11, 2003: Get ready for more rhetoric about the power
of markets and competition to fix the farm crisis. Get ready
for more talk about trade liberalization and about capturing
The World Trade Organization's fifth ministerial conference
for multilateral trade negotiations opens in Cancun, Mexico
this week. The official goals for agriculture are about fixing
- Substantial improvements in market access, meaning lower
tariffs and higher access quotas;
- Reductions with a view to phasing out all forms of export
- Substantial cutbacks in trade-distorting domestic safety
What if tariffs and quotas and export subsidies and domestic
farm safety nets are not the cause of the crisis - not the
cause of the over-supply in world grain production? The voices
supporting farm trade liberalization seldom include in their
elaborate rationales for trade deregulation any explanation
of the causes of the crisis.
The voices focus on solutions. Some argue that a free market
will draw resources to the most rewarding activities, creating
big benefits for an economy. Others emphasize that more competition
will free farmers to do what they do best -- produce. Those
who cannot out-produce the rest of the world can exit the
industry. Still others encourage a future where farming is
consolidated into a few firms that control supply chains from
farmer to consumer, with enough market clout to control overproduction
and the ability to do without trade protections.
What are the causes of the crisis? Farming is one of the
most entrepreneurial sectors of our economy. Develop an advanced
production technology; refine a management system or increase
output from existing resources and your achievement will spread
like wildfire throughout our farm economy. Consider how, in
half a decade, genetically modified plants have become commonplace
in North American farm fields.
The causes of the crisis are simply supply and demand. Agriculture's
enthusiasm for production gains has outstripped demand. Wheat
prices are very likely to strengthen in the months ahead --
not because of any negotiations at Cancun. Europe's heat wave
has devastated wheat fields. The agricultural goals of the
Doha round are a recipe for full-throttle production around
the world -- a formula for ever-lower farm gate prices.
The Agricultural Policy Analysis Center, University of Tennessee,
has documented the disastrous results of the U.S administration
abandoning production and price stabilization tools in the
1996 Freedom to Farm legislation. Opting for all-out production
and trade liberalization has resulted in record low prices
- a 40 percent plunge in world prices for corn, wheat, soybeans
and cotton since 1996.
The crisis is rooted in over-supply. How much longer will
we swallow the rhetoric about fixing markets?
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