It's been a while since we posted an Answer Desk response. Sometimes it's tough to find just the right expert with the time to respond. This time, we're happy to say we found just the right expert.
My question for you: 1) Do you believe large agricultural subsidies actually prevent environmental degradation overseas? 2) Would phasing out subsidies mitigate some of these ill effects and prevent a recession, if they were phased out over a number of years? 3) Do you think the US will ever eliminate subsidies given the huge farm lobby and protectionist trade practices? [full question is below]
To answer, we called on Professor Bruce Gardner of the Department of Agricultural and Resource Economics at the University of Maryland. Professor Gardner is a University Distinguished Professor, a former president of the American Agricultural Economics Association and former Assistant Secretary for Economics at the U.S. Department of Agriculture. Needless to say, Professor Gardner knows a little about U.S. agricultural policy.
Here's the full text of the question:
I have a question about large factory farm subsidies and their effect on environmental health. I’m not sure if this is up your alley or not but I thought it couldn’t hurt to ask. When I get into a discussion about energy or agriculture, the topic invariably turns to subsidies. Usually in favor of the free market, I typically argue against government subsidies, particularly as it relates to subsidizing petroleum.
An article over at Grist last week about the Cost of Organics delved into the reasons for more expensive organic products, and why the promise of lower prices has never materialized - http://gristmill.grist.org/story/2005/8/25/12228/0949#2 Comments and discussion topics rapidly turned to subsidies and I couldn’t help thinking that if we abolished large agricultural subsidies that 1) US produced food would instantly become more expensive and 2) Distributors would begin importing more, cheaper food, grown in countries that have a lower cost of living and production, and 3) The fallout of more food from overseas could be detrimental to the environment and the US economy.
Demand growth overseas could fuel more cutting of rainforests and questionable production methods and the US economy would sink into a recession.
My question for you: 1) Do you believe large agricultural subsidies actually prevent environmental degradation overseas? 2) Would phasing out subsidies mitigate some of these ill effects and prevent a recession, if they were phased out over a number of years? 3) Do you think the US will ever eliminate subsidies given the huge farm lobby and protectionist trade practices?
Here is Professor Gardner's response [with slight editorial formatting]:
1. Do large U.S. ag subsidies prevent environmental degradation overseas?
The thoughts generating a possible answer of yes are that without the subsidies: (a) the U.S. would produce less, (b) some of the gap would be filled by more imports of foreign ag products, and (c) increased foreign output would cause environmental degradation abroad. But I would not answer yes.
On (a) note first that the subsidies are limited to a few main products: wheat, rice, corn and other feed grains, cotton, milk, and peanuts. Second, the subsidies are in large part “decoupled” – the amount of money the farmer gets does not vary with the farm’s production – and so the effect on production is likely to be small. The main exceptions are cotton and rice, where support payments that do increase as output increases have been significant in recent years. The U.S. lost a WTO case on cotton on those grounds.
On (b), the most significant products are net exported now, not imported, and even for the most subsidized commodities it is unlikely that the U.S would become a net importer.
On (c), Nonetheless, with no subsidies the U.S. would export somewhat lower quantities, world prices would rise, and this would encourage additional production abroad. This would generate more income for farmers abroad, the case most discussed recently being benefits to growers of cotton in Africa. Even here though I believe the effects would be small – not nearly big enough to solve the economic problems of the African growers. The environmental effects in Africa would depend on the size of the acreage response, what is now being done on land that gets increased cotton production, and what production practices are used. Moreover, there is the question whether increased revenues from cotton might be used to finance environmental improvements. All those factors are so uncertain that I wouldn’t even bet on the [direction] of the effect on environmental quality. So I don’t think one should support U.S. agricultural subsidies on the grounds that they generate improved environmental quality in foreign countries.
2. Would phasing out subsidies mitigate ill effects of their removal?
Yes – but keeping in mind that these ill effects are mainly loss of revenues to the farms that now get them, not environmental effects.
3. Will the U.S. ever eliminate ag subsidies?
They may be reduced under budgetary pressures, but the politics will keep them in place in some form.
Thanks for the question, and thanks Professor Gardner for taking the time for a response.
