Let’s separate the wheat from the chaff

Lawrence Solomon
National Post
November 2, 1999

Ending farm subsidies would send marginal farmers to other jobs, let their land go wild again

Saskatchewan Premier Roy Romanow wants trade equity for Canada’s farmers to protect them from the high, trade-distorting subsidies that U.S. and European governments give their farmers. As his government explained in full-page national newspaper ads that ran last week — just before he and Manitoba Premier Gary Doer arrived in Ottawa to lobby Prime Minister Jean Chretien for $1.3-billion in farm aid — Prairie farmers want to compete and they want to earn their living off the public dole.

When Mr. Chretien refused, the premiers were deeply offended. “What farmers don’t need is doublespeak,” Mr. Doer said bitterly of his conversation with Mr. Chretien. “They need plain talk and realistic solutions to the farm crisis.”

Here is some plain talk. The U.S. farm sector, because of the huge subsidies that these premiers deplore, costs the U.S. economy more money than it earns. The same is true in the European Union. And the same is true in Canada. Add up all the profits made at all the farms in all these countries, subtract all the direct and indirect subsidies provided to the farm economies, and our countries’ vast farmlands — rather than being an inspiring source of economic strength — amount to a blight upon the economies of the United States, the European Union and Canada.

Here is more plain talk. Although the two premiers act as if their problems stem from the current subsidy war, two years ago, before the United States and the EU ramped up the dollars they spent, U.S. and EU agricultural trade subsidies were at their lowest level in recent times. Yet Canada’s farm economy ran an even larger deficit than it does today.

And more plain talk. The type of aid Canadian farmers now receive, and the type Mr. Romanow and Mr. Doer demand, only encourages more farm production and lower commodity prices for farmers, ultimately spreading the blight and creating more misery, not just here but also in the Third World, whose farmers can least cope with the rich countries’ subsidy war. Third World farmers are forced to curtail production, or even shut down, and then we in the West, thinking ourselves generous, and ignorant of what we’ve done to them, send them food aid.

Now here is the realistic solution Mr. Doer wants. The Western farm world runs at a deplorable loss only because the current agricultural system encourages people to farm who otherwise wouldn’t, and only because poor, marginal lands that should have been left as wilderness were short-sightedly brought under production. The subsidy system bloats production to the point of being uneconomic. Putting a stop to the farm subsidies would separate the wheat from the chaff, return marginal farms to wilderness, encourage farmers to seek productive work elsewhere in the economy, and leave Canadians with a farm economy that is profitable, sustainable without subsidies, and a true contributor to the national welfare.

Saskatchewan and Manitoba, though they account for much of the country’s arable land, receive relatively little from our system of subsidies — if they didn’t take the subsidies, they would show a small farm loss. The farmers who reap the lion’s share of the spoils from Canada’s complex, subsidy-ridden system are those east of the Manitoba border. To keep the Ontario system in place, Canadians provide $844-million a year in subsidies, or $2.50 worth of government subsidies for every dollar of profit that Ontario farmers earn. In Quebec, the subsidies are greater — almost $4 in government subsidies to produce $1 in farm profit — and in New Brunswick, the country’s leading farm loser, $8 in government money per dollar in farm profit.

Mr. Romanow is doubtless sincere in his call for fairness in the international trade arena. But where was he at the beginning of this decade, when Canadian farmers received more in subsidies from the rest of the Canadian economy than either the Americans or the Europeans did from theirs? And if his goal is international fairness, why point to them and not to ourselves? Canadian farmers are twice as subsidized as those in Australia, and 16 times as much as those in New Zealand, the one Western country that can, without risk of seeming hypocritical, deplore the devastation that farm subsidies wreak. New Zealand — now beginning a farm-led export recovery — has almost entirely eliminated subsidies, both for export and within the country, while other countries only promise to some day do one or both.

Luckily, at the World Trade Organization talks later this month, Canada has powerful allies who can make both moral and economic arguments. Although Canadians would never know it from Mr. Romanow’s ads, the only major remaining forces for agricultural protectionism are Japan and the EU.

Lining up against them — and for increased free trade in agricultural policy — are Third World countries such as Brazil, which believes free trade in agricultural goods would boost its exports by 30%, the influential Cairns group of 15 countries, which includes Australia and New Zealand along with Canada, and the enormous muscle of the United States itself.

This is a battle that the free farm traders can win, if we aim our sites on the real enemy without, and show the countries of the world that we are not hypocrites when we say we want, as Mr. Romanow’s ad says, “fair competition.”

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