Poor countries say the subsidies also work against the administration's avowed desire to reduce poverty and to diminish foreign negative opinion against the United States.
The main point of the dispute is by underwriting its largest farmers; the United States is flooding the world market with inexpensive corn, wheat, rice and soybeans, which sell at half what it costs to produce. That leads to artificially low world prices, which in turn undercut grain produced by farmers in countries that do not give subsidies. The grain market becomes distorted, domestic markets are ruined for producers overseas and their chances of making it into foreign markets are reduced, if not annihilated. However, some developing countries with sufficient foreign reserves prefer to import cheap American food as they build up other sectors of their economy, giving them more resources to divert to a stronger comparative advantage that the country may already have.
Despite the international complaints, the new American farm policy conforms to the current rules of the World Trade Organization. The United States is not alone as a wealthy country that gives generous welfare programs to farmers. The 15-nation European Union has been known for giving large subsidies to its seven million farmers. Disputes between the world's major economies, United States, Europe and Japan, over farm subsidies are nothing new. But the latest American increase, the European Union says, comes as they are trying to reduce their own payments.
With plans to admit 10 new countries, including Poland, where nearly one-third of 40 million inhabitants identify themselves as full or part-time farmers, the European Union says it must cut expensive programs to support agricultural production and give more money for conservation and rural development.
Critics of the new American policy say that, by giving in to the domestic farm vote, the United States will have a difficult time persuading other countries to open their markets to American agricultural products.
