Agriculture export dumping booms over the last 10 years

Posted March 3, 2005, IATP.org: Despite the now ten-year-old World Trade Organization (WTO) agreement to end market distorting practices in agriculture, commodity dumping by U.S. food companies continues and in greater numbers than when the agreement was made. According to an Institute for Agriculture and Trade Policy (IATP) report, all five major U.S. commodities were sold well below the cost of production in 2003.

“It is clear that the WTO Agreement on Agriculture is doing nothing to address agricultural dumping and its severe consequences for farmers around the world,” said IATP President Mark Ritchie. “The low global prices caused by dumping hurt farmers around the world, including U.S. farmers. It’s time for trade negotiators to put this issue front and center.”

Using data from the U.S. Department of Agriculture (USDA) and the Organization for Economic Cooperation and Development (OECD), IATP analyzed price information from 1990 through 2003 and found that U.S. commodities continue to be sold well below the cost of production. Analysis of 2003 data revealed:

• Wheat was exported at an average price of 28 percent below cost of production;
• Soybeans were exported at an average price of 10 percent below cost of production;
• Corn was exported at an average price of 10 percent below cost of production;
• Cotton was exported at an average price of 47 percent below cost of production;
• Rice was exported at an average price of 26 percent below cost of production.

Dumping is one of the most damaging of all current distortions in world trade. Yet, since its inception the WTO has refused to address or even acknowledge its negative impacts on rural economies around the world. Developing country agriculture, vital for food security, rural livelihoods, poverty reduction and generating foreign exchange, is crippled by the predatory competition from major commodities sold at well below cost of production prices in world markets.

The report found that dumping levels increased significantly for every commodity after the passage of the 1996 Freedom to Farm bill. The 1996 bill, followed by the 2002 U.S. Farm Bill, produced a vast structural, price-depressing oversupply of major agricultural commodities. This oversupply has driven commodity prices down worldwide. Both the 1996 and 2002 Farm Bills were driven by efforts to make them compliant with WTO rules. The result has been the institutionalization of agricultural dumping by U.S. farm policy, the report concluded. Each of the five major export commodities saw a significant jump in export dumping when comparing the seven years (1990-1996) prior to the 1996 Farm bill to the subsequent seven years (1997-2003):

• Wheat dumping levels increased from an average of 27 percent per year pre-1996 to 37 percent per year post 1996;
• Soybean dumping levels increased from an average of 2 percent per year pre-1996 to 11.8 percent post-1996;
• Maize dumping levels increased for an average of 6.8 percent per year pre-1996 to 19.2 percent post-1996;
• Cotton dumping levels increased from an average of 29.4 percent pre-1996 to an average of 48.4 percent post 1996;
• Rice dumping levels increased from an average of 13.5 percent pre-1996 to an average of 19.2 percent after 1996.

“Agriculture subsidies are not driving dumping,” says Ritchie. “It is the absence of farm programs that bring production in line with supply. Without these programs, farmers will over-produce with or without subsidies, and dumping will continue.”

The full report, along with a one-page fact sheet, is available at: iatp.org. The Institute for Agriculture and Trade Policy works globally to promote resilient family farms, communities and ecosystems through research and education, science and technology, and advocacy.