New subsidy system for Japan's farmers

The Daily Yomiuri, Asia News Network, Tokyo

The Agriculture, Forestry and Fisheries Ministry is working out a new basic plan for the nation's food, agriculture and farming community.

The plan will provide the guiding principles for the overall administration of agricultural programs from fiscal 2005 onward.

The centerpiece of the plan is the introduction of a direct disbursement system, through which the government would grant financial aid to farming households. The ministry plans to unveil an interim report in July and to draft a final report next spring.

It is well known that the nation's protectionist policies, which impose high tariffs on imports of agricultural products, are impeding the agricultural trade talks at the World Trade Organization (WTO) and have become an obstacle to the pursuit of free trade agreements.

In order to open up the domestic market to foreign products through these negotiations, it is vital for the government to make a drastic policy change and lower such tariffs.

Should the tariffs be lowered all at once, however, the nation's agricultural sector would be hit hard, making it inevitable for ratio of food self-sufficiency, which is currently the lowest among the major industrialized nations at about 40 percent, to decline further.

The farm ministry therefore plans to introduce the direct disbursement system and grant financial aid to core farming households every year to stabilize farm management.

The strategy is intended to meet the challenge of opening the agricultural market by establishing a framework to support the domestic farm industry.

If agricultural imports become cheaper due to the lowered tariffs, consumers will greatly benefit. The ministry needs to deepen its discussions on the introduction of the direct disbursement system.

The state of the nation's agricultural administration is that the government has passed out subsidies to farmers uniformly, but has failed to enhance the overall productivity.

To avoid repeating the same mistake, it is vital to narrow down those core farming households eligible for the government's aid. There are many problems to be solved for the direct disbursement system to be introduced, for example, criteria for determining which farmers are and are not eligible for aid.

Direct disbursement systems are allowed by the WTO. In the United States and Europe, direct payment systems are a main pillar of agricultural policy and are used to allocate sizable amounts of subsidies every year.

In addition to the imposition of high tariffs, the government has sought to prop up the farm sector by distributing uniform subsidies to all growers of specific crops, such as rice and soybeans, with the amount of subsidy based on the type of crop.

Such a system does not take into account the scale of farm production, nor does it question the efficiency of farm management, protecting farming households, most of which are part-time farmers, and leaving the nation's farming sector fragile and barely competitive internationally.

Learning from the error of their ways, the ministry plans to trim the list of farms to be covered by the new system to about 450,000 of full-time farming households.

The non-profit Japan Economic Research Institute points out in its recent proposal on agricultural policy, that it is vitally important to limit the type of farms eligible for financial aid.

Yet objections to the new system are being raised by part-time farmers who may not be eligible for aid and by agricultural cooperatives.

Meanwhile, Diet members who represent agricultural interests will likely intensify their pressure against the new system. The main opposition Minshuto (Democratic Party of Japan) has come up with its own proposal on the introduction of the direct disbursement system. Yet the number of those eligible under the new system is too large.

The money needed for the introduction of the new system should be obtained by abolishing the uniform crop subsidies and through cuts in agriculture-related public works spending which totals about 1 trillion yen a year.

The test of the ministry's ability will be whether it can establish a clear-cut method of supporting the nation's farming households, while ending the lavish distribution of subsidies to them.