Introduction
Agricultural efforts worldwide, also known as “agribusiness”, support the majority of the world’s food supply. Farmers work to provide the basic staples such as fruit, vegetables, protein (meat), and milk. Other farmers work to provide raw materials for the textile industry (such as leather or wool). Agribusinesses vary greatly in composition: a great deal of variety occurs in size (ranging from small family-owned groups to large transnational conglomerates), to type (organic farms counterbalance farms that use genetically modified seed and fertilizer), to farms that choose not to farm their land at all. The impact of tariffs and subsidies often drives the structure and business plan of the farm.
In the United States, one of the world’s foremost agricultural industries is dairy farming. However, as is the case with most commodities, the pricing structure for milk is cyclical. This economic pendulum swing has caused the consolidation and elimination of small- and medium-sized farms, in favor of large transnational corporations. To combat the economic erosion of the family farm environment, the government introduced the Milk Income Loss Contract program (MILC) as part of the 2002 Farm Security and Rural Investment Act. (D'antoni & Mishra, 2012, p. 476). These cost supports tend to protect the production levels of milk products, and reduce the reliance on imported milk products in the United States.
Citizens in the Poorest Nations Which do you think would help the citizens of the world’s poorest nations more, increasing foreign aid or removing all the agricultural tariffs and subsidies? The latter would help them more. Here’s why, in researching global poverty one can come across startling statistics, e.g. almost half the people in the world live on less than $2.50 a day (Shah, 2011), 1 out of every 2 children live in poverty (Shah, 2010); speaking of children, 1 child will die every 4 seconds due to poverty, easily preventable diseases and illnesses, and other related
causes (Shah, 2010), the GDP of the 41 Heavily Indebted Poor Countries is less than the wealth of the world’s 7 richest combined (Shah, 2011).
These facts are dumbfounding. And they might cause one to reason that global poverty is an issue of insufficient supply. That if there were more food and resources available and disseminated around the world, these impoverished people would (1) stand a better chance at surviving the hardships of poverty, and (2) have an increased opportunity to make a better life for themselves. While this is not an illogical way of reasoning, as there is an occasional shortage of food and resources (particularly medicines), one of the main causes of global poverty is an oversupply of goods, resources, and services.
And this may seem counter-intuitive given the aforementioned facts (how can people remain poor when there’s plenty to go around?). Nevertheless, this oversupply phenomenon is known as global overcapacity. To clarify a bit more, it’s the notion that due to technological advances in industry and in science, goods and services are cheaper and easier to produce resulting in an abundance that exceeds demand (Judis, 2010). There’s an old
Chinese proverb that states, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” This is a maxim that rings true for all fledgling countries wracked by poverty. It’s only through education and the adoption of new technology that a country can become self-sufficient and independent. Well, the definition of self-sufficiency
has changed in the global context, as no country is truly self-sufficient with regards to goods (particularly food) and services.
Due to globalization and industrialization sovereign countries are now, more than ever, forced to
rely on neighbors in the international community to provide goods, services, and resources not produced and/or endemic to their own land. So in a sense, as a result of this interconnectedness, the paradigm has shifted from the goal of “self-sufficiency” to a more leverage-based position within the international community (Freidman, 2005). This means that fledgling countries wracked by poverty are not seeking “self-sufficiency” so much as they are seeking leverage at/in the international marketplace. This is an important point to make because in many cases in precludes the poorer countries from becoming financially stable. It’s one thing if a country has the resources and the wherewithal to pioneer a path to socio-economic independence and fails to do so (for reasons such as war, oligarchy, despotism), it’s quite another if a country has the passion and the desire to do so, but lacks the international support and the subsequent
leverage needed to become a player at the negotiating table. While many countries experience both scenarios to varying extents (they’re not mutually exclusive), it is the case that many countries have the passion and desire to change, but lack the true, string-free support, needed to propel them into the modern era.
