Send farmers off to the markets

The globe badly needs a bit of comity and some political leaders are hoping to find it at Cancún, where the World Trade Organisation holds its summit later this month. Countries cannot agree on the issues of weapons or terror but maybe they can find a way to come together through trade. Just such a vision sustained Pascal Lamy, the European commissioner for trade, and Robert Zoellick, the US trade representative, to labour through a hot July, as they outlined a framework for a compromise on one of the WTO's main goals: cutting farm subsidies.

Their reward? A shower of abuse from some of the same nations that stand to benefit from freer food markets. K.M. Chandrasekhar, India's WTO ambassador, complained. Australia trashed it as unacceptable. On Thursday in Washington Rubens Barbosa, Brazil's ambassador to the US, summed up: "We, developing nations, are again frustrated." Mr Barbosa went on to bash Europe and the US some more, giving his audience a sinking feeling that this was yet another of those north-south issues that the north cannot win.

Or maybe it can if it calls the other side's bluff. After all, the critics are correct in one thing. The developed nations are indeed the world's piggiest protectionists. Their farm lobbies blackmail governments into handing over the equivalent of some $235bn each year in subsidies and breaks. Farms are no longer mere farms. They are monuments to the political power of a tiny group that holds the rest of us hostage. The average European cow is allotted a subsidy of more than $2 a day, more than many citizens of the world have to live on.

Perhaps, therefore, we should not fuss about frameworks and processes that simply invite criticism from the fractious WTO membership but take a truly radical and multinational step, wide-reaching enough to be worthy of the WTO's name and mandate. Maybe it is time, simply, to buy out the farmers. Pension off Europe's dairymen and fund their daughters' studies at Stanford. Send Iowa's corn kings on a field trip to the mall of America for TiVos and sports utility vehicles. Anything to end the cycle of subsidy.

This idea is not as wild as it may seem. Feeling a twinge about its own hypocrisy, the US Senate recently passed "buy-out" legislation for tobacco farmers, so that Washington might stop subsidising an industry it also vilifies.Economists have been talking about the concept for years. Data from the Organisation for Economic Co-operation and Development show that full-time farmers in its member countries get the equivalent of $11,000 a year in cash or price support. New Zealand subsidises to the tune of $1,000 per farmer. The European Union by contrast hands to each of its farmers the equivalent of $17,000 a year. In the US, the rate is $16,000. Few can beat Norway, which pays about $45,000.

Most of this "pay" therefore could fund the buy-outs. Farmers would be cut off from future subsidy; protectionism would end. But they would also receive a multiple of their old grants, say 15 years' worth, in a one-off payment. Annuities, investment funds, farm funds - all could be created for farmers. In the 1980s, Prof Stefan Tangermann, the OECD's director of agriculture, proposed Tangermann bonds: farmer bonds to be securitised and traded in capital markets.

The farming lobbies will hate the idea but many farmers may have reason to accept this life-changing switch. Because the advantage of a permanent end to subsidy is so large, governments may be generous with their buy-outs. European and US farmers could become mini Richard Grassos instead of rural welfare queens. Recently the EU has even laid the groundwork for Tangermann nirvana by decoupling a share of cash support from production rates. Is it impossible to take the crucial step of converting that cash from farmer support to formal farmer buy-out?

At this point a reader, especially one who has just returned from holiday in a secluded corner of Vermont's north-east kingdom or la France profonde, will object. He will embark on a discourse on the importance of our rural lifeline, the unique taste of a certain melon and a certain cheese rind. A Japanese may underline the importance of rice cultivation to national security. Yes, of course, many farms would give up the ghost without infusions of cash. But it is also possible to create new small subsidies to preserve rural culture: call them the farm biodiversity, farm tourism and farm national security funds. Why trade old subsidy for new? The answer is simple. The new subsidies are honest - and thus easier to monitor.

The economic advantages of farmer buy-outs are enormous. The greatest is the opportunity for the developing world. As the presidents of Mali and Burkina Faso noted in The New York Times, in one recent year aid to America's 25,000 cotton farmers was worth more than the entire gross domestic product of Burkina Faso, where 2m work in the cotton industry.

Just as important would be the political advantages. The centuries-old grip that farmers have held over many governments might relax. The EU would be a creature liberated. And a WTO that helps to bring about the demise of the old farm system is a WTO that will preside over faster global growth - which is what the thousands travelling to Cancún are aiming for, after all.

© Copyright 2003 Financial Times

Available for order:

To book Amity Shlaes for a speaking engagement, contact Jamie Brickhouse at the Red Brick Agency, 646.281.9041.
Recent Articles
Free Markets Can Appeal to the Working Class
National Review
December 3, 2020
Biden's Dangerous Central-Planning Ambitions
National Review
November 24, 2020
Episode 41: Coolidge Not Silent Any More
National Review
October 28, 2020