The US Farm Bill is the latest duplicity in American

Ask any Aussie farmer if they could use a Government handout of $400,000 over the next decade and the answer would be obvious. So too would Treasurer Costello’s likely response to such an economically reckless proposition.

Welcome to farm trade policy, American style, where the world’s most hypocritical vote-buying spree of the new millennium is underway. United States President George Bush recently signed into law the 2002 Farm Bill, boosting subsidies to American farmers by $135 billion, bringing total subsidies to US farmers to more than $270 billion over the next decade. That's AUS$40,000 for each farmer, every year, for the next ten years.

It’s a move which has united Australia’s farm lobby and aid agencies in their outrage. With agricultural subsidies already accounting for 25 per cent of the value of farm output in the United States, the 2002 Farm Bill will lead to greater American overproduction, further distort agricultural commodity markets around the world and restrict access to the United States market for both Australian farmers and poor farmers in the developing world.

The biggest winners of this battle fought out under the rigged rules of the World Trade Organisation will be the cashed-up American farm producers. The losers will be Australian farmers and poor farmers in developing countries who cannot reconcile Uncle Sam's rhetoric of free trade and a level playing field with the barriers they must overcome before even beginning to compete with subsidy bloated US farmers.

This is the paradox at the heart of international trade. World trade has the potential to be a powerful motor for economic growth and poverty reduction, but that potential is being lost. The United States and the European Union espouse their commitment to free trade and poverty reduction. Yet these same governments use their trade policies to commit what amounts to armed robbery against poorer countries. The developing world faces trade barriers costing them $200 billion per annum - twice as much as they receive in aid.

If developing countries were able to increase their share of world exports by just 5 per cent, this would generate $700 billion. The potential for this to translate into poverty reduction for hundreds of millions of people is enormous. Economic modelling by Oxfam indicates that if Africa, East Asia, South Asia and Latin America were each to increase their share of world trade by 1 per cent, the resulting gains in income could lift 128 million people out of poverty.

The reason for this is simple. Three billion people - half the world's population - survive on less than $2 per day, the majority living in rural areas and working as smallholder farmers, two thirds of them women. Given a fair go, these farmers could further invest any extra income in their farm sectors and other important areas including basic education and primary health care, particularly for their children.

However, no sector of world trade is more distorted than agriculture. During the Uruguay Round of world trade talks, rich countries pledged to cut agricultural subsidies. That promise was broken. During the 1990s the European Union and United States actually increased subsidies to their farm sectors by $20 billion and by 2000, rich countries subsidised their farmers more than $450 billion.

These policies have inflicted and continue to inflict real pain on the poor. In many instances, subsidised American farm produce has been dumped on local markets in developing countries at prices below the local cost of production, literally forcing poor farmers out of their livelihoods. Such was the case in the Philippines in 1997 when US corn farmers receiving $40,000 a year on average in subsidies began "competing" on the Filipino market against local corn farmers with average annual income levels of $700. Many Filipino producers lost 75 per cent of their income from corn sales with devastating effects on resources available for food, health care and education. More than half these corn producers live below the poverty line and one third of children below the age of six suffer malnutrition.

It's time for a wake up call. The US Farm Bill is not just indefensible, it is unsustainable. Large parts of the developing world are becoming enclaves of despair, increasingly cut off from the wealth generated by trade. Our prosperity cannot be built on such unstable foundations because the anger and despair that accompany such vast inequalities will ultimately not respect national borders. Developing countries must have a true level playing field, upon which they can access rich markets and the umpire can rule any subsidised agricultural over-production and export dumping by rich countries out of bounds.