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End to subsidies is best aid for Africa
by Laurie Goering
July 4, 2005 The Chicago Tribune



(KRT) - For decades, developed nations have been hatching grand plans to bail out Africa. Years of World Bank and International Monetary Fund loans, emergency food deliveries, hefty aid donations, special trade deals and pop star charity concerts, however, have left the continent as poor as ever.

Now developed-world leaders, who meet this week in Scotland, say they have a clearer idea of how to genuinely help Africa - and they're ready to act on it.

Their finance chiefs have signed a deal to forgive $40 billion in debt run up by 18 of the world's poorest countries, most of them in sub-Saharan Africa. They also hope to double foreign aid to the continent to an eventual $25 billion a year.

But after years of negotiations and promises, rich nations show few signs of lifting one of the biggest obstacles to better times on the continent: their massive agricultural subsidies.

The United States government last year paid 7,500 of the country's biggest cotton growers $3.2 billion in production subsidies - nearly a half-million dollars per farmer on average. The subsidies are necessary, producers argue, because foreign cotton growers, in places like West Africa and Brazil, can grow cotton much more cheaply than those in the United States. Without the help, they argue, they would be out of business.

Europe, similarly, pays about $3.2 billion dollars a year in subsidies to its sugar producers, guaranteeing them prices for their crops that - like cotton in the United States - give them an income three times higher than what they would get selling their products on an open world market.

The subsidies promote overproduction, cost taxpayers billions and artificially push down crop prices worldwide. In Africa, where governments can't afford to give their farmers such assistance, the subsidies create a disaster.

In dry countries like Burkina Faso, Mali and Benin, perched on the southern edge of the Sahara, cotton is about the only viable crop. Growers there can produce it at about a third of what it costs in the United States, according to Oxfam, a British anti-poverty group. In a free-trade environment, the growers would be able to boost their sales, their families' income and the welfare of their extremely poor countries.

But subsidies to U.S., European and even Chinese cotton farmers mean the 10 million people who rely on cotton in West and Central Africa are struggling to survive, hit by unfair competition and artificially low world prices for cotton. They're eager to improve their plight through trade rather than aid, as the wealthy world has long urged. It's just that the rich nations won't let them.

"While the U.S. advocates free trade and open markets in developing countries, its subsidies are destroying markets for vulnerable farmers," Oxfam says.

Britain and the United States say they're eager to end the subsidies. But France - the biggest beneficiary of European agricultural supports - is dragging its feet, to Tony Blair's frustration, and both Europe and the United States insist they can't act on their own.

"America cannot unilaterally end agricultural subsidies because American farmers compete with more highly subsidized European farmers," said Jendayi Frazer, the U.S. ambassador to South Africa. President Bush has proposed 100 percent elimination of agricultural subsidies, she said - but only if Europe goes along.

That remains unlikely in an increasingly divided Europe. Over protests from infuriated farmers, the European Union has proposed cutting its inflated prices paid to sugar producers by 39 percent - but only if ministers of the various nations agree at a meeting in November.

The United States, similarly, is proposing a complex worldwide plan to cut billions in cotton supports each year, but only if other nations go along.

That means Africa is unlikely to see any real relief soon, despite clear World Trade Organization rulings that both the European sugar and U.S. cotton subsidies are violations of free-trade rules.

For Africa, that means more bad times ahead. Eliminating debt is a great start to relieving African poverty and new aid would be an enormous boost for social programs and transportation infrastructure. But unless Africa is allowed to sell its products at fair prices, the continent will never pull itself out of poverty and will need bailouts over and over again, analysts say.

Oxfam estimates that if Africa boosted its share of world exports by just 1 percent worldwide, it would earn an additional $70 billion: five times what the continent gets in aid each year.

"Trade ... is a source of unprecedented wealth," Trevor Manuel, South Africa's finance minister, said in April. "We cannot talk about productive partnerships for development without there being significant and rapid progress in market access."

Paul Wolfowitz, the head of the World Bank, said as much recently on his first trip to Africa, insisting that "developed countries have to act together to reduce agricultural subsidies and open markets."

One of the ironies of rich-world agricultural subsidies is that they hurt even the rich nations themselves. U.S. taxpayers each year hand over $19 billion in agricultural subsidies primarily to a small pool of already wealthy corporate farmers. Backers of the subsidies insist that supporting farmers at taxpayer expense ensures that the United States remains self-reliant in key crops. But the need for self-reliance in cotton rings somewhat hollow from a nation that relies heavily on imports of more vital products. Three of every five barrels of oil the U.S. uses, for instance, come from overseas.

Whether world leaders come through with massive new aid for Africa at this week's G-8 summit remains to be seen. The United States has indicated that its growing aid to Africa is already substantial enough; other nations may point to the continent's own failings - including the African Union's refusal to strongly rebuke Zimbabwean President Robert Mugabe for human-rights violations - as evidence that it is not ready to be genuinely accountable.

The best indication of whether Africa's prospects are set to improve may come only in December, when the next round of World Trade Organization talks gets under way in Hong Kong. There, agricultural subsidies are expected to be at the top of the agenda.

As has been the case in countries like India and China, "growth is what will drive poverty reduction," not continuing aid, said Niall FitzGerald, the chairman of Reuters and co-chairman of the recent Africa Economic Summit in Cape Town. What rich countries need to do, he said, is clear the way for Africa to compete.

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(Laurie Goering is the Chicago Tribune's Africa correspondent.)


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