To circle back to that Chinese proverb, why do countries in power continue to deliver fish, instead of curriculum on fishing techniques? Here is an excerpt, from an article regarding the ill effects of food dumping, that underscores this issue, “Food aid (when not for emergency relief) can actually be very destructive on the economy of the recipient nation and contribute to
more hunger and poverty in the long term. Free, subsidized, or cheap food, below market prices undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, further slanting the market share of the larger producers such as those from the US and Europe”
(Shah, 2010).
There’s two additional points to make regarding this scenario. The first is obvious and an iteration of what’s just been said, the reason countries in power give away food, supplies, and other resources is because it subverts the efforts of foreign competition. The other reason countries in power donate food; food in particular, is because it helps diminish the available supply in the U.S., thus reducing global overcapacity.
One has, no doubt, heard of corn farmers burning their cornfields to serve a similar end, reduce supply to keep prices high.
Lavishing Extensive Support
This of course raises and also partly answers the question, “Why do governments in developed nations continue to lavish extensive support on agricultural producers, even though those producers constitute a very small segment of the population? The answer is obvious, given the aforementioned facts, to have the ability to control and manipulate supply. If a country like the U.S. continues to meddle in farming, almost nationalizing it in a way, it can control where many of those crops end up. If, for example, the U.S. wants to destabilize a country or subvert the economy of a corrupt regime, it has at the ready an abundant supply of resources to deliver and expend. And by undermining the local merchants and the country’s organic economy, it creates a dependency for that country on U.S. aid, which increases the U.S.’s leverage over that country’s government, while also (as previously mentioned) increasing the market share of U.S. producers. In short, both questions can be addressed by investigating how powerful countries attempt to deal with global overcapacity.
There are many efforts and considerations in worldwide and transnational agribusiness, but the largest impacts to consider are the impact of tariffs and subsidies. When considering the talks that have taken place regarding subsidies as a barrier to free trade in agriculture, one must take into consideration that there are two types of subsidies. The text does not clarify which type of subsidy is being provided when it states that the United States provides agricultural subsidies totaling some $43 billion per year (Hill, 2011).
The WTO recognizes that developed and developing nations should cut the value of their export subsidies by 36% (WTO). These restrictions may affect, but not stop all domestic subsidies.
Some subsidies encourage overproduction causing low-priced dumping on the markets. These are subsidies that are required to be cut by developed and developing nations. The least developed nations do not have to cut their subsidies. However, there are subsidies that may continue and other that are encouraged to continue.
Subsidies for government services such as research, disease control and food security are considered “green box” measures and can be used freely (WTO). The World Trade Organization also has “blue box” measures; these are direct payments to farmers when they are required to
limit production. As of 2007, negotiations were stalled due to several nations being unable to agree upon terms. These nations were the United States, the European Union, India and Brazil (Palmer, 2007). As of 2011 there has still been no official agreement and several leaders have voiced that 10 years of negotiations has been far too long.
As a group, our initial response was that the developed nations were greedy. In addition, farmers remain very politically active and most nations want to remain self-sustaining when it comes to their food supply. However, after further research into the WTO subsidy negotiations, it would appear that allowing one type of subsidy while not allowing another would be difficult to control and a burden to prove. One solution suggested was that nations would only produce items where they could be produced the cheapest. Another solution suggested was that the WTO could determine what nations would which crops. Crop rotation would have to be taken into consideration as well.
Conclusion
Greed tends to be a driving factor in the agribusiness industry. The primary concern is profitability for the farmers, not the overall expansion of the trade or research. Reduced tariffs and subsidies often allow for lowered production to maximize income, versus expanded production to provide more crops to market. The cultural impact of agribusiness can’t be ignored: a great source of pride can be gained by one’s production of food and textiles from their own land. However, the financial windfalls that a well-executed strategy can afford mid-size or large farming operations are very powerful.
Reference
D'antoni, J., & Mishra, A. (2012, January). Determinants
of dairy farmers' participation in the Milk Income Loss Contract program. Journal
of Dairy Science, 95(1), 476-483.
