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Draft Paper – Not to be cited without author’s permission

investigation, in case the exporting country complains when anti-dumping duties are imposed. Fourth, political realities work against even filing cases. As IATP argues:

Underlying these technical problems is the political reality of the multilateral trading system. When the ultimate threat is the imposition of sanctions – the suspension of trade – then the tool is a lot easier to apply when the U.S. challenges Bangladesh than vice versa. Just under half of Bangladesh’s exports are destined for the USA; this isn’t a trade relationship Bangladesh can afford to jeopardize. This dependence is of course not reciprocal, leaving the U.S. with considerable leverage over what trade policy course Bangladesh follows. 12

By far the best estimates available of the degree of dumping in global markets come from the work of IATP.13 According to their most recent data, in 2002 US exports continued to be sold at average prices well below the cost of production.14 For example:

  • Wheat was exported at an average price of 43% below cost of production;

  • Soybeans were exported at an average price of 25% below cost of production;

  • Maize was exported at an average price of 13% below cost of production;

  • Cotton was exported at an average price of 61% below cost of production;

  • Rice was exported at an average price of 35% below cost of production.

While dumping is in fact the number one problem of the current international trade regime in farm products, the media continues to focus on US and EU subsidies. The confusion over subsidies and dumping has intentionally or unintentionally extended to the Cairn’s group nations, by the G-20 negotiating bloc, and by entities and people as diverse as the World Bank,15 Oxfam, Jacques Diouf of FAO, Kofi Annan (head of the UN), the Wall Street Journal, and leading mainstream economists.16 A lot of confusion and media hype has been associated with a widely circulated estimate of $300 billion per year in wealthy country subsidies, a figure popularized by the New York Times in the famous 2003 ‘Harvesting Poverty’ series.17 However this figure is a major overestimate, as it conflates direct government payments with categories of what are more correctly called “supports,” like the dollar value to farmers of policies that raise consumer prices, but which involve little or no government payments and actually raise rather than lower prices. [Note that farm policy in most countries is a mixture of wildly contradictory policies]. The correct figure for actual subsidies is no more than 30% of the $300 figure.

18

While dumping is what it makes it impossible for Third World farmers to compete in their own home markets—it is not today largely caused by subsidies. This may not be immediately obvious, as statements about, for example, ‘subsidized American maize

flooding

into

Mexico

undercut

peasant

production’

make

such

logical

sense.

Yet

blaming subsidies for low commodity prices is actually Especially after the 1996 and 2002 US Farm Bills, and the

to reverse cause and effect. 2003 reform of the Common

Agricultural Policy (CAP) in the form of emergency payments,

EU, subsidies are counter-cyclical

largely triggered by low prices, in the payments, non-recourse loans, etc.

12

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