization for Economic Cooperation and Development (OECD), which includes the United States, and seven other countries (Brazil, China, Indonesia, Kazakhstan, Russia, South Africa, and Ukraine). They are responsible for almost 80 percent of global agricultural value. Global agricultural revenue was about $2.3 trillion in 2011.
All is not equal among these countries when it comes to subsidies. For example, Asia spends more than the rest of the world combined. China pays farmers an unparalleled $165 billion. Japan spends $65 billion on subsidies, Indonesia, $28 billion and South Korea, $20 billion.
According to WorldWatch, price supports make up almost 70 percent of China’s subsidy spending, and the government particularly encourages the growth of staple crops such as rice and wheat. China is also considering a target price subsidy program for its cotton producers.
By comparison the European Union’s Common Agricultural Policy spends around $106 billion annually on farms, while the United States spent about $30 billion in 2012, according to WorldWatch.
With the caveat that every arable crop acre in any country is not likely to be subsidized equally, or at all, Japan’s subsidy comes out to $5,400 per acre for 12 million acres under cultivation. With 4 million acres of arable land in South Korea, the subsidy works out to $5,000 per acre.
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Why such generosity?
For most countries, subsidy programs are designed to not only insure a reliable and ample supply of food each year, but to err on the side of oversupply. For them, this is not a concept to be trifled with. In China, subsidies are often used to calm social unrest.
An often appreciated reason for U.S. subsidies is to help U.S. farmers overcome some of the additional costs they incur because of their conservation efforts and environmental stewardship, costs that would put farmers in some countries out of business.
Subsidies also help U.S. farmers level the playing floor against unfair competition. These days, rarely does international trade competition pit farmer against farmer. As Bob Young, chief economist with the American Farm Bureau points out, “The average tariff faced by countries trying to land agricultural products here is around 12 percent. The average tariff faced by our farmers is around 62 percent.”
Some critics are already complaining that our new federalized crop insurance is too generous. But compared to what some countries pony up, it’s a drop in the bucket.