U.S. Initiative on Agricultural Productivity

I would like to just comment very briefly on the issue of raising agricultural productivity, which is one of the points stressed in the declaration and one of the points that we are stressing in our own programs. We think that higher yields, more yields per person, are an indispensable part of raising rural incomes and reducing rural poverty. We also think that higher yields, in the sense of greater output per hectare, is crucial in order to minimize the environmental impact of agriculture. Because, with growing populations, the tendency will be for agriculture to expand on ever more fragile environmental land. So higher yields are absolutely vital. We are putting a strong focus on this agricultural productivity issue in our bilateral assistance programs, and Administrator Natsios has talked to you about the increases that we are making in our bilateral effort.

We have also been working very hard with the multilateral development banks and encouraging some significant increases in their activities, and I am gratified that they are planning significant increases in their work on agriculture. Of course, the starting point is that the developing countries, themselves, place a high priority on agriculture. It was very gratifying to me in our meetings with heads of government and agriculture ministers from Africa and other developing countries to hear that in most cases they are putting agriculture at the very heart of their poverty-reduction strategies. This is important because when you have roughly two-thirds of the poor people in the world living in rural areas, you have to have agriculture be an essential part of poverty-reduction strategies.

One way of increasing agriculture productivity is biotechnology. As was noted, we are very pleased to be co-sponsoring this afternoon with a part of the World Bank, the Consultative Group on International Agricultural Research, a workshop on biotechnology where there will be opening remarks by Dr. Norman Borlaug, the winner of the Nobel Prize, the father of the Green Revolution, and representatives from a number of developing countries and think tanks on agriculture. They will all be giving their own perspective on the contribution that biotechnology can make to the resolution of the world hunger problem.

We also think that it is appropriate that this conference has put a stress on the role that freer trade can play in addressing the problem of poverty alleviation and the problem of achieving our goals on food security. The United States went to the Doha development meeting, the Doha negotiations, with one priority above all other priorities. That was to get strong language in a mandate for agricultural negotiations in the WTO. We were very pleased to have achieved that in the Doha agenda.

I’d like to say a quick word about a subject that has been discussed a great deal here at the conference, and that is the subject of agricultural subsidies. I begin by saying that I think it is clear that the EU’s Common Agricultural Policy is, by far, the largest and most elaborate and the most trade-distorting agricultural subsidy program in the world today. I’m going to give just a couple of statistics and I’m going to do it slowly.

The most trade-distorting subsidies in the world are export subsidies, because those are the subsidies that bring the products of rich countries into direct competition with the products of others in developing markets. The European Union spends $2 billion a year on agriculture export subsidies. The United States spends less than one percent of that amount.

On domestic supports, we have a chart that we are going to distribute that shows the bindings of Japan, the United States and the European Union. As you might guess, the European Union is the one on the far right, just over $60 billion. Japan is the one in the middle; the United States is the one on your left as you look at it. Ours is on the order of $20 billion. In other words, the European Union WTO bindings for domestic supports are three times as large as ours.

Now, I’m not here to engage in a beauty contest. Because I agree with those who have argued that distortions of agricultural trade are a problem for development and are a problem for meeting the goals of food security. That is why we fought hard for the mandate in Doha. That is why we fought hard to get a strong reference to this trade agenda in the Declaration from this very conference. That is why Secretary Veneman in her remarks to the conference yesterday evening said that the United States strongly supports an ambitious three-part agenda, eliminating agricultural export subsidies, substantially reducing trade-distorting domestic subsidies and supports, and reducing market access barriers to agricultural products. I would encourage you to look at the statements of other delegates and see how many of them committed themselves so forthrightly and so explicitly to the market liberalization agenda for agriculture in the Doha development round. With those opening remarks, I’d be happy to try to answer any questions you have.

Q. (THE FINANCIAL TIMES): -- The FAO’s anti-hunger program, and the figure of 24 billion U.S. dollars a year -- do you think this is a realistic aspiration or not, and what response can we expect in future years from the U.S. administration?

