Global Agriculture and the American Farmer: Opportunities for U.S. Leadership

By Kimberly Ann Elliot

The United States is one of the world's largest producers and exporters of a range of agricultural commodities, so U.S. policies have big effects on global food security and other global public goods linked to agriculture. On the positive side of the ledger, President Obama created the Feed the Future aid initiative to promote agricultural development in poorer countries as a tool to achieve the global goals of ending hunger and extreme poverty, which are mostly rural. But that generosity is undercut by U.S. support for farmers and livestock producers that suppresses global prices for developing country producers, increases food market volatility, increases greenhouse gas emissions, and contributes to the spread of antibiotic-resistant bacteria.

In this book, Elliott focuses on three policy areas that are particularly damaging for developing countries: traditional agricultural subsidy and trade policies that support the incomes of American farmers at the expense of farmers elsewhere; the biofuels mandate, which in its current form increases market volatility while doing little if anything to mitigate climate change; and weak regulation of antibiotic use in livestock. While noting that broad reforms are needed to fix these problems, Elliott also identifies practical steps that U.S. policymakers could take in the relatively short run to improve farm policies for American taxpayers and consumers as well as for the poor and vulnerable in developing countries.

• Language: English
• Publisher: Center for Global Development
• Release date: Dec 30, 2017
• ISBN: 9781944691004

Book preview

GLOBAL AGRICULTURE

and the

AMERICAN FARMER

OPPORTUNITIES FOR

U.S. LEADERSHIP

KIMBERLY ANN ELLIOTT

CENTER FOR GLOBAL DEVELOPMENT

Washington, D.C.

Copyright © 2017

CENTER FOR GLOBAL DEVELOPMENT

2055 L St. NW

Washington, DC 20036

www.cgdev.org

All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without permission in writing from the Center for Global Development.

987654321

Library of Congress Cataloging-in-Publication data

Names: Elliott, Kimberly Ann, 1960– author.

Title: Global agriculture and the American farmer : opportunities for U.S. leadership / by Kimberly Ann Elliott.

Description: Washington, D.C. : Center For Global Development, [2017] | Includes bibliographical references and index.

Identifiers: LCCN 2016057406 | ISBN 9781933286983 (pbk.)

Subjects: LCSH: Agriculture and state—United States. | Agriculture and state—Developing countries.

Classification: LCC HD1761 .E452 2017 | DDC 338.1/873—dc23 LC record available at https://lccn.loc.gov/2016057406

9 8 7 6 5 4 3 2 1

Composition by Elliott Beard

CONTENTS

Preface

Acknowledgments

1    Agriculture, Development, and Global Public Goods: U.S. Policies at Cross-Purposes

2    Agriculture, Poverty, and Food Security in Poor Countries

3    Domestic Agricultural Support at the Expense of Developing Country Farmers

4    Biofuel Policies at the Expense of Food Security and Climate Change

5    Livestock Support at the Expense of Global Health

6    Grasping Opportunities for American Leadership

Appendixes

A    Though Largely Hidden, U.S. Biofuel Policy Contributes to Palm Oil Demand

B    Livestock and Climate Change

References

Index

PREFACE

AMERICAN FARMERS ARE AMONG THE most productive in the world and the United States is one of the world’s largest producers and exporters of a range of staple foods. The U.S. government is also, by far, the largest provider of bilateral aid for agriculture in developing countries. American policies will thus have disproportionate effects on whether the world achieves the Sustainable Development Goals of ending the hunger and extreme poverty still found in many rural areas. U.S. policies also affect the provision of global public goods that are important for development.