Friedman, Thomas. The World Is Flat: A Brief History of the Twenty-first Century. New
York: Farrar, Straus
and Giroux, 2005. Print.
Hill.
C. (2011). International business: Competing in the global market place. New
York:
Mcgraw-Hill
Irwin.
Judis, J. B. (10 May. 2010). The Case for Economic Doom and Gloom. The New
Republic. Retrieved from
http://www.tnr.com/article/politics/the-case-economic-
doom-and-gloom
Palmer,
D. (2007). Talks between four big powers collapse. Retrieved February 5, 2012 from:
http://www.reuters.com/article/2007/06/21/us-trade-wto-idUSL2179513320070621
Shah, A.
(20 Sept. 2010). Today, Over
22,000 Children Died Around the World. Global
Issues.org. Retrieved from
http://www.globalissues.org/article/715/today-over-
22000-children-died-around-the-world
Shah, A.
(28 Nov. 2010). Structural
Adjustment-a Major Cause of Poverty. Global
Issues.org. Retrieved
from
http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty
Shah, A.
(5 June 2011). Causes of
Poverty. Global Issues.org. Retrieved
from
http://www.globalissues.org/issue/2/causes-of-poverty
Shah, A.
(5 June 2011). Food and
Agricultural Issues. Global Issues.org. Retrieved
from
http://www.globalissues.org/issue/749/food-and-agriculture-issues
WTO. (n.d.). Agriculture; fairer markets for
farmers. Retreived February 5, 2012 from:
http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm
Agricultural efforts worldwide, also known as “agribusiness”, support the majority of the world’s food supply. Farmers work to provide the basic staples such as fruit, vegetables, protein (meat), and milk. Other farmers work to provide raw materials for the textile industry (such as leather or wool). Agribusinesses vary greatly in composition: a great deal of variety occurs in size (ranging from small family-owned groups to large transnational conglomerates), to type (organic farms counterbalance farms that use genetically modified seed and fertilizer), to farms that choose not to farm their land at all. The impact of tariffs and subsidies often drives the structure and business plan of the farm.
In the United States, one of the world’s foremost agricultural industries is dairy farming. However, as is the case with most commodities, the pricing structure for milk is cyclical. This economic pendulum swing has caused the consolidation and elimination of small- and medium-sized farms, in favor of large transnational corporations. To combat the economic erosion of the family farm environment, the government introduced the Milk Income Loss Contract program (MILC) as part of the 2002 Farm Security and Rural Investment Act. (D'antoni & Mishra, 2012, p. 476). These cost supports tend to protect the production levels of milk products, and reduce the reliance on imported milk products in the United States.
Citizens in the Poorest Nations Which do you think would help the citizens of the world’s poorest nations more, increasing foreign aid or removing all the agricultural tariffs and subsidies? The latter would help them more. Here’s why, in researching global poverty one can come across startling statistics, e.g. almost half the people in the world live on less than $2.50 a day (Shah, 2011), 1 out of every 2 children live in poverty (Shah, 2010); speaking of children, 1 child will die every 4 seconds due to poverty, easily preventable diseases and illnesses, and other related
causes (Shah, 2010), the GDP of the 41 Heavily Indebted Poor Countries is less than the wealth of the world’s 7 richest combined (Shah, 2011).
These facts are dumbfounding. And they might cause one to reason that global poverty is an issue of insufficient supply. That if there were more food and resources available and disseminated around the world, these impoverished people would (1) stand a better chance at surviving the hardships of poverty, and (2) have an increased opportunity to make a better life for themselves. While this is not an illogical way of reasoning, as there is an occasional shortage of food and resources (particularly medicines), one of the main causes of global poverty is an oversupply of goods, resources, and services.
