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Fairness, Export Subsidies, and the Fair Trade Movement

By Mathias Risse | December 7, 2006

For years, agricultural subsidies in the US, the EU, and Japan have been summoned for debate. Their existence is widely regarded as indicating the unwillingness of these countries to design the trading system for the benefit of the poor. Even globalization proponents target subsidies in that spirit. According to Wolf (2004),

total assistance to rich country farmers was $311 billion in 2001, six times as much as all development assistance, indeed more than the GDP of Sub-Saharan Africa. In 2000, the EU provided $913 for each cow and $8 to each Sub-Saharan African. The Japanese, more generous still, though only to cows, provided $2,700 for each one and just $1.47 to each African. Not to be outdone, the US spent $10.7 million a day on cotton and $3.1 million a day on all aid to Sub-Saharan Africa. (p 215)

Wolf concludes that “the priorities shown here are obscene.” Similarly, Oxfam accuses developed countries of applying double-standards: while they insist that developing nations liberalize trade, they continue to protect their own economies. “Nowhere,” Oxfam says,

are the double standards of industrialized-country governments more apparent than in agriculture. Total subsidies to domestic farmers in these countries amount to more than $1 billion a day. These subsidies, the benefits of which accrue almost entirely to the wealthiest farmers, cause massive environmental damage. They also generate over-production. The resulting surpluses are dumped on world markets with the help of yet more subsidies, financed by taxpayers and consumers. (Oxfam (2002), p 11)

The same Oxfam report praises the Fair Trade movement as one of the most powerful responses to problems facing commodity producers. It aims to give consumers an opportunity to use their purchasing power to tilt the balance, however slightly, in favor of the poor (p 165). The view in the Oxfam report is widespread: support for Fair Trade is called for, agricultural subsidies are unjustifiable. Yet there are curious similarities between these scenarios.

By Malgorzata Kurjanska & Mathias Risse 

Download: Fairness, Export Subsidies, and the Fair Trade Movement (DOC, 116.50 K)

Read More: Ethics, Globalization, Trade, Japan, United States, Americas, Asia, Europe

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