Europe pays farmers to destroy food -- Double standards exposed

[Texan]

While India was criticized so much over the last few weeks for blocking a "historic WTO deal" in order to subsidize food for the poor and ensure that farmers receive minimum support price, Europe seems to not follow the same standards they expect India to follow. With Russia blocking import of many food items from European and North American countries, Europe has now resorted to "price fixing" for those food items to prevent prices from falling exponentially. In a way, this justifies Indian government's stance of protecting its farmers. It also illustrates the short-sightedness of the former Congress government, which on the one hand agreed to the WTO deal in principle and at the same time also introduced the Food Security Bill that would directly contradict this.

Europe pays farmers to destroy food hit by Russian ban The latest: Farmers in Europe will be paid to destroy or give away fruit and vegetables to stop prices from collapsing after Russia banned imports in retaliation for Western sanctions. EU officials said Monday they were setting aside 125 million euros ($167 million) to compensate producers for not selling a range of perishable items, harvesting them before they ripen or leaving them to rot. "This is a measure aimed at reducing the level of supply so the prices don't drop to crisis levels," said European Commission spokesman Roger Waite. Russia hit back at the latest round of Western sanctions over Ukraine with its own year-long ban on imports of food from Europe, the U.S., Australia, Canada and Norway. The emergency assistance will take effect immediately and run until November, under existing EU rules covering support for farmers' incomes in times of crisis. The products include apples, pears, tomatoes and cucumbers, and are all in full season. Farmers have few options to store them or find alternative markets, and prices for some products have already fallen by more than 50%. EU exports of fruit and vegetables to Russia were worth about $2.7 billion last year. Countries hardest hit by the Russian ban include Poland, Spain, and Lithuania. EU officials hope much of the withdrawn produce will be given away for free -- to food banks, prisons, schools or hospitals -- but some will be left on trees or in the ground, or harvested early and then destroyed. European farmers and food cooperatives welcomed the move but warned that the Russian ban could cause long lasting damage to the sector, and the cost would be much higher than the money earmarked for support. Officials will continue to monitor food markets, and could provide support to producers of other foodstuffs as needed.

http://money.cnn.com/2014/08/18/news/europe-farmers-russia/index.html?iid=HP_LN

[JaiRamesh2]

Nothing new, Europe farmers have resorting been to this for years, read into the infamous butter mountains or milk lakes, where tonnes of diary products were chucked away to rot because the farmers couldn't get the prices they wanted.

[Texan]

How Can India Be Breaking WTO Rules When Rich Countries Spend So Much More on Their Farmers? The collapse of a global trade deal last month over India’s right to stockpile food has some crying “double standardsâ€: Rich countries grouse about poor countries’ agricultural subsidies, the complaint goes, while doling out handsomely to their own farmers back home. Speaking before India’s parliament last week, Commerce Minister Nirmala Sitharaman said it is “regrettable†that the World Trade Organization can’t agree on how to treat India’s efforts to provide food for its poor “while the rich world can continue to subsidize their farmers unabatedly.†Arvind Virmani, India’s former representative to the International Monetary Fund, decried developed countries’ “hypocrisy†over subsidies, echoing language used by two Tufts University researchers in an Al Jazeera op-ed. It’s an appealing narrative, one with the added benefit of being somewhat true. The U.S. government, for instance, supports grain producers so massively that it ends up subsidizing the production of high-fructose corn syrup and fueling obesity. The European Union, meanwhile, pays off everyone from Spanish citrus farmers to Greek olive growers to French dairy producers—mostly, cynics would say, to keep them from taking to the barricades. (This week’s beneficiaries of EU largess: the Continent’s growers of peaches and nectarines.) But for the WTO, the relevant question isn’t just how much support governments provide to their farmers. It’s also how they provide this support. And it’s in asking the second question that the character of India’s farm subsidies, and the reason they may be at odds with WTO rules, comes into focus. First, the question of how much. During the trade talks in the late 1980s that led to the creation of the WTO, countries that were paying high farm subsidies at the time agreed to reduce them gradually on a fixed schedule. Among these countries were the U.S., the EU (which was the European Community at the time) and Japan. Here’s how their agricultural subsidies over the last two decades look relative to their WTO-imposed limits: India’s subsidies were negligible in the late ’80s and hence didn’t have to be reduced over time. Today, Delhi spends billions buying rice and wheat from planters at above-market prices. But as a developing country, it only needs to keep its farm support each year below 10% of the value of annual agricultural production. Here’s how U.S., EU and Japanese subsidies look as a share of their farm production: So it’s true that rich countries pay out billions each year to support farmers. But it’s not the case that these payments are “unabated†or even in excess of WTO limits. Rich countries do pay a lot more to their farmers than they report to the WTO as “subsidies,†however. And here’s where the question of how agricultural support is provided becomes important. Under WTO rules, subsidies only count against a country’s limits if they are deemed to distort trade. Arguably, all forms of government intervention create distortions. But for the WTO’s purposes, subsidies distort trade if they’re tied to the prices or production quantities of particular crops. Hence, supporting agricultural research or training is OK by the WTO; compensating farmers when crop prices fall isn’t. Subsidizing electricity, fertilizer or pest control isn’t trade-distorting; paying farmers to grow specific crops, as India does, is. Developed countries have fulfilled their WTO subsidy commitments by shifting from one kind of support to the other. In the U.S., a series of high-profile WTO disputes has driven Washington away from direct, price-linked payments to farmers, instead boosting crop insurance and other protections. The EU has also moved away from paying growers so generously for their output that “wine lakes and butter mountains†became Brussels shorthand for wasteful overproduction. Today, European farmers get government support essentially for being good stewards of the land, for managing it sustainably and keeping it in cultivable condition. They choose, based largely on market conditions, what to grow and how to grow it. EU funds also go toward promoting overall development of rural areas, for instance by encouraging tourism. Japan, in 1998, achieved a big cut in its trade-distorting subsidies by eliminating price supports for rice, even though researchers have found that politically motivated rice procurement continued to occur on occasion. Rice growers were also offered income support that was classified, at the WTO, as a food-security measure. A decade later, Tokyo converted price supports on other crops into incentives to promote large-scale farming, on the assumption that consolidation could increase productivity. Ms. Sitharaman, the Indian commerce minister, acknowledged last week that rich countries adjusted their farm policies to ensure WTO compliance. But she said they could make this shift only “because of their deep pockets.†The current WTO rules are vague on a lot of issues, including what exactly gets counted as trade-neutral and how inflation affects subsidy calculations. And because the group operates on the basis of disputes launched by one or several member governments against another, policing the rules is inherently political. But this much is clear: India isn’t alone among developing countries in having waded into hot water over farm subsidies. China, Brazil and Indonesia have also seen growing levels of trade-distorting support in the last decade. None of those countries refused to back the WTO trade-easing deal last month, however. “So much public attention is stuck in the old notion that all developed countries are high-support countries and all developing countries are low-support countries,†says Lars Brink, an economist who studies agricultural policy. “The world has changed a lot over the last 10 or 20 years.â€

http://blogs.wsj.com/indiarealtime/2014/08/13/how-can-india-be-breaking-wto-rules-when-rich-countries-spend/