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The Forum > Article Comments > Putting 'development' back into Doha > Comments

Putting 'development' back into Doha : Comments

By Andrew Hewett, published 23/1/2006

Andrew Hewett argues the recent World Trade Organisation ministerial in Hong Kong did little for the world's poor.

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Verdant you commented "So we should start to subsidise our farmers more". I probably agree in principle, however the problem is how these subsidies are distributed. If Australia follows the trends seen in the USA (and sadly we frequently do) then it would further disadvantage the poorer farmers. An example of what I mean is seen in the fact that out of the 140 odd billion paid out in subsidies over the past 10 years in the USA, around 100 billion has been sent to the richest 10% of farmers. Ricelands Foods would probably rank as the biggest rice mill in the world, yet this company has repeatedly received part of this lions share of subsidies. Oh it can be argued that they produce more, employ more etc, but in the meantime a staggering 65% of US farmers get no subsidies!. Ahhhhhh charity does not even begin at home so what hope is there for the poor farmers anywhere else when the US is so influencial within the WTO.
Posted by Coraliz, Tuesday, 24 January 2006 9:47:36 AM
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Verdant, Coraliz, one man's subsidy is another man's tax burden. Even worse - subsidies usually go to uncompetitive or unviable firms and put up the costs of viable firms. Marginally viable unsubsidised firms could be pushed over the brink by the taxation necessary to support the subsidised ones. The assistance lowers the overall wealth of the community.

In the late '80s, industry assistance amounted to 22% of Corporation Tax, which at the time was at the rate of 39%. Scrapping all those subsidies (something still under discussion) and cutting the tax rate would have been a great boost to competitiveness and incentives.

The main driver of innovation and entrepreneurship is the opportunity to make and retain wealth. In a subsidy-rich economy, there's a great incentive to milk the system rather than to innovate in ways which increase productivity and competitiveness, in ways which better serve the consumer.
Posted by Faustino, Thursday, 26 January 2006 5:48:14 PM
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