Winners and Losers: The Cost and Effects of Agriculture Subsidies and Dumping on the United States and Mexico Ja

1.  Winners and Losers:The Cost and Effects of Agriculture Subsidies and Dumping on the United States and Mexico Janet GrissettPolitical Science 353/Winter TermDr. William Gibson

2. What is dumping? Dumping is the practice of selling items below cost in efforts to eliminate surplus, hurt competitors, or gain a share of a particular market. For example, if it costs a farmer in Iowa three dollars a bushel to grow corn but that same corn is exported to Mexico at a price of two dollars a bushel.

3. It does not take an economist to know that one does not stay in business for very long if you sell items for less than the production cost of those items. However, this is exactly what takes place around the world on a daily basis within the trade market to such an extent that dumping has become the cause c�l�bre of the anti-globalization movement.

4. How is it possible to grow crops and then sell them for less than the cost of production? Because the government subsidizes agriculture.

5. Subsidies Basically, the government program pays farmers for growing crops that are not profitable. It also gives money to those who agree to let their land lay fallow. Therefore, when a farmer sells crops out a loss, the government issues payments based on what crop and how much of that crop was grown.

6. Money is also given out for other purposes under the program; such as allowing trees to remain on certain properties or raising certain crops or not producing certain crops, such as milk. In the years between 1999 and 2002, almost half of all farm income came via subsidies payment from the U.S. government. American cotton, which accounts for 40% of the world cotton market, is one of the heaviest subsided items, receiving an average of $230 per acre in subsidies or 100% of the market value

7. The subsidy program has its roots in programs that were begun during World War I as part of an effort to help small family farms survive. Over the years, it has involved into a multi-billion program that seems to help everyone but the small farmer.

8. Some of those who have received government subsidies in the past include: NBA star Scottie Pippen who received $26,000 for growing hardwood trees on his Arkansas property, Ted Turner who was paid $190,000 for raising bison on his Montana ranches, and David Rockefeller, member of the famous family and former Chairman of the Chase Manhattan Bank, who received $146,000 to �assist� in the operation of his 3,000-acre farm in New York state

9. In 2002, the US government issued $15.7 billion in subsidies and the U.S. Agriculture Department projected that figure would increase to $18.7 billion in 2003. This is more than some developing countries spend on their entire national budget!

11. It is easy to talk about billions of dollars, but do you realize just how much a BILLION dollars really is? Imagine someone gave you a million dollars and told you to spend $1,000 every day and come back when you ran out of money. You would return, with no money left, in three years. If someone then gave you a billion dollars and you spent $1,000 each day, you would be spending for about 2,740 years before you went broke.

12. That means that if you had the $15.7 billion to spend instead of it going to subsidies and you spent a $1,000 a day, it would take you over 43,000 years to spend it all!

13. However, don�t think the average farmer is getting rich off subsides. Over 80% of those who received subsidies were given an average of $846 10% of subsidy recipients, however, were issued an average of $34,800. This group had an average yearly income of at least $250,000.

14. Who is in this 10% group? Large corporate owned farms such as Cargill, the world�s largest grain trader and the top grain producer in the U.S. Cargill had net earning in 1999 of $597 million�an increase from its 1992 (pre-NAFTA) earnings of $350 million. Other top ten percent recipients between 1995 and 2002 include: Riceland Foods Inc, Tyler Farms, and Pilgrim's Pride Corporation

15. One interesting note: it was Cargill�s former senior vice president who drafted the U.S. backed agricultural proposal for the Uruguay Round of GATT: a proposal which continued to allow countries to issues subsidies and charge import duties on products.

16. The idyllic image of a farmer who owns a few hundred acres of land that he farms with the aid of his family has nearly ceased to exist.. In fact, so few small farms still exist that the U.S. Census Bureau no longer lists �farmer� as an occupational option on its census forms! The small family owned farm has been replaced by corporate owned conglomerates that account for most of all agriculture products in this country.

17. According to Department of Agriculture reports: large corporations produce 98% of the poultry 2% of farms produce 50% of all agricultural products 80% of the beef is slaughtered and marketed by only four companies over 59% of pork is also slaughtered and marketed by four companies and three mega agriculture companies control 82% of the U.S. corn exports.

