There may be sound economic arguments that support a world without agricultural subsidies. But we don't live in one, says Texas Tech's Darren Hudson, an internationally-recognized agricultural economist.

Speaking Wednesday (Jun. 3) at a U.S. House Agriculture Committee hearing, the director of Tech's International Center for Agricultural Competitiveness offered that other countries are treating their agricultural sectors as a national asset for security purposes, and for the United States not to consider the implications of those choices leaves us at a competitive disadvantage.

"The scope of agricultural subsidization is broad and deep globally with virtually all major producing countries providing some type of support," Hudson said.

As Hudson put it early in his testimony, the issue of subsidies for agriculture has been a contentious one for quite some time. U.S. federal budget concerns have continually put pressure on lawmakers to find avenues for budget savings in all areas, but agriculture has been a popular target because it is perceived as low hanging fruit. Opposition groups have framed agricultural subsidies as corporate welfare and argued that these subsidies distort domestic and international markets.

"Their logic is based on the United States acting in a vacuum, that is, the United States is the only country that subsidizes its agriculture, and, therefore, the only country that impacts world markets," Hudson said. Virtually every major agricultural producing country provides some sort of subsidies to their producers, be they complex systems as found in the United States and Europe, or simply supporting research and development projects to support agricultural productivity.

Sometimes impressions persist well beyond the point where reality has left the impression behind, Hudson said. In this case, the United States provided more support than major developing agricultural producers, leading to the impression that the United States was the primary distorter of markets. But, clearly, that's changed with major developing countries far outpacing the United States, and, in fact, on an opposite trajectory with total support, he said.

The most widely recognized type of support is direct price or income support. The European Union provides direct income supports as opposed to price supports. These direct subsidies are more transparent than other types of subsidies, and are, therefore, easier to identify and delineate the potential effects. Because the United States has used these approaches for some time, it has been much easier to target the U.S. subsidies in the media.

Indirect subsidies come in a variety of forms, Hudson added. The most commonly used type of indirect subsidy is an input subsidy. Countries subsidize such things as fertilizer, seed, transportation, energy and fuel. These subsidies are primarily used in developing countries such as Egypt, India, Mexico, Pakistan, Turkey, Uzbekistan, and the countries of West Africa, among others. Input subsides can be fairly innocuous and low value like slight price breaks on electricity to quite substantial like "free seeds" for cotton in West African countries.

At the hearing's close, Hudson explained his objective. "While the United States does provide significant support, the level of U.S. support is only average or below average in most cases, overall support is trending downward, and U.S. support is small relative to other major producing countries and regions." he said.

Written by Norman Martin

CONTACT: Darren Hudson, Director, International Center for Agricultural Competitiveness, Department of Agricultural and Applied Economics, Texas Tech University, (806) 834-0546 or darren.hudson@ttu.edu

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