WTO makes progress in cutting farm subsidies

[Dinner]

Originally posted by chegitz guevara
I'm with Spiffy. The WTO should allow the 3rd World to raise tarrifs on 1st world farm goods rather than screwing farmers and consumers in the West. I don't see why I should have to increase the percentage of my income that goes to food so that banks and agrobiz can get richer and 3rd world peasants still get completely screwed.

Che, in all likely hood your food bills won't go up instead floor used to make them will likely be grown in the third world instead of in Europe or America though. This will greatly increase incomes in the third world.

[Japher]

low cost suppliers do not need protection against dips in demand

and

furthermore, agricultural goods in general are very inelastic. people are not going to stop wearing cotton tshirts, or using sugar, or drinking coffee from one year to the next, for no reason

You are wrong, my friend. On both cases. And I know from first hand experience.

[Lawrence of Arabia]

You are wrong, my friend. On both cases. And I know from first hand experience.

are you serious? you dont think that agricultural goods are inelastic? tell me then, whats an alternative to food?

[Dinner]

Originally posted by Lawrence of Arabia
thats not entirely true. the reason third world farmers cant get ahead is because the subsidies put them at an either level or disadvantageous playing field vis a vis first world producers. the price of first world goods are depressed to the world market price, and not the other way around. prices in general havnt crashed, first world suppliers prices have crashed, leaving prices relatively similar between first and third world suppliers. with no clear advantage, consumers are as likely to buy first as they are to buy third world goods, meaning most of them starve.

Can you please site that the subsidies only cause first world goods to have pricing parity with third world goods? Everything I've seen is that the subsidies are so large that third world farmers can't even sell their crops for the money it cost them to plant them. That's not parity that's preditory trade practices.

[Japher]

are you serious? you dont think that agricultural goods are inelastic? tell me then, whats an alternative to food?

It ain't about the alternative, it's about the demand. Most cotton these days is grown in Mexico... Why?

Because about 10 years ago the bottom fell out of the market, it became to cheap of a crop to work because there was too much of it. Farmers turned to other products which allowed the cotton market to grow again. All the local farmers who continued to grow cotton because they couldn't afford to resow, or planted in that alast dreaded season, did not receive subsidies and went bankrupt. Most of this land was bought up by the Hmongs who now grow strawberries on it.

Raisins just took a big hit in the past few years. Why? I don't know. Mostly because demand dropped, I guess dried fruit lasts a little longer than lettuce and the like. However, growing vines is not cheap and takes several years to yield a crop. My father-in-law's brother was forced out of his farm which has been torn down and replaced with almond trees (something which has been gone for a while, but is making a comeback), another product which is expensive to grow and takes several years to mature.

There is definitly an elastic market in the ag buisness, and it does force people out of buisness or to sell. My wife's best friend is from a dairy family, and the high price of milk right now has encouraged their family to sell the farm. What will become of it? My guess; not a dairy farm.

[Dinner]

The US remains the world's largest producer of cotton last I heard. The large cotton subsidies insure it stays that way.

[Lawrence of Arabia]

It ain't about the alternative, it's about the demand. Most cotton these days is grown in Mexico... Why?

because american cotton farmers are subsidized to the tune of $25,000 a year EACH.

Because about 10 years ago the bottom fell out of the market, it became to cheap of a crop to work because there was too much of it.

and there was too much of it because of US subsidies. remember that mexico is also part of NAFTA, so the trade distorting subsidies give an even greater effect on non subsidized goods.

the other examples, your relatives were high cost producers with small profits and thats why they lost it all, because their cost of living is very high compared to third world farmers. a third world farmer can live like a king on the money most of us make in the first world, and needs very little money to survive. therefore, even if he makes less money one year, he can still live because everything is less expensive relative to america - the cost of living is low.

[Kidlicious]

Originally posted by Lawrence of Arabia

furthermore, agricultural goods in general are very inelastic. people are not going to stop wearing cotton tshirts, or using sugar, or drinking coffee from one year to the next, for no reason.

The price that intermediate suppliers pay farmers will go up, because the farmers will be producing less and the demand will be the same. That's why no.

