Corn subsidies to matter
Why agriculture policy affects more than farming
ELLIOT SIMS
It is unfortunate that once again agriculture policy needs to be explained and defended against cynical attitudes held by those who do not understand the industry and its implications for Canada. Mike Silicz’s article “Short-term pain, long-term gain” (Jan. 17) lacks understanding of basic agricultural economics and policy, leaving readers with a contemptuous view of an issue that affects far more than agriculture.
The Harper government recently announced trade action on U.S. domestic corn subsidies, a move that the farming community has promoted for years. The subsidy program has created exceptionally large U.S. corn crops that have lowered international feed grain prices and decreased the production of crops that can be used as substitutes for corn, like wheat and rice. The impact of this U.S. policy has had negative effects on Canada’s economy and environment.
Grain growers in Western Canada have long been advocating the creation of a biofuels industry in Canada to replace toxic fuel additives, which pollute groundwater and the atmosphere. The U.S. corn subsidies have created market conditions with prices so artificially low that Canadian farmers cannot afford to grow the raw materials, mainly low-quality wheat, used to make biofuels. This has two effects: robbing Canadian grain farmers of new profitable markets for their crops and robbing Canadians of the ability to stop polluting their own environment. Hence, without a change in economic conditions or large government subsidies to offset the effects of the U.S. corn subsidy, both the biofuel industry and Canadian grain farms will not be feasible. Hence, by arguing that corn subsidy is an unimportant issue, Silicz is stating that agriculture and the biofuel industries, both with strong potential for positive environmental and economic benefits, are expendable, a statement that most people would find absurd.
Cheap U.S. corn also inadvertently affects other countries by subsidizing the cost of food for consumers in Europe, Japan and other countries. With low international grain prices, buyers from developed countries can buy cereal grains for far less than they are willing and able to pay for the grain. These savings in grain purchases are then passed to consumers because companies lower prices on their products to gain larger market shares. This means the U.S. is subsidizing the consumers of the developed world, people who do not need subsidization. This subsidy to the affluent amounts to US$9 billion annually. Imagine the difference in society if instead of subsidizing the European middle class, the U.S. corn subsidy was passed onto people who really needed assistance, like the poor and starving regions of the world.
Unfortunately, the U.S. corn subsidy’s negative effects extend well beyond the developed world; it financially ruins farms in Third World countries. Because of the low international cereal grain prices caused by U.S. corn, many Third World farmers cannot sell their grain at a high enough price to make it a feasible crop. The farm production methods used by these farmers, mainly hoes, machetes and ox plows, require a financial return that is not able to compete with the per-bushel costs of modern technology and the U.S. treasury, even when considering the extra expense of shipping U.S. corn from America to Africa and other continents. The governments of these countries generally do not try to save their farmers with subsidies because they have no disposable revenues to use. Hence, these farmers have two options: abandon their land or find more profitable crops, which usually aren’t as well suited to their land and can even be drug plants like opium poppies. Again, the effect of the U.S. corn subsidy creates two problems: it hinders self-sufficient food production in Third World countries and can lead to an increase in the availability of cheap, illegal drugs in developed countries.
Contrary to Silicz’s belief, this policy is not being advocated by “economists and policymakers of today[,] ignoring the future of our children just to maintain an impressive bottom line in the short term.” This trade action is being made so that agriculture and related industries will be based on real economics, not fictitious ones influenced by U.S. domestic policy, which can change quickly. Farmers and policymakers understand this problem and the externalities it creates all around the world, which is why they are taking steps to ensure future generations are not burdened with the economic and social fallout of the subsidy program.
It can now be seen that Stephen Harper’s pledge to fight U.S. corn subsidies does matter and affects more than agriculture. By removing the U.S. subsidies, Canadians domestically should see many benefits including more environmentally friendly fuel, fewer illegal drugs on the streets, and a profitable agriculture industry. Also, internationally, the ending of the U.S. corn subsidy could help Third World countries develop sustainable agriculture and the availability of foreign aid. All this from one legal challenge against the U.S.! Hopefully the next time a CBC news bulletin announces an agricultural issue, everyone will take the time to understand the issue and its societal implications before writing comments that marginalize the agriculture industry.
Elliot Sims is a third-year student at the Asper School of Business.
