Farm bill robs poor and gives to rich

August 27, 2007

Center for American Progress/August 16, 2007

CARE, one of the largest humanitarian organizations fighting global poverty, announced yesterday that it would turn down $45 million in annual financing from the United States government because food grown in the United States under subsidies from the Farm Bill actually depresses the agricultural economies of the countries that receive food aid.

The practice literally robs the poor and gives to the rich.

As The New York Times explains, U.S. food donations compete with local farmers’ products, essentially perpetuating the cycle of poverty: “Under the system, the United States government buys the goods from American agribusinesses, ships them overseas, mostly on American-flagged carriers [which is stipulated by U.S. law], and then donates them to the aid groups as an indirect form of financing. The groups sell the products on the market in poor countries and use the money to finance their antipoverty programs. It amounts to about $180 million a year.”

Crops are cheap for the federal government to buy because the Farm Bill provides subsidies to U.S. farms to over-produce commodity crops like corn and soy—a violation of international trade agreements. As the Center for American Progress’ Jake Caldwell has explained, wealthy country subsidies deprive developing countries of a market for their agricultural products, leaving many poor farmers unable to compete in the global market.

The Center for American Progress has put forward a plan that not only levels the playing field by allowing foreign growers to compete, but also transforms American agriculture by allowing the U.S. to grow its own energy. The cornerstones of the plan include promoting sustainable biofuel production; growing clean energy from farm-based renewable energy and biofuels; capping unnecessarily high payments to U.S. producers and investing the savings research and development; building a strong safety net for American farmers; and opening new markets with a farm policy that strengthens U.S. agriculture, encourages exports to new markets and new customers, and ensures that trade liberalization, development, and poverty reduction move forward simultaneously.

Overproduction drives down prices on the global market, while subsidies support the farms either through direct payments, loans, or price supports. Yet profit margins for individual farmers remain low compared to those of agribusiness giants that sell chemical fertilizers and genetically enhanced seeds to those farmers. Foreign farmers cannot compete with the artificial price floor created by the Farm Bill and therefore cannot compete by growing grain locally while cheap products cascade out of ships flying the American flag. Farmers in developing nations suffer while U.S. agribusiness booms.

Defenders of the system point out that the food aid supports crucial anti-poverty work. But large NGOs including the Rockefeller Foundation and the Bill and Melinda Gates Foundation agree with the Government Accountability Office that the system is “inherently inefficient.”

CAP’s plan for reforming the Farm Bill would diversify and re-energize U.S. agriculture by encouraging domestic production of dedicated energy crops and eliminating over production of traditional commodity crops. This strategy promotes sustainable energy, combats catastrophic climate change, and promotes equitable trade that can grow the economies of developing nations.

American farmers growing energy crops can increase their profits while foreign growers can grow food to sell at competitive prices. Ultimately, U.S. farmers growing commodity crops like corn and soy would benefit as well because competition would drive up prices and eliminate the need for subsidies through the Farm Bill.

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