From: Grant Potter, Worldwatch Institute, More from this Affiliate
Published March 12, 2014 11:20 AM

Agricultural Subsidies Remain a Staple in the Industrial World

In 2012, the most recent year with data, agricultural subsidies totaled an estimated $486 billion in the top 21 food-producing countries in the world. These countries—the members of the Organisation for Economic Co-operation and Development (OECD) and seven other countries (Brazil, China, Indonesia, Kazakhstan, Russia, South Africa, and Ukraine)—are responsible for almost 80 percent of global agricultural value added in the world.

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Agricultural subsidies are not equally distributed around the globe. In fact, Asia spends more than the rest of the world combined. China pays farmers an unparalleled $165 billion. Significant subsidies are also provided by Japan ($65 billion), Indonesia ($28 billion), and South Korea ($20 billion).

Europe also contributes a great deal to agricultural subsidies due in large part to the Common Agricultural Policy (CAP) of the European Union (EU). At over $50 billion, CAP subsidies accounted for roughly 44 percent of the entire budget of the EU in 2011. And this figure does not include EU price supports, in which governments keep domestic crop prices artificially high to give farmers a further incentive at the expense of the consumer. Including these price supports, the EU spent over $106 billion on agricultural subsidies in total.

North America provides almost $45 billion in subsidies, with the United States spending just over $30 billion and Canada and Mexico spending $7.5 billion and $7 billion respectively. Of the countries studied by the OECD, 94 percent of subsidies were spent by Asia, Europe, and North America—leaving only 6 percent for the rest of the world.

The term "subsidies" covers a vast number of different policy options, but at the heart of all of them is government intervention in agricultural markets. A common type of subsidy is called direct payments. These are regularly paid to farmers who produce a designated crop and the payments are decoupled from production—which means that farmers can produce as much or as little as they want and still receive this subsidy. Direct payments are the cornerstone of the EU CAP and account for $40 billion of its $50 billion budget.

Subsidies like direct payments and crop insurance are criticized as not being safety nets for poor farmers, as is their stated purpose, but rather a way for wealthy farmers to get richer. The direct payment policy of the EU CAP, called the Single Farm Payment, is distributed by the hectare—so that farmers who own or rent more land receive greater financial benefits.

Read more from our affiliate, Worldwatch Institute.

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