Almost every agriculture-producing country provides some form of government support for farmers. In the late 1970s and early 1980s, as world agricultural market conditions became increasingly variable, most nations with sizable farm sectors instituted programs or strengthened existing ones to shield their own farmers from what was often regarded as foreign disruption. These policies helped shrink international markets for agricultural commodities, reduce international commodity prices, and increase surpluses of agricultural commodities in exporting countries.
In a narrow sense, it is understandable why a country might try to solve an agricultural overproduction problem by seeking to export its surplus freely while restricting imports. In practice, however, such a strategy is not possible; other countries are understandably reluctant to allow imports from countries that do not open their markets in turn.
By the mid-1980s, governments began working to reduce subsidies and allow freer trade for farm goods. In July 1986, the United States announced a new plan to reform international agricultural trade as part of the Uruguay Round of multilateral trade negotiations. The United States asked more than 90 countries that were members of the world's foremost international trade arrangement, known then as the General Agreement on Tariffs and Trade (GATT), to negotiate the gradual elimination of all farm subsidies and other policies that distort farm prices, production, and trade. The United States especially wanted a commitment for eventual elimination of European farm subsidies and the end to Japanese bans on rice imports.
Other countries or groups of countries made varying proposals of their own, mostly agreeing on the idea of moving away from trade-distorting subsidies and toward freer markets. But as with previous attempts to get international agreements on trimming farm subsidies, it initially proved extremely difficult to reach any accord. Nevertheless, the heads of the major Western industrialized nations recommitted themselves to achieving the subsidy-reduction and freer-market goals in 1991. The Uruguay Round was finally completed in 1995, with participants pledging to curb their farm and export subsidies and making some other changes designed to move toward freer trade (such as converting import quotas to more easily reduceable tariffs). They also revisited the issue in a new round of talks (the World Trade Organization Seattle Ministerial in late 1999). While these talks were designed to eliminate export subsidies entirely, the delegates could not agree on going that far. The European Community, meanwhile, moved to cut export subsidies, and trade tensions ebbed by the late 1990s.
Farm trade disputes continued, however. From Americans' point of view, the European Community failed to follow through with its commitment to reduce agricultural subsidies. The United States won favorable decisions from the World Trade Organization, which succeeded GATT in 1995, in several complaints about continuing European subsidies, but the EU refused to accept them. Meanwhile, European countries raised barriers to American foods that were produced with artificial hormones or were genetically altered -- a serious challenge to the American farm sector.
In early 1999, U.S. Vice President Al Gore called again for deep cuts in agricultural subsidies and tariffs worldwide. Japan and European nations were likely to resist these proposals, as they had during the Uruguay Round. Meanwhile, efforts to move toward freer world agricultural trade faced an additional obstacle because exports slumped in the late 1990s.
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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.
