Principles of Microeconomics
Principles of Microeconomics ECO 230
Popular in Course
Popular in Economcs
This 6 page Class Notes was uploaded by Waylon Crona on Sunday October 11, 2015. The Class Notes belongs to ECO 230 at Eastern Kentucky University taught by Staff in Fall. Since its upload, it has received 43 views. For similar materials see /class/221442/eco-230-eastern-kentucky-university in Economcs at Eastern Kentucky University.
Reviews for Principles of Microeconomics
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 10/11/15
Addiction to Sugar Subsidies Chokes Poor Nations39 Exports By ROGER THUROW and GEOFF WINESTOCK Sta Reporters of THE WALL STREET JOURNAL Monica Shandu has won awards for her sugarcane harvests in the hills of Entumeni but the crop puts less than a dollar a day in her pocket She and her extended family live without electricity or indoor plumbing in a warren of several mud huts and a small half finished cinderblock house The 40yearold South African tills her four acres of cane by hand and walks three miles to church because she has no car or tractor This is the type of poverty the wealthy nations of the world seek to conquer with their 50 billion in annual official development assistance At the recent World Summit on Sustainable Development in nearby Johannesburg the European Union in particular aggressively pushed other countries to follow its lead in boosting such aid But when it came to the summit s contentious negotiations on an issue that contributes directly to the poverty of Ms Shandu and millions of others the agricultural subsidies of rich countries the EU chose to preserve the status quo of its own farmers One is Dominique Fievez a prominent sugarbeet grower in France where demands for protectionism run especially high He lives in the fertile Somme region in a gabled chateau set amid a park of oaks lilacs and manicured lawns Like his father before him the 43yearold farmer cultivates 60 acres of sugar beet under a lucrative EU production quota that brings in a government guaranteed price nearly triple the WORLD ECONOMIC FORUM world Price The EU subsidies encourage sugar Finland Receives High Marks for Economic Competitiveness cultivation even in unlikely climes Dutch Accounting 39Pit Bull39 Steps Into Spotlights Glare such as Sweden and Finland The result surplus production of about six million tons annually which is dumped on the world market The US also protects its sugar growers with tariff and quota barriers but it exports very little The EU s dumped sugar which represents about 20 of annual exports from all countries knocks down prices and hobbles many developing economies stretching around the world s tropical midriff So what favors Mr Fievez hinders Ms Shandu and saps South Africa39s export revenues In Entumeni Ms Shandu was named South Africa s smallscale Cane Grower of the Year for a topquality harvest in 2001 Yet the breadwinner for her husband four children two grandchildren and several other adult kin says she earned only 200 after RAISING CANE Domsalo meultuml albums by rich nalinns whtm laerEi h totem monument am wreak Man an the vrlcs ot mmmodtlteu suett us sway a mop Vila t mumm Subsmle nutpae la mnmnld bymmn lggns1 Emmi unm MW metrmtaldumusue suwnn tntamuns m mm m otlltdus Inumeslle swam Dzuempmem nld umlap m mam sass S r 5490 mm Aswan m2 7 5135 A Equot umnl saga all market Amuug mp sugav nxpmmls only I39m EU salts atn Imamquot tumult puees Emansta mm m mnimmw s g amt m nimun u uaurt wurvlllanll Swami Wza mlemnnm Conannun Ind Dnebumlerlmnnnnllswlrowamnwn 5m mquot sudassayth eosts on thatharvest Sugar pnees depressed by subslddes euther annual lneome by about athlrd the eountryloses an esumated 100 mllllon m potentlal export eammgs To EU governments and farmers sueh as Mr Flevez however the tenslon between these Subsldles andthe ldeals ofsustatnable somethmg to hand down to my chlldren he says It ls m sueh flelds ofthe world s north and south where Mr Flevez and Ms Shandu oeeupy the hlgh end of sugar farmlng m then respeeuve areas that the eon l ung lnterests ofthe neh andp eolllde Agneultural subsldles lneludng eheap loans and amf ees total about 300 bllllon annually accordlng to the oor lclally Fame 350 bllllon m lost exportrevenue whleh the UN notes m effect negates the 50 bllllon m ad glven annually to the developlng world Simmering Cnn icl The eontllet over subslddes has been slmmenng for years m areane trade talks Itganedlmmedaey and promlnenee m Johannesburg artleularly wlth Western nauons seekmg to extend the war on rronsm ar e overty tha ean nounsh the elements that breedterronsm When negouators from the developlng wor d wan e or na farm subslddes the EU ve than the U s foughtback EU delegates twlce walked out ofthe closedrdoormeenngs The developlng world was outraged In a protest the lntematlonal a a m b but y t t m poor areas lfyou don t glve them aeeess to markets and an engme otgrowth says Mark Malloeh Brown the head of the U N Development Program 2004 Some EU andU s n ultur l negotlators m Johannesburg began aeknowledglng the by pressure for what one EU of clal ealled a mutual dlsarmament ofsubsldles The rest of the world isn39t interested in the ne nuances anymore just that the US and EU subsidize a bloody sight more than anyone else can affordquot says David Roberts a senior agriculture official with the European Commission the EU39s executive body who participated in the Johannesburg negotiations For European nations agricultural protectionism has its roots in the postWorld War II determination that their citizens should never again suffer rationing and hunger The Common Agricultural Policy or CAP designed to encourage farmers to grow almost everything Europe needs is one of the EU s cornerstones In the 1960s when West Germany and France moved to create the Common Market France insisted on protection for its heartland farmers as payback for allowing in German manufactured goods By the end of that decade European