Farmland Decline, Protectionism, and Biotechnology
Agriculture in the United States
Rati Mehrotra, June 2002
America’s powerful farming lobby has ensured that the United States says one thing about free trade and does the exact opposite. Out of 135 items that have tariffs over 35% in the United States, 100 are in agribusiness, including the commodities that are key exports of developing countries. Another effective barrier apart from tariffs that limit third world market access are the sanitary conditions imposed on fruits and vegetables. Some sanitary conditions are no doubt genuinely required. But others are simply protectionism in another guise. As far as subsidies are concerned, in the year 2001 agricultural subsidies exceeded $30 billion. This equals 30% of the net income derived from agriculture in the country.
It does not make economic sense to spend billions guaranteeing minimum prices for commodity producers in the developed world. It imposes an avoidable cost both on domestic consumers and on developing country producers. Of course, it certainly makes political sense. President Bush recently followed his infamous steel tariffs with a new bill to boost agricultural subsidies, in what is clearly a bid to strengthen support from central and southern states that depend on farm supports. The bill is a turn-around of the 1996 “Freedom to Farm” bill that sought to decrease commodity farmers’ dependence on federal concessions. In fact, government subsidies for some commodities like honey and wool that were removed five years ago are back in business now.
Subsidies lead to over-production and make it difficult for poor countries to sustain their commodity-driven exports. Who benefits? The government, lead by President Bush, gains domestic political points. The biggest farmers and ranchers benefit too. Republican Dan Miller has estimated that 88% of the $31.2 billion in subsidies will go to farms in the top 20% in terms of size.
What if the subsidies were done away with? Would that result in a catastrophe for farmers and consumers? The answer is an emphatic no. One only has to look at New Zealand. That country, five times more dependent on agriculture than the United States, abolished subsidies in 1984. Today farming is a healthy industry with farm output value having soared in constant dollar terms. Only 1% of farms went out of business and land prices, after falling initially, remain high today. This confirms that removing agricultural subsidies is the removal of market distortions, which results in a healthier farm economy. Moreover, it also supports environmental protection since marginal land farmed only to collect subsidies gets replaced with native wilderness.
Decline and Sprawl
A significant trend towards sprawling development in the United States is evident from the National Resource Inventory. Between 1982 and 1992, 1.4 million acres were developed each year. During the economic boom of the period 1992-97, the rate of development accelerated to 2.2 million acres annually. While big cities like Atlanta and New York continue to sprawl, many of the rural areas in the heart of the nation are experiencing population decline.
But this trend is not universal. At the core of land use allocation is the expected return over time. Hence the profitability of the crops (and livestock) raised is the key to sustaining agricultural uses of land in highly populated areas such as the Northeast. However, the presence of subsidies distorts the picture of profitability. Large tracts of land continue to be devoted to commodity farming like cotton and wheat in the Midwest when higher end products or more diverse land use would better serve economic interests.
An analysis of farm trends in key farm counties in the Northeast United States (Genesee, Jefferson, Steuben and Washington) reveals an almost universal decline in number of farms and land devoted to farming. This is evident even in Genesee, which is the most successful agricultural county of New York. Farm consolidation is indeed a nationwide trend. Contrast this with the fragmentation of holdings in most developing countries and it is almost as if agricultural interests are divided into two, unequal camps: on the one hand the rich rancher with his powerful farm lobby groups, and on the other hand the subsistence farmer at the mercy of both natural disasters and variable world prices. Of course this is a simplistic picture, but inequality seems destined to increase unless there is serious trade reform in both Europe and America.
The Bhooth of Biotechnology
The question is what are you really eating? Did you know that a shelf product in the United States is 60% likely to be genetically modified, intentionally or unintentionally? There is no law that requires genetically modified products to be labeled in the United States (unlike in the European Union). The argument is that there is no perceptible difference between the properties of such products and their natural counterparts, hence labeling would create an artificial difference in the mind of the consumer. The American consumer, of course, would rather know what s/he is eating, but is unwilling to pay for that knowledge.
Forget, for the moment, the potential long-term environmental and health risks associated with bio-engineered food crops. The United States is the world leader in biotechnology research. In 1996, U.S. farmers planted Bt cotton, Bt corn, and herbicide tolerant soybeans. In 1997, they increased acreage under these crops and added herbicide tolerant cotton and potatoes. But the subsequent increase in the growers’ profits comes at a price: increased dependence on a few multinational companies that control the lion’s share of the patents, and prevent growers from reusing seeds from the harvest for the next year. The so-called terminator gene that leads to sterile seeds is likely to be integrated into several GMO seeds by 2005. Increased producer dependence, private monopolistic power in agricultural inputs, worsening terms of trade in agriculture and consumer ignorance together paint a disturbing picture for the future of agricultural health and diversity.
What about how this affects developing countries? USDA scientists claim that it is highly unlikely that the presence of the terminator gene in United States could affect crop diversity and farming in the Third World. But the United States is a major supplier of seeds to India, and there are fears that the gene may sneak in anyway, and the resulting cross-pollination could irreversibly alter traditional indigenous crop varieties. Indian farmers (constituting 25% of the global farming community) cultivate an average landholding of just one acre, and grow a variety of indigenous crops. The terminator gene could spell the doom of such small farmers.
Of course, this doesn’t mean that biotechnology is bad in and of itself. Given the constraints of land and water, biotechnology has the potential to help feed the burgeoning population in developing countries. Recognizing this, many countries including India and China have invested in their own biotechnology programs. However, it is to be remembered that biotechnology is just one tool in increasing food security, and how effective it is depends on how it is used.
There is, as of now, no agreed upon international biosafety protocol. Meanwhile, biotechnology is a multi-billion dollar industry in the United States with Monsanto taking the lead as the most visible biotech player. Other conglomerates include DuPont, Novartis and Aventis. The American farmer is increasing adoption of bioengineered seeds, citing increased yields through improved pest control, decrease pesticide input costs, and increased planting flexibility as the main reasons for doing so. But might there be a long-term rising cost associated with this adoption? When large private monopolies control agricultural inputs and the research into their effects, it’s hard to imagine the international market yielding optimal results, economically and otherwise.