Governments in the United States supported farmers with $180 billion in direct and indirect support last year, says Ottawa trade analyst Peter Clark.
That would be more than 50 times Canadian farm support levels, even though the U.S. agriculture sector is 10 times the size of Canada’s.
In a study prepared for Dairy Farmers of Canada and released Nov. 24, Clark said direct and indirect support from federal, state and local governments in the U.S. take many forms, including direct subsidies, insurance premium coverage, expensive infrastructure, market-supporting school lunch programs and water subsidies.
He said the massive level of government support distorts production and trade, yet the U.S. does not declare most of them at the World Trade Organization is rarely called on them.
Meanwhile, the U.S. and the European Union demand more market access through WTO talks but are not willing to significantly reduce domestic subsidies that give their products an advantage.
And Canada plays by the WTO subsidy rules more than most other countries.
“We are very, very holy,” he told a Parliament Hill news conference. “Probably too holy.”
The American subsidy system reacts automatically to market failure, weather disasters or shrinking farm incomes, while Canada’s support system is slow to respond, requires political pressure and responds inadequately.
“Agriculture minister Gerry Ritz claims that Canadian farm policies should ensure that farmers get their money from the marketplace and not from the mailbox,” said Clark. “Unfortunately, this high-minded purist approach is not working and will not work. It is in effect unilateral disarmament for those parts of Canadian agriculture which describe themselves as export oriented.”
Clark said there could be a last-ditch effort to complete the nine-year-old WTO Doha negotiation next year and it is important that other countries realize the subsidy advantage that the two biggest players have.
It is his fourth report for DFC on the value of U.S. farm subsidies in two decades and he said they are becoming more lavish.
In the dairy industry, where Canada is often criticized for its price-fixing supply management system that takes production costs into account, he said U.S. subsidies are worth about 94 cents for a three-litre jug of milk.
Recently, the Paris-based Organization for Economic Co-operation and Development said Canada’s farm subsidies are rising while subsidies in the U.S. and Europe are falling.
“This is not only counterintuitive, it is dead wrong,” he said.
The OECD does not calculate all the U.S. subsidies, but it does calculates the difference between a “world price” and Canadian prices for dairy, poultry and egg products as a subsidy. Recently that gap has grown because the Canadian dollar is stronger and world prices in those commodities have fallen.
