agricultural subsidies and farmers in west africa

According to an article in the New York Times, a drastic cut back of U.S. agricultural subsidies will lead to higher revenues for cotton growers in West Africa. The reasoning behind this assumes that subsidization of the American cotton market is an unfair pampering of an industry that would otherwise be unsuccessful in a competitive market, whereas environmental conditions in West Africa would make it the most competitive cotton-growing market. When a crop is subsidized it, in effect, lowers the cost to farmers for growing that crop, enabling them to produce more for the same price. According to the basic principles of supply and demand, when there’s more of a good on the market (increased supply) the price of that good falls. When the price of the good falls, Oxfam argues, that has serious impacts on the standard of living of poor farmers in West Africa whose governments can’t afford to subsidize them. Eliminating these trade distorting subsidies would have net positive effects.

Cotton is a simple-ish case because there are very few consumers of it in West Africa (lower prices benefit consumers even though they hurt growers). Corn, which is also a heavily subsidized U.S. agriculture staple, is a trickier case because although rural Mexican farmers lose out from depressed corn prices, the urban poor benefit by being able to get food cheaper.

In the NY Times article, Dani Rodrik argues that the changes for the West African farmers will be small and imperceptible. He thinks that the most impact will be made by developing nascent industries that can subsume more families and generate sustainably higher wages. He is quite right that the most durable change will not come from liberalizing trade. But that’s no reason not to cut these unfair subsidies if it can make even the slightest difference for those caught in the cotton fields.

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One response to “agricultural subsidies and farmers in west africa

  1. Pingback: an urban explosion « eat bread and salt and speak the truth

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