Farm Bill Hyperbole

When Congress passed the $300 billion farm bill, the op-ed pages were filled with the typical bloviators, lecturing on how farm subsidies harm the world's poor. The high-priest of bloviation, David Brooks, wrote with his trademark condescension:

Obama’s support may help him win Iowa, but it will lead to higher global food prices and more hunger in Africa.

Robert Reich called U.S. farm policy "the single most damaging thing we're doing to the world's poor."

Every right-thinking person knows that ending U.S. farm subsidies could benefit some developing countries, but could also harm other developing countries. So I was interested to see this article in the Journal of Economic Perspectives by Stephen Tokarick, a senior economist at the IMF. The article is titled, "Dispelling Some Misconceptions about Agricultural Trade Liberalization." In it, Tokarick examines the effects that ending farm subsidies in rich countries would have on developing countries. Tokarick writes:

If most or all of the agricultural trade liberalization is implemented by high-income countries, some developing countries would actually be harmed. The reason is that tariff and subsidy removal by high-income countries will tend to raise the world prices of products previously subject to these tariffs and subsidies.

More importantly, Tokarick provides two separate estimates of the effects that ending farm subsidies in rich countries would have on real income in developing countries. Eliminating all farm subsidies in rich countries would, according to both estimates, decrease real income in developing countries. Under one estimate, real income in developing countries would decrease by $4.5 billion; under the other estimate, real income would decrease by $1.2 billion. Moreover, one of the studies broke it down further, and specifically estimated that eliminating only export subsidies for farmers in rich countries would decrease real income in developing countries by $1.5 billion.

So contrary to what you may hear on the op-ed pages, it's not at all clear that the U.S. farm bill causes net harm to developing countries. This is NOT to say that I support the farm bill, or that the farm subsidies don't distort the market. I don't, and they do. But it's important to understand how the farm subsidies distort the market.