18. Furthermore, an estimated one out of every ten dollars spent on food in this country goes into the coffers of one company: Altria, the parent company of Kraft Foods, Philip Morris, and largest stockholder in Miller Brewing

19. The consequences of subsidies Dumping Mexican economy damaged Mexican farmers forced to sell their farms Increase in undocumented immigrants Genetic engineered (GE) foods

20. Dumping The International Food Policy Research Institute, a non-profit NGO, conducted a study that showed a direct correlation between subsidies and farm income which revealed that farm subsidies programs of wealthy nations cost poorer developing nations approximately $24 billion a year in lost income with Latin America and the Caribbean losing about $8.3 billion each year

21. Dumping occurs when a surplus of a product exists in one country, allowing exporters to be able to sell that product at a deep discount in other countries, often far below what a local farmer must sell his crop for in order to make a profit. Thus, while a farmer in Chiapas, Mexico may be able to grow corn for, say, $3 a bushel, a U.S. company can export it to Mexico and sell it for $2.20 a bushel (25% below the cost to produce it), allowing the corn to sell on Mexican markets cheaper than domestic corn.

22. Corn is Mexico�s de facto national crop, yet in post-NAFTA Mexico over 25% of the country�s corn market is now imported from America: an eighteen fold increase since the implementation of NAFTA.

23. Under NAFTA, a yearly cap was placed on the amount of allowable amount of corn that the U.S. could export to Mexico. The amount was supposed to increase yearly until by the year 2008 when all limitations are removed. This was intended to facilitate the price of corn in Mexico, which had been above world average, to fall slowly until it was more in line with the price of corn in America and Europe.

24. Unfortunately for the Mexican farmer, this did not occur. Instead of a gradual decrease in the price of corn over fifteen years, the market price collapsed at an astonishing rate until, by 1997, it was equivalent to the world market average�having decreased over 70 percent. In a little over two years, the bottom fell out from beneath the feet of Mexican corn farmers.

25. This results in the Mexican farmer, whose field is likely less than five acres in size, not being able to sell his crop for a profit. In turn, this will lead to forced sale of his farm. These former farmers often attempt to cross into the US in hopes of finding a way to earn money. Ironically, they often end up working for the very farm corporations that put them out of business.

26. Undocumented Immigration Problems It is one consequence of subsidies and dumping that is often overlooked. Yet, it has become a nightmare scenario for the US government. In 1993, pre-NAFTA, the government spent $967 million on immigration control. The number of armed Border Patrol officers has doubled in size to over 9,000, making it a larger agency than the Federal Bureau of Investigation

27. In this process, the government has also built nine walls, including a ten foot high, fourteen mile long wall running along the San Diego border.

28. The costs have ballooned as well with the newly renamed U.S. Citizenship and Immigration Service now commanding a budget of $4.3 billion and almost $6 billion above that being spent on immigration enforcement along the Mexican border

29. All these efforts seem to have reduced the amount of undocumented aliens entering via the southern border. In 1996, Border agents apprehended 1,598,016 Mexicans attempting to enter this country-- a figure made even more fantastical by the fact that the total number apprehended that year was 1,649,986, meaning that Mexicans comprised over 96% of immigrants attempting to enter this country undocumented.

30. In 2003, a total of 905,063 apprehensions were made: a decrease of 744, 923. These numbers make it appear as if all the money being spent on patrolling the border is having an effect. However, while the number being apprehended has decreased, other statistics show an increase in the total number of undocumented Mexican immigrants in this country.

31. According to figures released just this week by the Mexican government, undocumented immigration to the U.S. has increased by 66% over the last 12 years. According to the study, over 1 million undocumented immigrants cross the border every year. Only 1/3 of those are able to stay in the U.S. to work. The number of Mexicans living in the United States went from 4.3 million in 1994, the year NAFTA was enacted, to 9.5 million in 2002, according to U.S. estimates. Last year, Mexicans in the United States sent roughly 12 billion dollars back to their relatives in Mexico.

32. Unfortunately, there has also been a cost in human lives. A study done by the University of Houston study estimated that from the years 1993 to 1997, 1,600 migrants died while trying to cross the border. Another study conducted by the American Friends Service Committee estimated that there have been over 1,300 deaths since 1995.

33. The Mexican government does not allow the planting of genetically engineered corn (GE); however, it can be imported as food or animal feed. This has allowed GE corn to slip into the Mexican agriculture. GE corn plants were discovered growing among native plants in Oaxaca, Mexico, the cradle of corn. This presents a serious threat to the genetic integrity of native Mexican corn and poses a danger to biological diversity within the food crop, creating a potential dangerous situation should a crop virus appear. GE Food

34. Dumping Wars: A Cold War for Our Generation If dumping wrecks such havoc on victim nations, then why do they not attempt to stop the practice? Nations do take action to at least punish the offending nation, usually through the means of anti-dumping tariffs. However, most anti-dumping tariffs are not allowed under either WTO or NAFTA guidelines and are usually fought by those who are assessed such tariffs.

