In class and in the text we covered subsidies. Corn is one subsidized good that has been and continues to be a hot topic. It is difficult to buy a product today without corn being one of the ingredients. Did you know that coke you drink has corn in it? Your cold medicine does too. It is probably listed as corn syrup or high fructose corn syrup. Government subsidies keep the prices consumers pay low and keep the supply high. Subsidies are nice for us (the consumers) because they keep prices low. In the United States corn subsidies to farmers have made it possible for corn to end up in so many products, because the subsidies have created a surplus. Believe it or not U.S. corn subsidies hugely impact markets in other countries. This is one of the many outcomes of globalization. U.S. subsidized corn has ended up in huge quantities in Mexico, and Mexican farmers are unable to compete with the low prices of the subsidized corn. An author of an article from Oxfam (available through http://www.oxfam.org/ eng/pr030827_ corn_ dumping. htm) remarks, “The US pays its corn farmers $10 billion a year which encourages them to produce a surplus that is then dumped onto world markets at artificially low prices. New Oxfam calculations show US corn is dumped in Mexico at between $105m and $145m a year less than the cost of production”. Poor farmers in Mexico get hurt.
To learn more about the effects of U.S. agricultural subsidies on developing countries I read an article headlines “As US Food-Aid Policy Enriches Farmers, Poor Nations Cry Foul: Sending Crops, Not Cash, Eases American Gluts, Ignores Local Surpluses” from the Wall Street Journal. I discovered that the United States government purchases surpluses from American farmers and ships it to developing countries like Ethiopia. In fact U.S. legislation requires that US grown food be used for aid with few exceptions. Unfortunately U.S. food aid leaves farmers in developing countries sitting on their surpluses. It is crazy to think that in a time of famine, Ethiopian farmers had warehouses full of surplus grain. Ethiopian farmers, who are unable to get rid of their surplus, fear not having enough money for the next round of harvest and storage. Also, prices in Ethiopia will drop, farmers will be unable to pay loans and expenses. These factors will contribute to a smaller crop planted for next season, and famine will continue. Many groups “charge that Washington uses food aid to dump surplus commodities, in effect subsidizing U.S. growers”.
Farmers in the United States often plant around double what is needed domestically. To prevent losses the federal government grants subsidies. This will keep prices from dropping. The government also protects farmers by purchasing much of the surplus grain for food aid to other countries. Food aid purchases often account for nearly one-third of farmer’s profits. Nevertheless, in spite of food aid programs famine continues. Discrepancies between food aid budgets and foreign development aid contribute in part. For example, $500 million in food aid was sent to Ethiopia but only $5 million for development programs was sent. These programs are crucial because they support local development which can help prevent future crises. “The emphasis on food aid, they say, needs to be matched by long-term investment in agriculture and water that will develop the economy and save livelihoods as well as lives”.
It seems to me that food aid is more of a business than a humanitarian program. There are many beneficiaries of food aid programs such as farmers, combine drivers, ship crews, and more. They seem to have the potential to benefit more than the poor in famine stricken countries. Food aid introduces American products to other countries which benefits producers. I think it is wonderful that the United States offers help to developing countries, but I think we need to evaluate the methods of helping. For example, why does the U.S. send lentils to Ethiopia while Ethiopia has a huge surplus of locally grown lentils?