Subsidies, Trade, and the Broken Food System

Source: Gates Foundation, Creative Commons Licensed

You have probably heard about it before: The Broken Food System. Our world’s ability to produce a surplus of food, juxtaposed with our inability to feed all the world’s people.

Roughly one-third of the food produced in the world every year intended for human consumption gets lost or wasted.

If just one-fourth of the food currently wasted globally could be saved, it would be enough to feed the 870 million hungry people in the world.

How does this happen?

In a recent report, Oxfam has laid out several reasons. These include the intense pressure on agriculture from climate change, ecological degradation, population growth, rising energy prices, rising demand for meat and dairy products, and competition for land from biofuels, industry, and urbanization.

Yet one specifically interesting reason for structural hunger and inequality in the food system comes from its design.  The unfair trade rules and domestic protectionist policies have “rigged” the rules of the game in favor of the rich, at the expense of the poor.  These unjust policies have brought the food system to its breaking point.


According to the neoliberal policies supported by organizations such as the World Trade Organization, the World Bank and the International Monetary Fund, developing markets have been pressured to open their agriculture sectors to international trade by removing import tariffs. This policy opens small farmers and markets up to the volatile global prices, increasing their vulnerability. This forced liberalization of trade in developing countries allows foreign companies to enter these small markets and compete with local suppliers and farmers.

If that weren’t unfair enough, many “rich” countries, like the US and the European Union, have continued to maintain very strong domestic subsidy programs in order to protect their agriculture businesses from competition in the global markets.

A bit ironic, don’t you think?


When “rich” countries heavily subsidize domestic agriculture, companies produce large surpluses of food stocks; the more they produce the more subsidy money they receive from the government. Often, the surplus of food is then “dumped” onto the global markets, bringing down the price of food in developing countries, and pushing local farmers out of a job. The price of the competing food coming from “rich” countries is too low for local farmers to make a profit. So, local farmers go out of business and become consumers of food, rather than producers.

Therefore, developing countries become increasingly dependent on food stocks from their “rich” neighbors. So, when the global food supply gets low – as it did in 2008 – and prices begin to rise, poor communities cannot afford to pay for basic food.

Add in the additional factors affecting food insecurity (bad weather, land degradation, increasing energy prices, population growth and competition for land) and poor communities can find themselves in a real state of vulnerability.

But, these policies have to be helping the “Rich” Countries, right?

On top of the fact that these subsidies and trade policies destroy food systems and security in developing countries, they are not actually benefiting many people in developed countries, either.

Citizens in the US and the EU are paying for these subsidies – twice. They first pay through their taxes, and then through higher food prices. According to an Oxfam report, in 2009 “the EU’s Common Agricultural Policy (CAP) added €79.5bn to tax bills and another €36.2bn to food bills. According to one calculation, it costs a typical European family of four almost €1,000 a year.”

So who is benefiting from this system?

In Europe, about 80% of government direct income support goes to the top 20% of the agricultural sector – mainly big landowners and agribusiness companies. In the USA, 4% of farm owners collectively own about half of the farm land. “A few hundred companies – traders, processors, manufacturers, and retailers – control 70% of the choices and decisions in the food system globally, including those concerning key resources such as land, water, seeds and technologies, and infrastructure.”:

Source: Growing a Better Future: Food justice in a resource-constrained world
Oxfam 2011. Click to Enlarge.

The future success of our global food system relies on our ability to correct these systemic issues and set the rules of the game so that everyone plays on a level playing field.

Without systemic change, the future will likely look very similar to the present.

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