Government Subsidization in the US corn Market

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United States subsidies are bound to create more harm than good both to the international market place of corn and to the state's economy. Agricultural trade is being damaged by export subsidies and barriers imposed on the importation and production processes. Developing countries are likely to suffer in the market place from the negative effects that culminate from these subsidies (David Orden 1999). In as much as subsidization in the US corn market seems beneficial to farmers its drawbacks to the economy outweigh its benefits. Subsidization is bound to affect the trade relations in the corn market and this will negatively impact on the country's economy. Much criticism is also focused on the amount of money spent on subsidies; this is promoting corruption in the agricultural sector with more money and resources being channeled to big farm businesses rather than small farms which clearly deserve these subsidies. Subsidies are also a major underlying cause for overproduction which has adverse environmental effects (David Orden 1999). Internationally these subsidies are perceived as key elements which discourage farmers in developing countries from competing hence driving them out of market. This is claimed to contribute to increasing poverty by anti-poverty campaigners in developing countries. Subsidies debates are now taking center stage with developing countries and World Trade Organization turning off US offers to minimize direct subsidies (David Orden 1999). This paper seeks to analyze the negative impacts of subsidies in trade relations, in the economy and in the environment.

Government intervention by introduction of subsidies in the market place apparently contradicts free trade values which the same government advocates for (Gilbert M. Gaul 2006). The complexity of US agricultural subsidies, the regulations, price supports and protection tariffs portrays the US as a command economy which reflects a socialist form of agricultural system. These subsidies are also violating international agreements in which the US is a signatory for instance the North America Free Trade Act and the World Trade Organization (Thomson 2006). This may end up tarnishing the credibility of the country.

Apparently these subsidies are expensive and complex to handle. They clearly reflect a burden to both the consumer and the Tax payer. They redistribute the taxpayer's wealth to a small group of farmers and land owners (Thomson 2006). Statistics from the United States Department for Agriculture show that average income from agricultural households is higher compared to other house holds. For instance in 2007, average income for farm households was $86,223 while that of other US households was $67,609 ( www.fas.usda.gov). Statistics also indicate that the government is spending a lot of money in subsidies which could otherwise be channeled into other more important policies (Gilbert M. Gaul 2006). At the same time it is evident that there agriculture could still be successful without these subsidies. The figure below illustrates government expenditure on Farm Income Stabilization between 1990 and 2006in terms of Billions of Dollars.

Subsidies are also triggering poverty both internationally and domestically due to the fact that they maintain fixed price of goods which does not consider the cost of production (C. E. DeHaven 2002). This implies the fact that when these subsidized goods are competing in the global market, companies may end up trading their goods at a lesser price than what they had incurred in production. For instance in 2006, the onion market in Jamaica had to thrive on the domestic level and this adversely affected onion farmers (David Orden 1999). Subsidies are also meant to alter the international trade against farmers in developing countries. For instance cultivation of cotton in West Africa is cheap compared to the United States; therefore farmers in West Africa can draw benefits from this and help their countries economies develop. But due to the fact that subsidies in the US make it easy for cotton farmers and boosts overproduction, this drives cotton farmers from developing countries out of market.

Subsidies also have adverse effects on the environmental market. They encourage large scale production of particular products hence resulting into monoculture (David Orden 1999). Monoculture cultivation affects the fertility of land due to the fact repetitive cultivation of one particular crop is meant to absorb all nutrients from the soil resulting to soil degradation. When the soil is degraded it necessitates application of more fertilizers hence increasing production costs and polluting the environment in terms of water pollution from the soil run off (David Orden 1999). Subsides also put a country at risk in that when local producers are driven out of business the country is forced to rely on imports. This was experienced in Jamaica when the Jamaicans had to rely on the US to supply them onions. Importation results into air pollution as more air transport is involved to help meet the country's demand (David Orden 1999). Subsidies encourage cultivation and production in unsuitable areas for instance cultivation in prairie areas which are supposed to serve the purpose of pastoral and vegetable farming.

Internal subsidization of agriculture also affects international human rights to livelihood (Thomson 2006). This is due to the fact that agriculture is pivotal to the economy of most developing countries. Statistics indicate that developing countries thrive 50-80 percent of their revenues from the agriculture sector while the US thrives only 1.5 percent (Thomson 2006). This clearly implies that if farmers from developing countries are unable to trade their products, their financial conundrum will be exacerbated. As a result subsidies deny local marketers their livelihood by not giving them a chance to participate in the markets. The table below illustrates how subsidies that are meant to protect farmers have changed into entitlement programs that drive the poor out of business.

Illustration of the amount payments directly made to U.S farmers in 2006 at the expense of the taxpayer and poor farmers from developing countries.

With all the negative impacts that accrue from subsidies, the United States government has a task to make a move to end agricultural subsidies. Developed countries ought to minimize their agricultural protection including doing away with subsidies. Since the United States is a signatory of World Trade Organizations and Doha, it should act within the negotiated terms to avoid damaging its reputation internationally. Doing away with subsidies will not affect the US' economy since it will open doors for more international trade and help developing countries that rely on economy improve.