The problem addressed in this book is that some U.S. policies to support domestic farmers conflict with efforts to use agriculture as an antipoverty tool abroad. The United States is not alone in subsidizing agriculture, and it is by no means the worst offender in this regard. But its outsized role in agricultural markets makes American leadership the key to progress in this area. In this book Senior Fellow Kimberly Elliott focuses on three areas where U.S. policies disproportionately favor farm interests and do so in ways that are particularly damaging for the poor and vulnerable in developing countries: agricultural subsidies and trade barriers that distort global markets; biofuel mandates that fail to mitigate climate change; and the failure to adequately regulate antibiotic use in livestock, which contributes to the global spread of antibiotic-resistant super bugs.

U.S. agricultural subsidies impose costs on U.S. taxpayers. And, by pushing down global food prices, they make it harder for poor farmers and rural workers in developing countries to earn a decent living in agriculture.

In the mid-2000s U.S. (and European Union) policymakers ratcheted up policies to promote the use of food-based biofuels as a means of reducing dependence on oil imports and reducing greenhouse gas emissions from fossil fuels. However, these policies raise the risk of additional deforestation or other land use changes to replace the food crops now going into fuel tanks. These negative effects on forests and soil quality, among other things, could mean that the net impact of this generation of biofuels is more carbon in the atmosphere, not less.

Finally, effective antibiotics are another global public good put at risk by certain agricultural policies. Until recently, U.S. regulators allowed farmers and ranchers to buy antibiotics over the counter—mixed in feed or in water-soluble form—to promote growth in healthy animals, rather than solely to treat sick ones. Without further steps, livestock producers could still use large amounts of antibiotics in similar ways to prevent disease in large-scale animal feeding operations. These uses encourage the survival of drug-resistant bacteria, increasing the risk of deadly antibiotic-resistant infections in people. The threat is particularly potent in developing countries where clean water and sanitation are insufficient and the disease burden is high. The modest steps that U.S. and other policymakers have taken to reduce antibiotic use in livestock do not go nearly far enough. Moreover, the response must be global to be fully effective.

While noting that broad, often global, reforms are needed to fix each of these problems, Elliott identifies practical steps that U.S. policymakers could take in the relatively short run to improve farm policies for American taxpayers and consumers as well as for the poor and vulnerable in developing countries. With this volume Elliott builds on the analysis in her previous CGD book, Delivering on Doha: Farm Trade and the Poor (copublished with the Peterson Institute for International Economics). Global Agriculture and the American Farmer adds to a body of CGD work examining how aid, trade, and other policies in the advanced countries can do a better job in addressing food security and rural poverty in developing countries. We hope that this volume contributes to the debate over needed reforms by distilling any number of complex and sometimes hard-to-follow U.S. policies into an accessible form.

Masood Ahmed

PRESIDENT

CENTER FOR GLOBAL DEVELOPMENT

ACKNOWLEDGMENTS

THIS BOOK HAS BEEN A long time in the making, and first and foremost I would like to thank Nancy Birdsall for her strong encouragement throughout. As with my previous book on agriculture, Delivering on Doha, David Orden was an indispensable resource, and I am extremely grateful for his continued help and support. Joe Glauber also read more than one draft and allowed me to plumb his deep knowledge on farm bill and agricultural trade issues. I am grateful to CGD colleagues Alan Gelb and Erin Collinson for reading the entire manuscript and providing their usual clear-headed and insightful comments. I also benefited greatly from the comments of an anonymous reviewer and the discussion in a January 2016 study group, including (in addition to those named above) Grace Burton, Charles Kenny, Gawain Kripke, Will Martin, John Osterman, Erik Pederson, Vijaya Ramachandran, and Emmy Simmons. While any remaining errors are mine alone, they surely would be more numerous without the help I received from so many generous and patient colleagues.

Last but by no means least, the book would not have been possible without the research assistance of Ted Collins and Albert Alwang. Janeen Madan was the last of this excellent group and did yeoman’s work assisting with the final research tasks, as well as in pulling everything together. I would also like to thank Rajesh Mirchandani, Emily Schabacker, and the rest of the CGD communications team for their help in producing and promoting this book.

