Farming subsidies hurt the third world?

It is frequently purported that first world farm subsidies not only hurt those countries, but also third world countries. The idea is simple; subsidies increase the production of the goods and in turn lower the market price for those goods. This cuts into revenues for farmers of third world countries that are not getting subsidies.

This is the rationale that Nicholas Kristof used today in his call for the first world to repeal its ridiculous farm subsidies. His argument is not unusual:

...subsidies are the problem, not the solution. They have kept marginal land in production, resulting in overproduction and lower prices...

...the arguments against subsidies focused on the harm they do to poor countries by depressing prices of their exports. Europe is the worst offender, subsidizing each cow to the tune of $2.20 a day - more than much of the world lives on. I agree that one of the most effective ways to help poor countries would be to cut our subsidies, especially for cotton.

But this may not be true. Last week the New York Times discussed why. It turns out that poorer nations are almost all net importers of farm goods. This means that a depressed price of food ends up causing cheaper food for the poor:

A 1999 study by economists Alex McCalla of the University of California, Davis, and Alberto Valdes of the World Bank, found that 105 of 148 developing countries, including 48 of the 63 poorest nations, imported more food than they sold. Some poor countries export nonfood agricultural products, like cotton. Yet even including these commodities, 85 of 148 developing countries and 30 of the 63 poorest imported more than they exported.

As a result, some economists are now saying that removing the international farm subsidies would hurt the poor countries. This is backed by a recent study:

Nava Ashraf from Harvard, Margaret McMillan from Tufts, and Alix Peterson Zwane from the University of California, Berkeley, concluded that agricultural supports boosted the per capita income of two-thirds of 77 developing nations, including most of the poorest countries, like Burundi and Zambia.

But the article does make on distinction on something America is particularly guilty of: cotton subsidies.

United States and China provide enormous subsidies to domestic producers. Depressed world cotton prices are intensely hurting African cotton farmers.

This may be why Kristof ends up centering his article around cotton, though it doesn't seem like his is all that interested in discussing the diverging economic consequences of repealing cotton subsidies as opposed to all farming subsidies. On top of that, repealing cotton subsidies may benefit Africa, but end up hurting countries like Bangladesh that are net importers of cotton, for the production of textiles.

But in Krisof's defense, he makes a very strong argument for repealing farm subsidies not to benefit the third world, but to help stagnant American farmers get into sectors of the economy that are not, "a stroke of a pen from going out of business." It is difficult argument to make in a compassionate way and kudos to Kristof for doing it.

-Mr. Alec

NOTE: I should note that this is by no means an argument FOR farm subsidies, distorting markets is rarely beneficial. You can see that by witnessing the host of effects subsidies have that benefit and hurt some countries. When it comes down to it, it is best to have a market based on supply and demand, as opposed to the "stroke of a pen".