Online at: http://politicalaffairs.net/article/articleview/3066/

Savage Subsidies

By Michael Hogan

Archives - Dates and Topics

2006 – print

April click here for related stories: imperialism/globalization

3-28-06, 1:00 pm

Few Americans are aware of the incredible resentment caused by the US policy of subsidizing agricultural products which are dumped on the international market, while insisting that manufactured goods, in which the US has a competitive advantage, be subject strictly to the laws of free trade.

It is estimated that government of developed countries, largely the United States and the European Union, provide more than $300 million in domestic support and export subsidies for agricultural products: most notably sugar, cotton and corn which depress world market prices, diminish the earning of poor countries and prevent them from competing with artificially low prices of the developed world. This is one of the major reasons that, despite the proclaimed economic advantages of “free trade” and the Washington Consensus, the poverty in Latin America has doubled over the past decade.

The economic competitive advantage of countries such as Brazil and Guatemala is that they can grow and harvest sugar cheaper than the United States. Mexico can produce corn cheaper and Argentina, beef. However, subsidies to agricultural conglomerates in the developed countries have created an artificially lower price whose net result is an economic depression in these Latin American countries, abandonment of farm and ranch lands, and – in Mexico – the net importation of corn from the United States. Mexico at least has some leverage to fight back since it is the United States’ largest trading partner. Recently it has sought an exemption from the Canadian and US agreement to eliminate tariffs from all agricultural imports. President Fox of Mexico has been negotiating a side agreement which will exempt beans and white corn from the tariff elimination process. Regardless of the outcome, opposition leaders in the Mexican Congress will make the agricultural aspects of Nafta a major issue in the coming years.

The West and Central African nations (Chad, Mali, Benin and Burkina Faso) produce cotton five times cheaper than the United States and it accounts for 80 percent of their exports. However, with $4 billion in subsidies to US cotton farmers, the United States is able to flood the market with “cheaper” cotton, thus simultaneously bleeding the American taxpayer and the poor Africans. Nor do the subsidies protect independent farmers in the United States, since they go mostly to massive agribusiness corporations. Subsidies are, in effect, corporate welfare provided by successive administrations who have removed safety nets for the marginal workers, cut food stamps and welfare, while transferring the surplus thus provided to double-dipping corporate agribusinesses. When a representative group of these African nations at the Cancún conference called for an immediate elimination of subsidies on cotton because they were destroying the livelihoods of African farmers and impeding development in the region, their proposal was greeted with contempt by the US delegation. One US negotiator reportedly quipped, “Create a larger demand for T-shirts!” The depths of resentment and even hatred that encounters such as these create abroad are considerable, and undermine the United States’ legitimacy as a world leader. According to the New York Times:

Any hope that the United States would take a moral high ground at Cancún, and reclaim its historic leadership in pressing for freer trade, was further dashed by the disgraceful manner in which American negotiators rebuffed the rightful demands of West African nations that the United States commit itself to a clear phasing out of its harmful cotton subsidies. American business and labor groups, not to mention tax payers, should be enraged that the administration seems more solicitous of protecting the most indefensible segment of United States protectionism rather than protecting the national interest by promoting economic growth through trade.

A report by the Carnegie Endowment, an independent Washington research group, found that after 10 years of Nafta, Mexico was worse off that it was before it signed the agreement. Jobs in the manufacturing sector had fallen by 2 percent, as well as those in the service sector. But those who suffered the worst were the farmers “who were adversely affected by falling prices for their crops especially corn,” a problem intensified by the lowered tariff barriers to American-grown corn which because of US farm subsidies could be sold at a lower price than the domestic Mexican commodity.

This issue of subsidies is interesting, too, in the light of the US public’s negative attitude toward foreign aid (less than 1 percent of the federal budget). We give more economic aid to multinational corporations to increase their profits than we do to all the countries in the world combined. And if we were to end those subsidies tomorrow, as the African delegation suggested at Cancún, the economic growth of those countries exporting their products at market prices would obviate the necessity for more foreign aid. Another boon to the US taxpayer.