1

AGRICULTURE, DEVELOPMENT, AND GLOBAL PUBLIC GOODS

U.S. Policies at Cross Purposes

THE CENTRAL AIMS OF THE Sustainable Development Goals are to eliminate extreme poverty and hunger by 2030. As the goals recognize, this will not happen without attention to agriculture. Right now, a billion people scrape by on just over $1 per day. Most of them live in rural areas and most are dependent on agriculture for their meager livelihoods. On any given day, millions more are at risk of falling back into poverty because of a bad harvest or an unexpected illness. Even though they farm for a living, these families are often malnourished and hungry. An estimated 150 million children younger than age five will have their growth stunted by malnutrition, and many will suffer life-long health and cognitive problems as a result. The global poor are also most at risk from climate change, which has obvious links to agriculture, and are vulnerable to antibiotic-resistant diseases, which have less-well-understood connections to agricultural practices.

The United States is one of the world’s largest producers and exporters of a range of agricultural commodities, so U.S. policies that affect agriculture will play a large role in whether the international community can end hunger and extreme poverty, and do so sustainably. During the food price spikes of 2007–08, President George W. Bush sharply increased foreign assistance for food security and nutrition. His successor, Barack Obama, with strong support from Congress, created Feed the Future and the New Alliance for Food Security and Nutrition to provide assistance for (climate-smart) agricultural development in food-insecure countries.

Yet U.S. policies often work at cross purposes. Since before World War II, the United States has provided subsidies and trade protection to farmers in ways that suppressed global prices on global markets, distorted incentives to invest in developing country agriculture, and undermined the livelihoods of poor farmers in other countries. Then, just as the long-run secular decline in agricultural prices seemed to be bottoming out, the United States and the European Union (EU) ratcheted up policies promoting demand for food-based biofuels, which helped turn modestly rising food prices into sharp spikes that roiled global markets. And when commodity prices started falling again in 2013–14, the U.S. Congress ensured that subsidy programs were in place to shield American farmers from revenue declines.

In addition to the price and other global market distortions from U.S. (and other) farm programs, some agricultural policies create negative global spillovers because of what they fail to do. Biofuel support policies were touted as part of the solution to climate change, but both U.S. and European policymakers failed to develop effective sustainability criteria to ensure that would be the case. Instead, corn-based ethanol and oilseed-based biodiesel may well be increasing greenhouse gas (GHG) emissions, relative to their fossil fuel counterparts. Another growing concern is the use of massive amounts of antibiotics to promote growth and prevent disease in livestock, which contributes to the proliferation of antibiotic-resistant bacteria. Despite long-standing concerns, U.S. authorities have only recently taken modest steps to regulate the practice.

American policymakers are genuinely committed to promoting global food security and poverty alleviation, addressing climate change, and combating antimicrobial resistance. And farmers face risks that markets cannot handle, so there is a role for public policy. But policymakers all too often fail to ensure that the agriculture sector shoulders a fair share of the burden of the negative spillovers that it produces. This book focuses on U.S. agricultural policies and practices in these three areas—traditional agricultural subsidies, biofuels, and the use of antibiotics in livestock—because they have global implications that are particularly harmful for the poor and food-insecure in developing countries. Of course, American consumers and taxpayers would also benefit from such reforms.

THE AGRICULTURE AND DEVELOPMENT DEBATE SHIFTS

In the first decade of the new millennium, the goals of reducing poverty and hunger sometimes seemed to be in conflict. When food prices spiked in 2007–08, some experts estimated that more than 100 million people might fall into deeper poverty and go hungry. Many blamed biofuel subsidies and mandates in rich countries for diverting food crops for fuel. Just a few years before, however, agricultural prices had been at historically low levels and the debate around rural poverty was starkly different. At that time, high-income countries were in the spotlight because they were providing billions of dollars in support to their relatively well-off producers at the expense of millions of poor farmers in developing countries.¹

