Subsidy WatchIssue 14, July 2007

  • Chocking the modern city: Fuel subsidies and the case of Indonesia

    By Harya Setyaka*, The Urban and Regional Development Institute (URDI)

    When Indonesia started subsidizing fuel in 1967, in the early days of President Suharto, the policy seemed to make sense given the staggering poverty at the time. Hyperinflation hit 650 percent, and the resulting public anger forced Founding Father President Sukarno to step down after 22 years of power. Suharto then introduced fuel subsidies as a means to keep poverty at bay.

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Also in this issue:

Commentary

  • Subsidies for not rearing pigs?

    His neighbor has just received £3,000 from the UK's Rural Payments Agency for not rearing pigs, and he wants to know how he might do the same. In a sarcastic letter to David Miliband, the Environment Secretary, Nigel Johnson-Hill asks: "What is the best kind of farm not to rear pigs on, and which is the best breed of pigs not to rear?

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News

  • Canada launches largest WTO case ever against US farm subsidies

    Canada has formally asked the World Trade Organization (WTO) to establish a panel to judge whether the United States has broken its commitments to limit agricultural subsides.

    Canada alleges that the US has violated its commitments to keep so-called amber box subsidies to agriculture under its US$ 19.1 billion a year ceiling. According to Canada, the US has exceeded its commitments every year between 1999 and 2005, except 2003, by an average of US$ 5 billion a year.

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  • EU scraps subsidies on dairy exports

    The European Commission (EC) announced last month that export subsidies to dairy products would be set at zero. The announcement followed a decision by the EU's dairy management committee to eliminate export subsidies to butter and cheese. Export subsidies to other dairy products have already been eliminated.

    Export subsidies vary in amount, depending on the market price of the commodity. In 2005, when world prices were low, EU export subsidies to dairy products were estimated at between 1.1 to 1.5 billion euros.

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  • EU Parliament approves Commission’s reform of fruit and vegetable subsidies

    The European Parliament gave unanimous approval to a new reform package from the European Commission which seeks to de-couple subsidies to fruit and vegetable products.

    Under the new scheme, subsidies linked to production will be replaced with direct payments, in order to not encourage over production of fruit and vegetables and the associated low prices that come with it. The direct payment will be given in return for meeting certain environmental, food safety and land management standards, says the Commission.

    The new reform, approved on 12 June, will come into force in 2008.

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Studies

  • The Economic impact of not extending biofuels subsidies

    A report by the Food and Agricultural Policy Research Institute of the University of Missouri-Columbia reveals the degree to which ethanol production is dependent on subsidies in the United States.

    Ethanol production in the US currently benefits from a US$ 0.51 per gallon tax credit and a US$ 0.54 per gallon import tariff. Currently, the tax credit is set to expire in 2008 and the tariff in 2010.

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  • Environmental Working Group reveals 1.5 million subsidy recipients

    The Environmental Working Group (EWG), a public-interest organization, launched a database in June that includes the names of over 1.5 million subsidy recipients in the United States and the amounts that they received.

    The Farm Policy Analysis Database suggests millions of dollars in US farm subsidies are going to rich land owners, many of whom don't even farm. Among the recipients are millionaire bothers Mark and David Rockefeller, who received over US$ 160, 000 US between them from 2003 to 2005.

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  • NGO report critical of subsidies to oil substitutes in the United States and Canada

    Providing subsidies to companies involved in liquid coal, oil shale and tar sands "threatens drastic increases in heat-trapping global warming pollution and severe impacts on popular habitats across the United States and Western Canada," says a report released in June by the New York-based Natural Resources Defence Council (NRDC).

    Driving It Home: Choosing the Right Path for Fueling North America's Transportation Future, examines the tough choices that will have to be made as the world approaches th

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  • IFPRI estimates agricultural producer support in India, Indonesia, China and Vietnam

    A forthcoming report from the International Food Policy Research Institute analyzes protection to the agricultural sector in India, Indonesia, China and Vietnam. The study calculates commodity-specific market-price support (MPS) and producer support estimates (PSEs) for each country.

    According to an abstract of the as-yet unpublished study, governments in all four countries relaxed their grip on agriculture during the 1985-2002 period, moving from state-led policies that aimed to keep food prices low and promote food self-sufficiency, to greater integration with the world market.

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  • Subsidies to Wal-Mart more than $200 Million over three years

    The American non-profit Good Jobs First estimates that the retail giant Wal-Mart has received more than US$ 200 million in economic development subsidies over the last three years. In 2004, a highly-publicized report from Good Jobs First calculated that the company had netted some US$ 1 billion in subsidies.

    Subsidy deals went to 30 stores and nine distribution centers in 15 states. The bulk of the state and local government subsidies flowed to retail stores - US$ 190 million of the US$ 220 million total.

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