In Miami two months after the Cancún walkout, there was a conference to formulate guidelines for the new Free Trade Area of the Americas (FTAA), a plan by the Bush administration to construct a set of rules in which economic relations in the Western Hemisphere would be organized. Knowing the inconsistencies, inequalities and disruption that Nafta caused in Mexico, Miami became a site for protests by union leaders, environmentalists, feminists and workers’ groups. Their suppression by the Miami police was both brutal and unprecedented. According to a report filed by Rebecca Solnit there were over 200 demonstrators arrested and over 100 injured, most as a result of tear gas, pepper spray and blows to the head and face by police batons. People were pulled out of their cars at gunpoint outside of the International Hotel in Miami: “mostly white, mostly labor organizers, environmentalists and religious” who saw the dangers inherent in another Nafta-like agreement which would despoil the lands of Central America, pollute its rivers, dislocate its farmers and plunge the economies into a nosedive similar to that experienced by Mexico after the signing of the 1994 accord.

The comparison of the two agreements by Solnit is not accidental. FTAA is an agreement which the current administration touts as having many of the same “benefits” as Nafta. However, a close look at the results of the agreement over the past 10 years show that besides loss of growth in the Mexican sector and the displacement of farmers, “close to 400,000 jobs have been lost in the U.S. since NAFTA with new jobs paying, on average, only 77 percent of the wages of their earlier employment.” So that explains why the labor leaders and union members were there in Miami,10 thousand of them in force.

The FTAA, as presently written, could force countries throughout Central America to accept genetically modified foods.

Being forced to buy expensive patented seeds every season, rather than saving and planting their own, will force traditional subsistence farmers in the developing world into dependency on transnational corporations and closer to the brink of starvation.

Of course, that’s the point. But, lest we think this is a Central American problem, keep in mind that more than 80 percent of the planet’s biodiversity in corn and potatoes is in Latin America. If that biodiversity disappears and a virus infects the common Idaho potato which is now the single most common one grown and sold today, the result will make the Irish Famine look like a walk in the country, not to mention what will happen to the lovers of McDonald’s french fries deprived of their staple until the end of time.

As to the environmentalists, they know that since Nafta fifteen wood product companies from the US have set up operations in Mexico, and logging there has increased dramatically. In the Mexican state of Guerrero, 40 percent of the forests have been lost in the last eight years, and massive clearcutting has led to soil erosion and habitat destruction.

Those who risked being assaulted and imprisoned in Miami to protest the destruction of the US middle class, the right to fair wages, the preservation of a strong labor force and the conservation of the last remaining oxygen sources in our hemisphere were doing work which honored us all. The contempt with which they were treated is akin to the contempt with which Martin Luther King was treated when he was similarly beaten and imprisoned in the US South to protect the right and dignity of human beings and spoke up to insure the dignity of human life.

The US proposal of the FTAA is not a method to shape a global agreement. It is instead to shape a regional agreement in which US-based multinationals have an economic advantage and provide them with preferential positions. So, while the administration preaches free trade and globalization, what it is actually seeking is a restriction on globalization with a competitive advantage for US-based multinationals rather than those based in the Far East or Europe.

This in itself would not be wholly objectionable as it would simply encourage competition between regions. However, there is little that is “free” in it, either as free trader or as laissez-faire nongovernment interference in the market. It is direct manipulation of the market and so we have a gap both in ideology and in credibility.

US labor unions and even the National Association of Manufacturers urged that the FTAA not be approved by Congress unless there were revisions in the agreement for labor and environmental accords. While the US Chamber of Commerce, most multinationals, and the Bush administration were “flexible” on these issues because, of course, low wages and lack of environmental accords are exactly what allow large companies to make disproportionate profits. The price, though heavy: child labor, brutal conditions, lack of social services, destruction of lakes and rivers, deforestation, is not one the businesses will have to pay. These costs will be absorbed by the host countries in terms of loss of potable drinking water, disease, fetus malformation, polluted air and generations of physically and mentally marginalized citizens. They will also be absorbed by US taxpayers in terms of increased unemployment, global warming, increased immigration, anti-Americanism, and a less secure world. Add to this the displacement of hundred of thousand of farmers who can no longer make a living on the land due to the agricultural subsidies and the flooding of the market with the products of those subsidies, and you have the cauldron of civic unrest, domestic disorder and the violence born of desperation throughout Latin America.