In the wake of the food price spikes, advanced country governments responded with rather more alacrity than they had to the earlier criticisms of their price-suppressing policies. But they did so in a limited way. In L’Aquila, Italy, in 2009, the Group of 8 (G8) industrialized countries put food insecurity at the top of the development agenda and committed $20 billion over three years to address it. President Barack Obama launched the Feed the Future initiative in 2010 and pledged $3.5 billion for the effort. In 2014, the administration’s ongoing commitment included spending a total of $2.4 billion for Feed the Future and related food security funding, including nonemergency food aid.²

What is striking, however, is what the United States and other G8 countries did not do. They have mostly not reformed policies that undermine food security and generate negative global spillovers if it would mean taking on their own domestic agricultural interests. To the contrary, both the United States and the EU ramped up their support for biofuels in 2008–09 (though the EU later backtracked a bit). In 2008, and again in 2014, the U.S. Congress passed farm bills that maintained an array of subsidies for American farmers. Overall, from 2002 to 2013 the U.S. government spent not quite $10 billion for agriculture and nutrition assistance to developing countries and more than $300 billion to support the incomes of American farmers.³

The United States is not the world’s worst offender when it comes to supporting the agriculture sector. The levels of trade-distorting farm support remain far higher in Japan, Korea, and much of Europe. But the United States is among the world’s largest producers and exporters of a number of agricultural commodities, and Congress has shown a great reluctance to stop intervening in agricultural markets.⁴ The United States is also the world’s largest market for biofuels and one of the largest users of antibiotics in livestock. While pressures are growing for reform in all three areas, the forces opposing it are potent.

Although the EU still provides billions of dollars in overall agricultural support, it has gone further in addressing concerns about its agricultural policies. EU policymakers converted most producer support to less trade-distorting forms and reduced the incentives to consume more food-based biofuels. They responded to the antimicrobial resistance threat with more vigorous action against antibiotic use in livestock than in the United States to date. Each chapter thus draws contrasts with EU policy as applicable.

The policies of large emerging markets where beggar-thy-neighbor policies are beginning to take root are also of increasing interest. In addition to providing potentially trade-distorting support to farmers, India’s decision to ban wheat and rice exports in 2007 contributed to the price spikes for those commodities. While China’s support for farmers is expanding, alarm over the use of antibiotics in its industrializing livestock sector is increasingly urgent. Thus another reason it is important for the United States to reform is that emerging powers are not likely to respond to do as I say, not as I do rhetoric.

PLAN OF THE BOOK

Chapter 2 begins by providing background on the important role of agriculture in many of the world’s poorest countries and how the shifts in agricultural markets in the 2000s affected them. Agriculture is the largest source of employment in the poorer countries and is also often an important source of export revenues. But food also accounts for a large share of household expenditures for the poor, and many poor farmers are net buyers of food because of their low productivity. Thus, higher food prices can increase poverty in the short run where the number of poor net buyers exceeds the number of poor net sellers. A growing body of research suggests, however, that (somewhat) higher prices reduce poverty in the medium and long run.

Chapter 3 turns to the problems presented by agricultural subsidies and trade barriers. Government support for agriculture has declined in most high-income countries since the 1990s. However, this decline in support occurred mostly because rising prices reduced the need for subsidies, and only in a few cases because governments embraced policy reform. The U.S. Congress passed a farm bill in 2014 that took some steps in a more market-oriented direction, but it did so in ways that put U.S. programs at odds with the direction of reform embodied in international trade rules. And because the policy reforms in the United States and other high-income countries remain incomplete at best, the distorting impact of subsidies and trade barriers will resurface if commodity prices resume their earlier trend decline.

Chapter 4 turns to biofuel policies. The United States and the EU boosted support for biofuel consumption at a time when commodity markets were already tightening, and they did so mostly through inflexible mandates, which contributed importantly to the food price spikes in 2007–08. The price volatility created by these policies had negative consequences for consumers and producers