farmers were locked into a policy of guaranteed high prices for crops buttressed by massive production subsidies and high tariff barriers And the CAP was on its way to becoming part of the European social model with farmers organized into powerful labor unions that doled out quotas ran pension schemes and founded a rural banking system Now CAP spending accounts for fully half of the entire EU budget Subsidies and other forms of support to farmers totaled 93 billion last year or nearly twice as much as the 49 billion in the US The expanding CAP has led to massive surpluses such as the legendary wine lakes and butter mountains which in turn have wreaked havoc on world commodities prices While the EU alone contributes half of the 50 billion in development aid that ows annually from rich nations to poor the CAP undoes much of that generosity For instance the roughly 120 million in aid the EU extends to South Africa every year is nearly erased by the more than 100 million in potential export revenues the country loses to sugar dumping Europe tries to de ect criticism by pointing at US agriculture subsidies claiming they are worse And the US does the same thing in reverse In reality the two farm programs are joined at the hip and their clashes have been particularly intense in the past year Last November at the World Trade Organization meeting in Doha Qatar the Americans allied with developing countries to lean on the EU to cut subsidies France nearly walked out of the talks but the isolated EU eventually caved in agreeing to work toward the quotsubstantial reductionquot of some forms of subsidies The European Commission which runs EU farm policy started preparing a farreaching reform of farm subsidies to try to implement the Doha commitments But then in May the US passed a new farm bill which maintains or increases various aspects of the farm budget including America39s own protectionist sugar regime Reformers in the EU complained that it pulled the rug out from under their feet French farmers pounced on the bill as proof that the EU should continue its own subsidies unchanged quotWe want to be Americans tooquot the main French farm union proclaimed While the US countered in July by sending a highlevel delegation to the WTO in Geneva to propose new cuts to farm subsidies and import tariffs worldwide the reform Freneh th t un h t unlon s farm polleles unul atleast 2006 when the eurrent EU farm blll explres T T h nu bur aetryrsts pnmanly for rts sugar polreres Sugar eane whlch grows m many ofthe ltl 0 wt d W llke grass requlnng lrttle myestment or sophrstreateol marntenanee Thmy years ago 1 the EU was anetrmporter ofTsugar supportmg the eeonomres ofmany ofrts form U ppmquot qquot new three umes hlgher m Europe than m some oleyelopmg eountnes the EU has beeome exporter of refmeol whrte sugar Byzanline Syslem 1n rts defense the EU pornts to aEyzanune system ofpreferenual aeeess thatmember states extenolto rmports from some former eolomes sueh as Mauntrus anol Em Eut EU h l Tu t d nrl r Flu W wd s lps an equryalent amount ofwhrte sugar baekto worlol markets Thls eosts EU taxpayers 0800 mllllon ayearln extra subsrdles anol expanols the worlolglut ule prooluets from the world s leastrdeveloped eo b rms er unmes The proposal was ealleol Everythmg an xeepuon for sugar olelaymg freermarket l r m nu p r mruauye Eyerythmg but Arms er and Sugar but espeerally m Eranee they are neh hlghly organlzed anol eoneentrateolm afew eleetorally 39T h r Mr L L n rFuH M Tu t reform m June he Jolned 10000 farmers outsrole the European Parlrament m Strasbourg Eranee T m w t mlm wt Mr Fl uny hamlet of FontamersouerontdAdAer about 100 mlles north ofPans en the reform proposals were releaseol amonth after the farmers protest the sugar reglmewasn ttouched AndnertherwasMr Flevez sllfestyle Smee he took over the famlly s 420racre farm m 1984 the pnee he reeeryes for hls sugar hasn t ehangeol mueh whlle the worlol pnee has nsen and fallen olramaueally The OECD estrrnates that aFreneh farmer wrth an average sugarrbeet plot of 33 aeres reeerved subsrdres of about 023000 Mr Flevez s plot re andtake re rs double that He says he to su beet would have to sell at the depressed world prree He grows eorn and wheat rnstead In South Afnca by eontrast Roy Shannars rurng the day he deerdedto bet heavrly on sugarcane farmlng Untrl afew years ago he grew abrt ofcane on hrs 257mm plot on the Indlan Oeean eoast but rnarnly he tended vegetables Then sugar rnrlls began r t apartherdgovernrnent Mr Shanna 47rurnped at the ehanee and snapped up 180 aeres he says A and m um um Frl w urr w m r wd nhlmm V d u r a 070000 rn Franee subsrdres alone on aplot hrs srze would arnountto rnore than 100000 Alter all hrs eosts are pard Mr Shanna says he barely has enough leltto rneet the payments on the loan for the land he bought we ean tget out of Mr Shanna says um the worldpnee Othe eountry s 2 o rnrllron tons ofsugar produeuon rnore than halfls exported Agneultural eeonornrsts ealeulate thatrfthe EU eutrts produeu n and stopped durnprng on the world rnarket the pnee would rrnprove by about 20 and South Afnca tth u rlelw t d m l Rutth w ter around here sard Enos Nene the developrnent of cer of the loeal growers assoeratron as he drove through the flelds and past the farmers huts The areas 3700 smallrscale growers typreally wrth fewer than 10 aeres ofcane are berng pushedto plant m r wd But ltls arnatter ofsurvlval for the rnrll rs barely pro table and eould use about 50000 tons of eane rnore to rernarn rn longrter m operatron Mr Nene rnetMs Shandu on herway from ehureh She sard she wrll do herbest by addrng another aere next season Sugar eane rs all we have here she sard en r Nene toldher the pnee European farmers llke Mr Flevez reap she rolled her eyes I ean t even rrnagrne that she sard Mr developrnent ard ltwas utled Frghung Poverty The men laughed and suggested another title quotCreating Povertyquot
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'