Addiction to Sugar Subsidies Chokes Poor Nations' Exports
By ROGER THUROW and GEOFF WINESTOCK
Staff Reporters of THE WALL STREET JOURNAL
Monica Shandu has won awards for her sugar-cane harvests in the hills of Entumeni, but the crop puts less than a dollar a day in her pocket. She and her extended family live without electricity or indoor plumbing in a warren of several mud huts and a small half-finished cinderblock house. The 40-year-old South African tills her four acres of cane by hand and walks three miles to church, because she has no car or tractor.
This is the type of poverty the wealthy nations of the world seek to conquer with their $50 billion in annual official development assistance. At the recent World Summit on Sustainable Development in nearby Johannesburg, the European Union in particular aggressively pushed other countries to follow its lead in boosting such aid. But when it came to the summit's contentious negotiations on an issue that contributes directly to the poverty of Ms. Shandu and millions of others -- the agricultural subsidies of rich countries -- the EU chose to preserve the status quo of its own farmers.
One is Dominique Fievez, a prominent sugar-beet grower in France, where demands for protectionism run especially high. He lives in the fertile Somme region, in a gabled chateau set amid a park of oaks, lilacs and manicured lawns. Like his father before him, the 43-year-old farmer cultivates 60 acres of sugar beet under a lucrative EU production quota that brings in a government-guaranteed price nearly triple the world price.
The EU subsidies encourage sugar cultivation even in unlikely climes such as Sweden and Finland. The result: surplus production of about six million tons annually, which is dumped on the world market. The U.S. also protects its sugar growers with tariff and quota barriers, but it exports very little. The EU's dumped sugar, which represents about 20% of annual exports from all countries, knocks down prices and hobbles many developing economies stretching around the world's tropical midriff. So what favors Mr. Fievez hinders Ms. Shandu and saps South Africa's export revenues.
In Entumeni, Ms. Shandu was named South Africa's small-scale Cane Grower of the Year for a top-quality harvest in 2001. Yet the breadwinner for her husband, four children, two grandchildren and several other adult kin says she earned only $200 after costs on that harvest. Sugar prices depressed by subsidies cut her annual income by about a third; the country loses an estimated $100 million in potential export earnings.
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Europe tries to deflect criticism by pointing at U.S. agriculture subsidies, claiming they are worse. And the U.S. does the same thing in reverse. In reality, the two farm programs are joined at the hip, and their clashes have been particularly intense in the past year. Last November, at the World Trade Organization meeting in Doha, Qatar, the Americans allied with developing countries to lean on the EU to cut subsidies. France nearly walked out of the talks, but the isolated EU eventually caved in, agreeing to work toward the "substantial reduction" of some forms of subsidies. The European Commission, which runs EU farm policy, started preparing a far-reaching reform of farm subsidies to try to implement the Doha commitments.
But then in May the U.S. passed a new farm bill, which maintains or increases various aspects of the farm budget, including America's own protectionist sugar regime. Reformers in the EU complained that it pulled the rug out from under their feet. French farmers pounced on the bill as proof that the EU should continue its own subsidies unchanged. "We want to be Americans, too!" the main French farm union proclaimed.
While the U.S. countered in July by sending a high-level delegation to the WTO in Geneva to propose new cuts to farm subsidies and import tariffs world-wide, the reform momentum was already dashed. French President Jacques Chirac, the staunchest supporter of agriculture in the EU, pledged that he would block any reform of the union's farm policies until at least 2006, when the current EU farm bill expires.
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