[Japher]

I can concede that something needs to be done to promote international competition on an ag basis since it is the easiest competion basis a third world country can ask for. My concern is that such competition would ruin domestic production making us even more dependent on 3rd world products which I doubt are consitant, fair, and safe.

The framework agreement calls for the countries with the highest subsidies to cut the most. It also provides recognition of the need for special treatment for developing countries, which may need to retain protection for critical products

This almost sounds like a Kyoto proposal. However, if countries cutting the subsidies could also select critical products to protect I would be much more inclined to agree with the plan as I am able to see it (I am sure I am missing something). Not even Tiger Woods would let me start at -60.

Mr. Mitchell said Canada did manage to win a concession on supply-management that eliminated text that specifically called for ceilings on "over-quota tariffs" -- which apply stiff duties to imports of dairy products above a modest quota -- and replaced it with broader language on opening domestic markets.

Attacking of Canada's grain production, IMO, is insulting. They have worked to create an infastructure that is strong and capable of meeting strong demands. The duty quota can help. However, the question still remains; what happens when the market gets flooded with cheaper grain? And than what will happen if that supply is haltered? I personally do not trust a thrid world country to supply a consistant and safe product... Nevermind quality.

[Kidlicious]

Originally posted by Oerdin
I'd like a site for this. I'd be willing to bet money that the reason those farmers don't have enough money to buy food is because crop prices are depressed due to over production. Any excellent example is cotton farmers or sugar farmers in Africa. Both crops have seen crashes in prices due to rich country subsidies and now African farmers can't sell their crops for what it cost them to plant.

It's not that the farmers are exporting instead of eating it is because subsidies have caused prices to crash.

Price crashes for ag products are common place in capitalism especially with globalization. I wouldn't be too quick to blame the subsidies.

[chequita guevara]

Originally posted by Lawrence of Arabia
who cares? its still costing each and every citizen who pays taxes (the vast majority) hundreds of dollars each year. and, dont forget, if those subsidies were removed, the price of food would go down, saving consumers even more.

Wrong, the subsidies allow the farmers to sell their produce under cost and still make money. If they can only get money from their products, a large number will go out of business, and the smaller number of producers will have greater market control, enabling them to drive prices up, so consumers get screwed.

[Japher]

Wrong, the subsidies allow the farmers to sell their produce under cost and still make money. If they can only get money from their products, a large number will go out of business, and the smaller number of producers will have greater market control, enabling them to drive prices up, so consumers get screwed.

Are Che and I on the same side of an argument?

[Lawrence of Arabia]

Wrong, the subsidies allow the farmers to sell their produce under cost and still make money. If they can only get money from their products, a large number will go out of business, and the smaller number of producers will have greater market control, enabling them to drive prices up, so consumers get screwed.

nope, as suppliers drop out, third world suppliers can icnrease production since they will get more capital which use dto be going to high cost suppliers, and smaller third world farmers with less economies of scale can jump in, thus there will be MORE suppliers rather then less.

[Kidlicious]

Originally posted by Lawrence of Arabia


nope, as suppliers drop out, third world suppliers can icnrease production since they will get more capital which use dto be going to high cost suppliers, and smaller third world farmers with less economies of scale can jump in, thus there will be MORE suppliers rather then less.

I'm sorry to put it to you so harshly, but you are violating the Law of Supply. Smaller subsidies decrease production almost by definition. The prices will be higher except in some kind of freak occurence. The elasticity of demand does not contradict the Law of Supply.

[Lawrence of Arabia]

nope the price will go down

P is price domestic
Q is quantity domestic
Ps is price of domestically subsidized goods
Pw is world price

with no subsidy, Pw would be the price in the system. imports would be the area of Q'-Q"-D2-S2, domestic firms would supply 0-Q'-S2-Pw, and the total amount supplied would be 0-Q"-D2-Pw.

With subsidy, Ps will be the price in the system. Imports will be Q"'-Q""-D1-S1 and domestic firms would supply 0-Q"'-S1-Ps, and the total amount supplied would be 0-Q""-D1-S1-Ps. Notice that the price Ps is higher than Pw, and that you are getting less quantity for the amount spent.

with the subsidy gone, all domestic firms in S2-D2-e would go out of business, and the price would decrease from Ps to Pw.

so yeah, no law has been violated.