When Henry Ford opened his factory in Dearborn, Michigan he had a revolutionary new theory. His idea was to mass produce automobiles, pay his workers a fair wage, and sell the automobile at a price his workers could afford. The idea worked, resulting in generations of highly paid workers, growth of the market, new designs and technological advances, and increased prosperity for his nation. He did not find the cheapest materials, the lowest paid workers; he did not move his plant to Guatemala or Cambodia. The reason: he wanted to create a larger market for his cars, not just sell them to the affluent. Ford knew that if he wanted his business to continue to grow, for the economy to grow, he needed to create customers for his products. In the process he provided business to the steel mills, to the tire factories, to the oil speculators the refineries. He provided millions of jobs to upholsterers, to mechanics, to oil workers, to traffic cops and construction workers. And he sold more cars.

This sane economic reasoning has been lost on the new generation of global marketers. They want to move the companies to areas where the labor force is most mobile, most desperate and cheapest, where the environmental laws are most lax. We are already seeing the inevitable results. The increase in inventory of hard manufactured goods, growing poverty in Latin America, irreparable damage to the environment, loss of employment in the United States, and recession.

A factory worker in Mexico making $300 a month cannot purchase a new Ford. A electronics assembler in Guatemala making $45 a week cannot afford the digital camera or computer she assembles. If the workers in the factories where the products are produced cannot afford to buy those products what is the result? Short-term profits for a few manufacturers, cheaper prices for a few buyers, but – ultimately – stagnation, lack of growth, because even though more units are being produced, there are fewer people with the wages or savings to purchase them.

When former US Trade Representative Robert B. Zoellick stated that opponents of globalization might have had “intellectual connections” with terrorists he was signaling a very dangerous formulation which is part of the newspeak which underlies an ideological divide that is as far from Henry Ford’s model of capitalism as the World Bank is from Jeffersonian democracy. What the new formulation consists of is a combination of corporate greed and antipopulist ideology which seeks to derive short-term economic advantage from the marketplace while at the same time destroying the economy now for the poor, 10 years from now for the middle class, and a generation from now for those who will inherit the no-growth companies and paper wealth their forebears accumulated.

There are, of course, alternatives. They don’t appear on CNN or in the press releases from the Oval Office. However, they do exist. The policies that now encompass globalization are, in fact, merely corporate strategies marketed as such and supported by those few who have their fingers in this very rich pie. It is in their self-interest to convince the public that there are no real alternatives, that free trade equals democracy, that its opponents are either Communists promoting class conflict or intellectual bunkmates of international terrorists. In fact, there are hundred of thousands around the world who are creating grassroots alternatives to this corporate globalization. Citizen groups composed of workers, small business people, investment counselors, doctors, attorneys, economists, teachers and scientists from around the world who have formulated an “Alternative Agreement for the Americas” which offers a view of what a totally responsible and environmentally sustainable economy in this hemisphere would look like. You can find this document on the Global Exchange website.

The media tells us largely by its silence, that there is little happening in Latin America besides earthquakes, hungry masses and economic chaos. When proposals such as Nafta and FTAA are decided on, when international economic conferences in Cancún or Miami are reported on, the media tells us that the protests outside the conferences are organized by anarchists and radicals whom the police need to keep in check to maintain public order. We are told that we are blessed to be living in the United States and that the problems of the third world are ones we should let the experts in trade, finance and diplomacy take care of. Never in the course of human history has that been less true, never has the importance of the knowledge and awareness of the American citizen been more important. We need to be proactive, we need to ask questions of our representatives in Congress, read alternative versions of events on Znet and other alternative publications and other sites which report economic and social news of the hemisphere which affects us daily.

As Noam Chomsky once wrote in another time and place:

Whether they’re called “liberal” or “conservative”, the major media are large corporations, owned by and interlinked by larger conglomerates. Like other corporations they sell a product to the market. The market is advertisers, that is, other businesses. The product is audiences…There are systems of illegitimate authority in every corner of the social, political, economic and cultural worlds. For the first time in human history, we have to face the problem of protecting an environment that can sustain a decent human existence. We don’t know that honest and dedicated effort will be enough to resolve or mitigate such problems as these. We can be quite confident that the lack of such efforts will spell disaster.

--Michael Hogan is the author of 14 books including The Irish Soldiers of Mexico. He lives and works in Guadalahara, Jalisco. Send your letters to the editor to pa-letters@politicalaffairs.net