And this may seem counter-intuitive given the aforementioned facts (how can people remain poor when there’s plenty to go around?). Nevertheless, this oversupply phenomenon is known as global overcapacity. To clarify a bit more, it’s the notion that due to technological advances in industry and in science, goods and services are cheaper and easier to produce resulting in an abundance that exceeds demand (Judis, 2010). There’s an old
Chinese proverb that states, “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” This is a maxim that rings true for all fledgling countries wracked by poverty. It’s only through education and the adoption of new technology that a country can become self-sufficient and independent. Well, the definition of self-sufficiency
has changed in the global context, as no country is truly self-sufficient with regards to goods (particularly food) and services.
Due to globalization and industrialization sovereign countries are now, more than ever, forced to
rely on neighbors in the international community to provide goods, services, and resources not produced and/or endemic to their own land. So in a sense, as a result of this interconnectedness, the paradigm has shifted from the goal of “self-sufficiency” to a more leverage-based position within the international community (Freidman, 2005). This means that fledgling countries wracked by poverty are not seeking “self-sufficiency” so much as they are seeking leverage at/in the international marketplace. This is an important point to make because in many cases in precludes the poorer countries from becoming financially stable. It’s one thing if a country has the resources and the wherewithal to pioneer a path to socio-economic independence and fails to do so (for reasons such as war, oligarchy, despotism), it’s quite another if a country has the passion and the desire to do so, but lacks the international support and the subsequent
leverage needed to become a player at the negotiating table. While many countries experience both scenarios to varying extents (they’re not mutually exclusive), it is the case that many countries have the passion and desire to change, but lack the true, string-free support, needed to propel them into the modern era.
To circle back to that Chinese proverb, why do countries in power continue to deliver fish, instead of curriculum on fishing techniques? Here is an excerpt, from an article regarding the ill effects of food dumping, that underscores this issue, “Food aid (when not for emergency relief) can actually be very destructive on the economy of the recipient nation and contribute to
more hunger and poverty in the long term. Free, subsidized, or cheap food, below market prices undercuts local farmers, who cannot compete and are driven out of jobs and into poverty, further slanting the market share of the larger producers such as those from the US and Europe”
(Shah, 2010).
There’s two additional points to make regarding this scenario. The first is obvious and an iteration of what’s just been said, the reason countries in power give away food, supplies, and other resources is because it subverts the efforts of foreign competition. The other reason countries in power donate food; food in particular, is because it helps diminish the available supply in the U.S., thus reducing global overcapacity.
One has, no doubt, heard of corn farmers burning their cornfields to serve a similar end, reduce supply to keep prices high.
Lavishing Extensive Support
This of course raises and also partly answers the question, “Why do governments in developed nations continue to lavish extensive support on agricultural producers, even though those producers constitute a very small segment of the population? The answer is obvious, given the aforementioned facts, to have the ability to control and manipulate supply. If a country like the U.S. continues to meddle in farming, almost nationalizing it in a way, it can control where many of those crops end up. If, for example, the U.S. wants to destabilize a country or subvert the economy of a corrupt regime, it has at the ready an abundant supply of resources to deliver and expend. And by undermining the local merchants and the country’s organic economy, it creates a dependency for that country on U.S. aid, which increases the U.S.’s leverage over that country’s government, while also (as previously mentioned) increasing the market share of U.S. producers. In short, both questions can be addressed by investigating how powerful countries attempt to deal with global overcapacity.
There are many efforts and considerations in worldwide and transnational agribusiness, but the largest impacts to consider are the impact of tariffs and subsidies. When considering the talks that have taken place regarding subsidies as a barrier to free trade in agriculture, one must take into consideration that there are two types of subsidies. The text does not clarify which type of subsidy is being provided when it states that the United States provides agricultural subsidies totaling some $43 billion per year (Hill, 2011).
The WTO recognizes that developed and developing nations should cut the value of their export subsidies by 36% (WTO). These restrictions may affect, but not stop all domestic subsidies.
Some subsidies encourage overproduction causing low-priced dumping on the markets. These are subsidies that are required to be cut by developed and developing nations. The least developed nations do not have to cut their subsidies. However, there are subsidies that may continue and other that are encouraged to continue.