35. Fighting such measures can be costly, however, often costing in the millions of dollars to pursue in international trade courts and being drawn out over long periods of time. Furthermore, these anti-dumping tariffs are sometimes applied in seemingly nonsensical manners and often are not standardized. In addition, countries such as Mexico turn a blind eye to dumping for various reasons, such as low-interest loans from the U.S. Commodity Credit Corporation that are only issued to importers of U.S. agricultural products or favorable trade agreements on other products produced in Mexico such as fruit and some vegetables.

36. These are possible reasons that in 1996 the Mexican government allowed the importation of 5,817,658 metric tons of duty free maize instead of the 2,652,250 metric tons required under NAFTA. This was an extra 3,165,408 metric tons of U.S. grain imported free of any tariffs when a basic importation duty established by the Mexican government of 189.2% should have been collected.

37. One an example of an anti-dumping measure involves US beef imports to Mexico While Mexico exports more live cattle to the U.S. than it imports, the U.S. exports beef products back into Mexico in large numbers accounting for over 18% of the U.S. beef market which amounted to over $450 million worth of beef products. The Mexican government, in response to complaints from its farmers, instituted anti-dumping tariffs on US beef products.

38. However, the four major U.S. beef packers are being charged anti-dumping tariffs ranging from zero to 7.6% on bone in and boneless beef products exported to Mexico while all the other U.S. packers must pay 75% on boneless beef and 13% on bone-in beef. In addition, beef offal is hit with a 215% anti-dumping tariff for all American packers except the big four who pay anywhere from 3% to 26% duty on the same products. The measures still exist and American beef packers are still seeking a decision by international trade courts.

39. Some countries institute de facto anti-dumping measures involving packing standards, health standards, or manufacture standards that would prove extremely costly, if not impossible, for some countries to maintain. These measures have the same result of monetary anti-dumping measures: they usually result in the decrease of importation of those products into the domestic market. The countries being affected can not fight such measures as these standards are matters of internal domestic affairs, and the WTO has ruled that countries have to right to enact such laws as ways to ensure the health of citizens.

40. For example, the U.S. refuses to allow the importation of Hass avocadoes from Mexico by contending that pesticides methods are not on par with American standards and the risk of pests entering the country, despite the Mexican government insisting that it has other measures to ensure the avocados are pest free. This measure is, surprisingly, strongly supported by California avocado growers.

41. One side issue to the anti-dumping measure that was recently settled in front of the WTO is the Byrd Amendment that was enacted in October of 2000 by the U.S. Congress. Senator Robert Byrd of West Virginia authored the law that was enacted by President Clinton. The Byrd Amendment changed the way in which monies awarded by the WTO in anti-dumping cases was handled. When a country brings a case requesting to be allowed to institute anti-dumping measures before the WTO and wins that right, then, in the case of the U.S. at least, that money was channeled back into the government.

42. However, the Byrd Amendment radically changed that: it mandated that all monies collected from anti-dumping tariffs be turned over the any U.S. company that filed the case. This resulted in hundreds of millions of �free� money being turned over to U.S. companies that complained they were being harmed by the dumping of products on the U.S. market.

43. In the first annual distribution of receipts that took place in January of 2002, almost $207 million was distributed to various U.S. companies consisting mainly of steel producers but also as diverse as pasta makers and candle manufacturers. Over $270 million was distributed to companies in 2003. Since the amendment was passed, over $700 million has been turned over to U.S. companies.

44. Over twenty countries immediately filed suit against the U.S. demanding that the Byrd Amendment be ruled illegal under international trade laws as it is, according to the EU trade commissioner, �clear that the Byrd Amendment is a WTO-incompatible response to dumping and subsidization and must therefore go.� The WTO agreed, and in 2002 it ruled that the Byrd Amendment violated international trade law and demanded that the U.S. repel the Amendment by December 27, 2003.

45. The U.S. stated that it intended to fight the decision and has yet to comply with the directive of the WTO. The European Union as well as Canada, Japan, Brazil, South Korea, Chile, Mexico and India convinced the WTO to hold a special meeting on January 26 to address the issue of possible sanctions and other measures against the U.S. for non-compliance.

46. The meeting is slated to go into arbitration with the countries involved seeking trade sanctions against the U.S. equivalent to the amount the U.S. collects under the Byrd amendment each year it remains in effect. The U.S. still insists the Amendment is not against WTO guidelines while some Congressman refuse to budge as they believe this is an internal matter and the WTO is simply trying to dictate U.S. domestic policy.

47. Solutions? Under the Uruguay Round of trade talks, the US agreed to limit its subsidies payouts to $19 million a year. Furthermore, the EU and US agreed to pay out no more than 5% of production in subsidies.

48. However, ways are already being found to circumvent these measures and massive pay-outs continue. While many support subsidies as a way to ensure the survival of farmers, groups like Kick AAS argue that the only way a global free trade can work and a true level free market be accomplished is to eliminate all subsidies.