More than ever, money has the capacity to influence political decisions. Their connections to the political elite allow the largest companies to reap undeserved profits through subsidies, tax breaks, and bailouts. Supporters of such methods have claimed that benefits to larger corporations will allow them to hire more workers, which will result in the flourishing of the economy. To the contrary, these methods have proven to be detrimental rather than beneficial to the economic recovery and do not truly represent a “free market” approach. Providing subsidies to smaller companies would allow them to be more competitive with well-established, larger corporations, which would force the market to innovate and optimize efficiency. Rather than foster competition, increased advantages are provided to the largest companies; smaller companies are unable to compete, which inevitably leads to the largest companies dominating the market. According to the Environmental Working Group, 10 percent of the US farms producing cotton have received 74 percent of the total cotton subsidies between 1995 and 2009. The United States federal government maintains the position that these cotton subsidies are used to protect the farmers—why then do 62 percent of farmers receive no subsidies at all? An analysis of the raw data shreds holes in any optimistic theories on subsidy use.
Subsidies are damaging to smaller companies in any economy, but also, and more dangerously, to the global market. Companies that receive subsidies are able to sell products at lower prices—when these cheaper products are sold in the international market, countries that can’t afford to subsidize suffer due to the price differential. Subsidies are provided to a realm of different industries; unfortunately, cotton subsidies have proven to have disastrous consequences on the markets of less developed nations. In particular, the C-4, consisting of Benin, Burkina Faso, Chad, and Mali, have issued numerous requests to have the unfair subsidy issue addressed—however, their call for change has fallen on deaf ears.
Who decides what’s fair in the world market, you ask? The World Trade Organization (WTO) is responsible for monitoring trade policies and implementing WTO trade agreements. There are three categories of subsidies as defined by the WTO: amber, blue, and green. “Green box” subsidies are those that don’t distort trade, are government-funded, and are not involved in price support—these are good subsidies. “Amber box” subsidies distort production and trade; these are the subsidies that are damaging to the world economy because they are used to lower prices or encourage high levels of production. “Blue box” subsidies are similar to those in the amber box, with the key difference that these subsidies have conditions that limit production. There is a limit to the amount of amber box subsidies that any one country can implement due to their negative influence on world markets. Despite the clear limits established by the WTO, the United States and the EU have continued to fill up the amber box with money to “protect their farmers.”
Brazil, a member state of the WTO, has raised concerns that subsidies applied to the cotton industry in the United States are damaging the economies of lesser-developed countries involved in cotton exports, which would render such subsidies illegal. The WTO ruled in favour of Brazil and permitted them to levy 830 million dollars worth of tariffs against the US to compensate for their losses as a result of the subsidies. Rather than deal with international problems associated with the subsidies, Brazil now receives over 140 million dollars in subsidies from the United States, effectively solving the problem in Brazil, while countries elsewhere continue to suffer. Although successive American administrations had promised to revoke the subsidies, the farm bill currently being debated by US legislators seeks to maintain the illegal cotton subsidies which could re-ignite the conflict between Brazil and the US.
Despite the growing number of legitimate complaints from cotton-producing African countries, the subsidy issue has still not been addressed at the global scale. One might assume the ruling that resolved the issue for Brazil could be applied to other nations suffering from the exact same cotton subsidies. Rather than address the issue at the global level, which would seem like common logic for an organization known as the “world” trade organization, these resolutions are dealt with similar to individual court cases bilaterally. Since Brazil brought up the case, they are the ones to reap the benefits, while other member nations are left to fend for themselves. Is it even plausible to believe that only one country can be affected? The answer is no.
In the case of Brazil, the WTO ruled that Brazil could implement tariffs on trades with the United States due to the illegal subsidies, while these exact same subsidies continue to be a detriment to numerous other economies. The problem has been clearly identified, yet no international action is taken. Unlike Brazil, the C-4 nations often can’t afford the lengthy judicial process and don’t have as much economic leverage involved in obtaining a formal decision. Although the WTO has a Secretariat composed of experts in law, statistics, and economics, no case has been made for less developed nations suffering from the American cotton market.
If you’ve ever watched a TV show about law, you’ll notice that if a defendant can’t afford a lawyer, one is provided for the person; in the World Trade Organization, if a member nation can’t afford the legal process they’re seemingly out of luck. The difference is that rather than a single individual suffering from a lack of representation, an entire country’s population suffers from it. Reality is antagonistic to the WTO’s claim that special provisions are provided for developing nations—if this were the case, why are these illegal subsidies still able to negatively affect the economies of these less affluent member states? The American pacification of Brazil with subsidies is intended to prevent interfere with the illegality of their policies while the WTO watches. It’s as if the defendant got up after the court had ruled, handed some money to the prosecution, and said “let’s just forget about this court ruling for right now.”
No clear end to the subsidy problem is in sight; the World Trade Organization has been ineffectively addressing these issues since the Uruguay talks that begin in the ‘80s. These initial talks ineffectively dealt with the trade issues at hand and established a future agenda rather than take much direct action, which led to the absence of some member nations at the Seattle conference in 1999. A follow-up conference, the Doha round of talks, began in 2001 hoping to reduce subsidies that protect industries in more developed nations. Essentially, the countries with the largest economies are refusing to compromise on key agricultural issues and each agenda promise is delayed or extended another year.
Does the World Trade Organization have any influence on countries with the largest economies? Seemingly not. The trade promises that have been made over the past 20 years are still in the process of being implemented while the issues that aren’t addressed continue to decimate other nations’ industries. Where is the accountability? If the WTO took a stronger stance on implementing punishment for countries that refuse to abide by their trade agreements, we might see more results. However, it seems that they’d rather not ruffle the feathers of any of their more affluent members. Twenty years of inaction is enough. When is the world going to protest the cotton industry rather than Kony? It’s time to wake up and take action—the problem exists, it needs a solution.
In the world of "aiding the less unfortunate achieve a better life", it is entirely unfair to offer subsidies to well-established, larger companies, and completely push down the possibility of profits for the smaller companies. The saying goes, "Don't give a man fish. Instead, teach him how to fish." In this situation, the economy is neither giving the unfortunate "fish", nor are they allowing them to successfully "fish". It is high time that the individuals who are at a disadvantage due to this unfair bias, all got together and protested. "A bundle of sticks is always stronger than one stick". I wasn't aware of this subsidies issue before reading this article. I'm sure there are many people who are in the same boat as me. Therefore, if we (the individuals who are aware of the situation) and the unfortunate people who are disadvantaged got together and protested and increased awareness, I'm sure that a solution would be achieved.
ReplyDelete