Subsidies for government services such as research, disease control and food security are considered “green box” measures and can be used freely (WTO). The World Trade Organization also has “blue box” measures; these are direct payments to farmers when they are required to
limit production. As of 2007, negotiations were stalled due to several nations being unable to agree upon terms. These nations were the United States, the European Union, India and Brazil (Palmer, 2007). As of 2011 there has still been no official agreement and several leaders have voiced that 10 years of negotiations has been far too long.
As a group, our initial response was that the developed nations were greedy. In addition, farmers remain very politically active and most nations want to remain self-sustaining when it comes to their food supply. However, after further research into the WTO subsidy negotiations, it would appear that allowing one type of subsidy while not allowing another would be difficult to control and a burden to prove. One solution suggested was that nations would only produce items where they could be produced the cheapest. Another solution suggested was that the WTO could determine what nations would which crops. Crop rotation would have to be taken into consideration as well.
Conclusion
Greed tends to be a driving factor in the agribusiness industry. The primary concern is profitability for the farmers, not the overall expansion of the trade or research. Reduced tariffs and subsidies often allow for lowered production to maximize income, versus expanded production to provide more crops to market. The cultural impact of agribusiness can’t be ignored: a great source of pride can be gained by one’s production of food and textiles from their own land. However, the financial windfalls that a well-executed strategy can afford mid-size or large farming operations are very powerful.
Reference
D'antoni, J., & Mishra, A. (2012, January). Determinants
of dairy farmers' participation in the Milk Income Loss Contract program. Journal
of Dairy Science, 95(1), 476-483.
Friedman, Thomas. The World Is Flat: A Brief History of the Twenty-first Century. New
York: Farrar, Straus
and Giroux, 2005. Print.
Hill.
C. (2011). International business: Competing in the global market place. New
York:
Mcgraw-Hill
Irwin.
Judis, J. B. (10 May. 2010). The Case for Economic Doom and Gloom. The New
Republic. Retrieved from
http://www.tnr.com/article/politics/the-case-economic-
doom-and-gloom
Palmer,
D. (2007). Talks between four big powers collapse. Retrieved February 5, 2012 from:
http://www.reuters.com/article/2007/06/21/us-trade-wto-idUSL2179513320070621
Shah, A.
(20 Sept. 2010). Today, Over
22,000 Children Died Around the World. Global
Issues.org. Retrieved from
http://www.globalissues.org/article/715/today-over-
22000-children-died-around-the-world
Shah, A.
(28 Nov. 2010). Structural
Adjustment-a Major Cause of Poverty. Global
Issues.org. Retrieved
from
http://www.globalissues.org/article/3/structural-adjustment-a-major-cause-of-poverty
Shah, A.
(5 June 2011). Causes of
Poverty. Global Issues.org. Retrieved
from
http://www.globalissues.org/issue/2/causes-of-poverty
Shah, A.
(5 June 2011). Food and
Agricultural Issues. Global Issues.org. Retrieved
from
http://www.globalissues.org/issue/749/food-and-agriculture-issues
WTO. (n.d.). Agriculture; fairer markets for
farmers. Retreived February 5, 2012 from:
http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm
2 comments:
Hi Catherine. Thank you for your comment on my blog. I thought you might like to read the story about my 24-weeker, Chris: http://marie-everydaymiracle.blogspot.com/2007/08/happy-birthday-beautiful-boy.html. I wrote it when he was 11, and now he is 15, almost 16!! He had a rough first year or two, but now he's doing great. He's a freshman in high school.
I'd love to hear more about your little girl!
Hi Marie,
You have really inspired me with your son's story. I am so glad to hear that he is doing great now. My daughter is a little walking miracle too. She is 18 months/14 months corrected. So far she has not given us any surprises. The neurologist told us she might get a seizure when she is older because bleed she had. Right now she is walking, doing puzzles, trying to be a part of the conversation, she has good social skills. I have always wanted to hear a story of someone who has gone through what my daughter has so I can have an Idea of what could happen to her.
Thank y ou for sharing the story
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