Emerging countries’ subsidies
At the beginning of April, President Luiz Inácio Lula da Silva, in an online participation in the Latin American Summit on Food Security and Nutrition, organized by Mexico, made a strong statement: "The multilateral trading system must get rid of the shameful agricultural subsidies of the rich countries," which, according to him, "sabotage the embryonic agriculture of developing countries."Mr. Lula’s statement makes a lot of sense. But what caught one’s attention was that he limited the confrontation to rich and poor, repeating a vision from 2003. And he ignored that the new big suppliers of agricultural subsidies, which could threaten Brazil’s shares in trade in the future, are emerging countries like India and China.You only have to look at the fact that the agricultural G20, the great tactical movement that Brazil prepared and led, was completely emptied a few years ago when the conflict of interests between exporting countries and emerging subsidizing countries became apparent. This is what brought Brazil back to the Cairns Group, which brings together exporters.The United States and the European Union continue to provide subsidies to their farmers and create new programs and barriers under the argument of environmental sustainability. One example is the U.S. Inflation Reduction Act, a $391 billion subsidy package to promote the country’s transition to clean energy, which includes nearly $40 billion for agriculture and rural development.But one can’t ignore the fact that it’s now creating repeated distortions in markets, damaging the environment, and not necessarily solving food security problems. In China, aid to the agricultural sector grew by 204% between 2011 and 2021, reaching $276.4 billion, more than the U.S. and EU combined. Chinese aid to its farmers is already three times higher than in 2000-2002.On average, subsidies will account for 14.8% of Chinese farmers’ gross income in 2019-2021. This compares with 19% in the European Union, 11% in the United States, and around 5% in countries such as Brazil, Australia, New Zealand, and Chile.Beijing has implemented a reform that has reduced support for some products. However, payments based on acreage continue to increase, and this is one of the most trade-distorting ways. In Indonesia, Thailand, the Philippines, and other emerging economies, agricultural subsidies are also on the rise.But nothing compares to India. A paper submitted to the World Trade Organization (WTO) by exporting...
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