NCPA - National Center for Policy Analysis

U.S. Cotton Subsidies Victimize Third World Farmers

June 26, 2002

One prong of the war on terrorism is help to build the economies of poor countries. The U.S. says it wants to stabilize and strengthen world agricultural markets to enable farmers in developing countries to bring their products to markets. But what it says and what federal programs do are two entirely different things.

Subsidies to U.S. cotton farmers are wrecking world cotton markets through low prices and pushing cotton farmers in developing counties into bankruptcy.

  • America's 25,000 cotton growers will receive half of their income through subsidies from the government this year.
  • The average net worth of a full-time, U.S. cotton-farming household, including land and non-farm assets, is about $800,000.
  • The $3.4 billion subsidy windfall allows U.S. growers to sell their cotton on world markets at depressed prices -- undercutting the efforts of farmers in other countries to achieve market-set compensation.
  • The subsidies further aggravate market imbalances by encouraging U.S. overproduction, thus creating a cotton glut and further eroding world prices -- now at their lowest level in three decades.

While subsidies protect growers in America and several other countries from falling world prices, they cripple growers in less subsidized countries.

Take, for example, what is happening in the tiny, predominantly Muslim country of Mali. The U.S. sends it $40 million a year for education, health and other programs. Cotton makes up nearly half the country's export revenue, but the state cotton company predicts a deficit of about $30 million this year and is warning cotton farmers to expect about 10 percent less income this year from their harvests.

Source: Roger Thurow and Scott Kilman, "How a Cotton Glut Bred by U.S. Harms Poor Farmers Abroad," Wall Street Journal, June 26, 2002.


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