NCPA - National Center for Policy Analysis

Farm Subsidies Fall In Canada

December 20, 1999

While annual farm subsidies among European Union countries now amount to a towering $130 billion, Canada has cut such payments to a mere $3 billion. EU authorities ignore arguments that such payments hurt consumers and taxpayers, preferring to dwell on the benefits of keeping people down on the farm and preserving rural landscapes for tourists.

Canada, on the other hand, has survived the loss of large rural populations, with only 3 percent of its work force now employed in farming.

  • Whereas in the period 1991-93 some 30 percent of Canada's farming income came from subsidies, only 16 percent did in 1998.
  • Comparing the same periods, subsidies rose from 19 percent of U.S. farmers' income to 22 percent.
  • Subsidies comprised only about 1 percent of New Zealand farmers' income in 1998 and 7 percent for those in Australia.
  • Yet subsidies have barely retreated from 47 percent of farmers' income in the EU to an estimated 45 percent last year.

Canada has cut wheat subsidies from 31 percent of gross receipts in 1991 to 9 percent today. That compares to 38 percent in the U.S. and 56 percent in the EU. Australia's wheat subsidy is 4 percent and New Zealand's is zero.

While Canadian farmers bemoan the loss of their subsidies and political clout, they are turning to free-market approaches to best their political opponents in Ottawa. They are demanding abolition of the Canadian Wheat Board -- a government-monopoly purchasing system that started as a war measure in 1943.

The state company buys all the wheat and barley grown for export in western Canada, sells it overseas and pays farmers the average price. But the wheat farmers' trade group points to surveys that indicate farmers get as little as 80 percent of the price charged by their American farming neighbors.

The government monopoly, farmers say, has retarded development of western flour and pasta mills -- processing operations that add value. So many farmers have switched to planting canola -- a crop that is marketed privately and outside the board's monopoly. Last year, for the first time, canola overtook wheat to become Canada's most important source of farm income.

Source: James Brooke, "Down and Out in Rural Canada," New York Times, December 18, 1999.

 

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