UNDER SECRETARY LARSON: I’ve been very consistent in the last several months saying that we are very skeptical about financial gap analysis, whether it comes from the FAO or the World Bank or others. We think the honest answer is that none of us really knows how much it is going to cost. One of the lessons of the Monterrey Conference on the Financing for Development is that if you are going to finance development, you have to capture all of the resources that are available.

Development assistance, for sure, is very important, but development assistance in the world today is $50 billion. In contrast, export earnings of developing countries are $1.8 trillion. If you could get exports from developing countries to double in ten years, you are talking about a figure over $3.5 trillion. It is important to recognize that if you are asking the question "how much is it going to cost?", you have to look at all the sources of income and include export earnings, the domestic savings of the developing countries, the contribution that foreign direct investment can make, as well as foreign assistance. I just think analytically it is very difficult, I would argue, and impossible to come up with a number like that.

What I think the FAO is doing, and I really support it, is to say that more is needed. We agree that more is needed and that is why we are ramping up our contributions in this area, and we are encouraging others to do so. It is one of the reasons why the President has made a call in the United States for a fifty percent increase in our development assistance budget focused on the best performers.

Q. (CORRIERE DELLA SERA): Today the Italian Minister of Agriculture Alemanno said that the American Farm Bill is dangerous for free commerce. How do you reply to this?

UNDER SECRETARY LARSON: First of all, as I indicated, the Farm Bill will keep us within our WTO limits. The U.S. Farm Bill will keep us within the limits that we have agreed to in the WTO. As you will have seen, our limits in the WTO are here at roughly $20 billion. The limits of the European Union are here at $60 billion. I will let you judge which figure is more dangerous.

Q. (CENTRAL AFRICA NEWS BUREAU) There is no year mentioned on this chart, and so we are somewhat lost in my view. I may be wrong.

UNDER SECRETARY LARSON: Let me elaborate on the chart just so there is no misunderstanding and I’ll give you a couple of other numbers, as well. What this is about – the title talks about WTO commitments. In other words, in the WTO, the major trading countries have made commitments to keep their subsidy programs within certain caps. What this shows is the cap for the United States. That is why there is not a year associated with it. It’s a cap we have to live under every year. Just as the European number is the cap that they have to live under every year. Obviously, there is more than one way to calculate these subsidies. This is the WTO methodology.

I was once our Ambassador to the OECD in Paris, which has done analytic work since 1987 to calculate what is called the "producer subsidy equivalent". This is a way of measuring the different types of subsidies that countries provide, and it does so on the basis of the percentage of the final value of the product that is represented by the subsidy. A little bit different approach analytically. In 2001, the producer subsidy equivalent of U.S. agricultural programs amounted to 21%. That was down slightly from the year before. The figure for the European Union in 2001 was 35%. The figure for Japan in 2001 is 59%. Again, I invite you to consider for yourselves which subsidy program is the most onerous for the trading system, which subsidy program is the most dangerous.

Again, having said that, I do think this conference is about what we do going forward. The position of the United States going forward on trade is that we want to implement this Doha development agenda on trade. We want to move to eliminate agricultural export subsidies. We want to move to substantially reduce the domestic trade-distorting subsidies and supports and dramatically improve market access. We have said so repeatedly. The Secretary of Agriculture went on the record yesterday, and again I would encourage you to read carefully the statements of other representatives and see how forthright they were in stating what their intentions are.

Any other questions?

UNDER SECRETARY LARSON: No, let me just try one more time, because I tried to answer it for the previous questioner. Those represent annual caps or ceilings that continue to exist. They were commitments that were entered into in the Uruguay Round, they continue to be commitments for all of the trading partners that made commitments. What we have done in the Farm Bill is we have said we believe that the subsidy levels in the Farm Bill will end up at a lower level on an annual basis for the next five years than the levels we have had over the last three. But there is a circuit breaker that provides that if they were ever to bump up against this cap, this commitment, then by law - by law - the Secretary of Agriculture would stop those subsidies, so as not to break our cap.

Q. (CONGRESSIONAL HUNGER CENTER): The Secretary of Agriculture announced the three priorities, the first of which is increasing productivity. You mentioned increasing yield. Can you elaborate a bit about what that means. Is it simply a matter of production, or what are the other areas in terms of farm and off-farm livelihoods that the U.S. will be focusing on?

