Robert Reich did a great job of summing up why farm subsidies are such a bad idea in this Marketplace commentary last week :

Here’s the problem: Poor nations don’t have much industry, but they do have farms. In fact, the corn, wheat, cotton, sugar, rice, and dairy products they produce are just about the only things many poor nations have to trade for what they need from the rest of the world. Poor nations can produce a lot of these staples cheaper than rich nations, so you might think there’s a natural fit. Well, think again, because rich nations have farmers too. Not many of them, mind you, but they’re politically powerful.

Fewer than three percent of Americans work directly on farms, but agribusiness is big business in America. It’s the same in Europe and in Japan. As a result, rich countries are spending hundreds of billions a year subsidizing their farmers, which makes it almost impossible for poor countries to compete. Japan gives its rice farmers seven times what it costs them to produce the rice, which allows Japanese rice farmers to turn around and sell the rice for very little. This effectively shuts out cheap rice produced in Thailand and other developing nations.

One of the biggest culprits is the United States. Last year the Bush Administration announced that it would give American farmers an extra $175 billion over the next decade. They said it was acting to defend our farmers against artificially cheap produce coming from Europe. This is crazy, folks! These subsidies cost all the rest of us twice over. We pay more for the food we eat and we pay more taxes to make these farm payments.

Meanwhile, poor nations get clobbered. How are they going to earn the money they need to develop their economies if they can’t sell their farm produce? We talk a good game about foreign aid, baloney! The yearly subsidy we give just to American cotton farmers is three times our total foreign aid to Africa. Poor nations don’t need foreign aid, they need a fair shot at our markets.

Which is why the talks starting today in Cancun are so important, but also why they seem doomed from the start. Farmers in rich countries won’t give up without a fight but poor nations have almost nothing to fight with. We should be ashamed.

Like a financial Nostradamus, Reich did a great job predicting the disaster that the World Trade Organization’s meeting degenerated into :

World Trade Organization leaders, crippled by two major defeats in four years, are searching for a way to win back the trust of poor nations and cobble together a global trade treaty that will shape the world’s economy for years to come.

Developing countries say they won’t take any more bullying from the rich, and want a deal that will help even the poorest.
. . .
During five days of talks in Cancun, ministers spent little time on what was expected to be the main issue: agriculture.

Instead, they argued over whether to launch formal negotiations on several new topics, including rules on foreign investment and competition. Several nations insisted on taking up the talks, while other developing nations refused.

The failure of the talks makes it nearly impossible for the WTO to reach its main goal: a new global trade treaty by the end of the next year.

I haven’t written much about the WTO on here because I haven’t read as much about it as I should. On the surface, it seems like a decent idea. Free trade sounds pretty good in theory. Unfortunately, as this weekend’s meeting shows, the WTO seems to be the latest example of rich nations bulling the rest of the world in the name of “free trade”.

As Reich pointed out, the rich nations don’t seem to be interested in real free trade and competition. If they were, they’d cut out all the subsidies, tax incentives, tax cuts, legal caps, and close a myriad of loopholes that benefit their own countries in order to give poorer nations a decent chance to compete in their markets. In reality, what it looks like rich countries have been doing is using these trade agreements to strengthen their own industries and then pass local laws that stifle foreign competition.

Anyone who thinks the “invisible hand” zealots in this country really care about the free market is smoking crack. Behind every big policy decision whose purpose is to let businesses “stay competitive” lies the ulterior motive of helping big businesses to make as much money as possible at the expense of American workers.

Do the Republicans keep offshore tax loopholes open because our tax system creates such a big burden that corporations are unable to compete? Of course not, they do it because they hate any taxes. Do they want tort reform because they fear insurance companies are a few outrageous civil penalties away from bankruptcy? Hell no, huge punitive damages rarely survive the appeal process (Shhhh..don’t tell the voters). Did they deregulate the energy industry in California because they wanted to drive down the energy prices for consumers? Do they think “voluntary regulations” will actually help the environment? Do they insist on a multi-billion dollar retroactive tax refunds so businesses will have more money to “invest” into the economy? The answers should be obvious.