Do agricultural subsidies protect domestic jobs?
The simple answer to the question is yes, some jobs! A follow up question is, at what cost? Rich countries subsidize their farmers at a magnitude of about $300 billion a year -- roughly a billion every day, except Sundays and holidays. One direct impact of this policy is that it protects some domestic jobs in the subsidized industries, such as in the sugar and cotton industries in the U.S. If that were all, these subsidies would simply be viewed as a redistribution of taxpayers’ income to some farmers. In reality, the impact is greater than that, and most of it is negative (bad).
Subsidies are usually accompanied by restrictions on imports, which cause domestic prices to be higher than they would be otherwise. For example, a 5-pound bag of sugar that may cost about $2 at a grocery store in the U.S., would actually cost only about $0.75 if the U.S. sugar subsidy program was eliminated. You may say to yourself, well, that is not a big deal, given how little sugar you consume (or should consume) in a year. However, consider that there are 300 million consumers in the U.S. It is estimated that on average, for every job the U.S. saves in the sugar industry, it costs U.S. consumers about $800,000. Consider also that producers of canned foods, soft drinks, and candy use sugar as an input. Some of them have moved their businesses overseas, not to go after cheaper labor there, but rather to go after cheaper sugar.
In analyzing the broader impact of agricultural subsidies, many questions usually guide the discussion. If agricultural subsidies and protection cost so much, why do such programs persist? Why do corn growers in the U.S. support the U.S. sugar program? How are developing countries impacted by these programs? How is the World Trade Organization (WTO) dealing with these subsidies?
Richard E. Mshomba, PhD.