The Bitter Impact of Foreign Subsidies

Global subsidies threaten the livelihood of America’s farmers and ranchers. Every year, foreign nations funnel billions of dollars to prop up inefficient producers. The subsidies create trade barriers for farmers, especially those in the sugar industry who are gathering this week at the International Sweetener Symposium in Asheville, North Carolina.

sugarDr. Darren Hudson is director of the International Center for Agricultural Competitiveness at Texas Tech University. The center maintains a database of agricultural subsidies across the globe. In the latest Groundwork podcast by Farm Policy Facts, Hudson outlines the impact of subsidies…

“It depends on the commodity. Sugar, for example, almost every major producing country uses some sort of import restriction. A big swath of those use production subsidies, so credits for fertilizer, seed, mechanization, interest rates, those kind of things. And then you add on the growing use of ethanol mandates as one of the indirect subsidies for sugar. And when you look at them combined together you run into fairly substantial trade barriers from these major producing and exporting countries.”

Most countries have a subsidy system to protect their agriculture industry. However, the subsidies have contributed to the volatility of the cost of sugar, driving it to less than half of the cost of production and destroying the global sugar market in the process…

“They generate substantial overproduction. That overproduction puts pressure on global prices. And those global prices then come back to the U.S. producer, they have to sell into that market, they have to compete with those low-cost goods in an international market. And it has indirect effects on the way other commodities as a result of the subsidies get planted, or those markets get distorted around the world.”

U.S. sugar policy differs from foreign competition, operating at no-cost to U.S. taxpayers. Hudson says the global market needs a commitment to establish   a level playing field…

“It takes a commitment and a belief in the system that yes, there are going to be dislocations around the world when you free this system up. But, what those dislocations do is create opportunities for other types of production. And what you get is a much more efficient allocation of sources. And the U.S. is trying to through example provide leadership to show this is the path forward.”

Listen to more of Dr Hudson’s comments on the most recent episode of Groundwork on iTunes or at FarmPolicyFacts.org.