UNDER SECRETARY LARSON: Raising agriculture productivity in developing countries is a task that I think we all need to be a little bit humble about. In our meetings with the head of IFAD this week, for example, he was stressing that the international community knows a lot more than it did 20 years ago about what works and doesn’t work.

One of the things that is important is to start with community-based strategies. We are not about imposing ideas from the outside, but we are about encouraging governments to work with their local communities to give them the tools they need to increase agricultural output. In many parts of the world it involves making better use of water resources. Micro dams. We have heard a lot this week about "treadle pump irrigators." In other words, a way of using pedal power to bring water from lakes and streams to irrigate lands that are dry. It is a question of bringing technology in the form of optimal mixes of fertilizers and inputs for that particular environment. It is about doing targeted science and research so that you can develop new varieties of seeds that are well adapted to the challenges of the area -- in particular, developing seeds that may be drought resistant, that may grow well in saline areas, or that are resistant to persistent pests. These are things we would like to support in many ways.

The workshop we are having a little bit later this afternoon is with CGIAR. That’s an organization that is devoted to agricultural research on an international basis. We are the biggest contributor to CGIAR and we are proposing to increase our contributions. We believe that in this total mix of things there is a role for biotechnology. In those countries that want to use it (we are not going to force it down anybody’s throat, but we have seen a lot of interesting experiments in places like Kenya, where they have been able to develop drought-resistant sweet potatoes, for example) -- I think that there is an increasing appreciation that is just one piece of the mix of trying to increase agriculture productivity. In some countries, there are financing issues. Micro-credit can be an important part of helping farmers deal with the lag between the time when they need to buy their input and the time they sell their crops.

Market information can be important. In Mali, U.S. AID has done a tremendously interesting project where they have helped farmers understand what the price is for their products in different markets, so they can optimize their return by getting to the right market at the right time. These are all pieces of what is a complex task and I think what it is going to require to actually achieve it is to have countries that are dedicated to using agriculture as a poverty alleviation tool -- having locally-owned strategies that are well-designed and then being prepared to support those strategies through the know-how and the resources of bilateral assistance programs and of the multilateral development banks.

Q. (COUNTERPART INTERNATIONAL): Following on the question, with the technology question, is technology in the developing world context often imbedded in a political/economic context that is equally as important as the technological constraints that we face? I was wondering your point of view on that, as well. What is the U.S. government’s position on those parallel changes that need to occur in political institutions?

UNDER SECRETARY LARSON: I think I know where you are headed, but let me see if my answer is responsive. If it’s not, you can try again.

One of the things that has been stressed to us in our conversations here this week has been the importance of local and rural empowerment as part of an agricultural strategy. That has different components. One is to make sure that in the national allocation of resources for things like education, that rural areas are not short-changed. It is very important if you want to increase agricultural productivity to have farm communities where there are educated people who can work as leaders within the community and you can work with those who come from outside, whether they be from the government or NGOs, who have ideas and technology that may be useful.

Another thing that we have learned is that in many of these countries there is a very strong sense of pride in the rural areas. They don’t want to be told what they have to do. They want to be given the help to take ownership of these things themselves. That argues for a greater emphasis on local solutions like micro dams rather than huge dams, low-tech irrigation techniques whenever possible, rather than higher tech. I think it means that there is a different sort of relationship between local communities and the central government, as well. This is just one slant on it, but it also means, frankly, in most cases, a respect for property rights.

Now the form that property rights take may differ from country to country. It’s not that there is necessarily a one-size-fits-all approach. It is important in almost all societies that the farmer have a sense that he is the steward of the land, the owner of the land, that he can make improvements in the land, that he will be able to benefit from them, that they are not going to be expropriated or appropriated by some larger authority. One of the things that we learned is that respect for property rights is a very important part of the equation, part of the political and institutional equation, even though the precise form that it takes may vary quite a bit from one country to another.

All of those things have political and cultural implications. I think the most important one for me is the implication of the importance of human freedom and human empowerment as a sort of central organizing principle. I’m personally a great fan of Amartya Sen and his approach to economic development, "development as freedom," and I think there is a lot of wisdom in applying that approach to this set of problems.

Any other questions? If not, thank you very much.