The quotes Dan provides here cover a lot of ground, but let me note a few things:

First, with respect to the cost of farm subsidy programs: in the United States, the major subsidy programs for crops (corn and feed grains, soybeans, wheat, cotton and rice) vary in cost depending on climate and market conditions. They will be more expensive in years with bumper crops and low world market prices, and cost less if either the market price is higher or the crop is smaller -- unless they are then augmented by disaster assistance of the kind that was rushed through Congress on several occasions between 1996 and 2002. The political rhetoric on farm programs that makes it through the media clutter will often give the impression that they cost every year what they did in the most expensive year.

Other major farm programs work a little differently. The dairy program impacts international trade in dairy through import barriers; its subsidies are indirect, and mostly influence the economics of producing milk for sale in different parts of the United States. The tobacco and peanut programs historically relied on production quotas, while the sugar program is built on import restrictions (quotas more than tariffs), as the United States is comparatively disadvantaged with respect to sugar production. In terms of direct subsidies from the Treasury, in most years these go to producers of the five major crop groups, plus dairy farmers. Budget outlays for tobacco, peanuts and sugar are typically small by comparison, and of course there are still many farm products that do not receive direct subsidies.

With respect to Europe: Panagariya doesn't mention one salient benefit of eliminating farm subsidies to most European countries -- they pay more than their own farmers get back. This is one reason why resistance to cutting back on Europe's farm programs is strongest from the French. French farmers are more heavily subsidized than their German or English counterparts.

As to the countries whose farmers would benefit from trade liberalization, Panagariya is absolutely right: large developed countries and some of the more advanced developing countries have powerful farm sectors that would likely compete effectively in a freer trade environment. The idea of farm trade liberalization as a boon to subsistence cotton farmers in West Africa is almost certainly wrong; and to the extent it isn't, it is likely that agriculture in such countries would consolidate quickly to take advantage of economies of scale, just as it has in established farm exporters like the United States and Australia. Freer trade equals greater farm income...and, in fairly short order, fewer farmers.

Last point, about the Marshall survey as it applies to agriculture: I've trained myself not to grit my teeth when I see numbers like these in a survey. The problem is that they always raise the same questions. What is a small farm? What is a large farm? Why are we subsidizing the first? What about the second? If you want to subsidize small but not large farms, how do you restructure farm programs to do this? For good measure, in Europe one of the objectives of subsidizing small farmers is to keep some of Europe's least economically productive people on the land and out of the cities. In North America by contrast most small farms, not economically viable by themselves, are not supposed to be -- they are hobby farms, recreation for their owners. So the definitions of small farm, large farm, family farm, corporate farm are not even the same in different parts of the world. What then is to be the standard for an agreement about what kinds of subsidies are permissable in a trade agreement, and what kinds are not?

A successful Doha round depends in part on whether answers to these questions can be found. My point here is only that the general public does not have a clue as to what the questions Marshall is asking mean in practical terms -- which means that people devising farm program schemes can plausibly claim that almost any program will do what the surveyed public says it wants done.

Can agriculture be treated apart from water and energy? Large-scale farming means relying more heavily on non-renewable energy for power. It also means consuming more fresh water. Although with marginal improvements in efficiency of use, water could probably be conserved in much greater amounts, this has yet to be done, and it may not be enough to offset by greater non-farm demand.

Of course, the market will presumably adjust supply and demand eventually. But I wonder if the question for government policy is not to liquidate older impediments to free trade but to make the transition to a sustainable economy less abrupt.

Depends what sector of agriculture you're taling about, David. One of the major environmental problems in watersheds around the eastern and central United States turns out to be a product of all the changes in landscaping designed to drain water from farms. Then again there are many parts of the world where commercially productive agriculture is only possible with irrigation -- but where agriculture can't compete with much more water-intensive users, like people's homes.

Frankly, if a "sustainable" society is our objective changes in agricultural practices alone won't get us there, or even get us close. Changes in how the non-farm population lives and works would make a larger difference by several orders of magnitude.

"Frankly, if a "sustainable" society is our objective changes in agricultural practices alone won't get us there, or even get us close. Changes in how the non-farm population lives and works would make a larger difference by several orders of magnitude."

Agreed. I hope there is debate about trade and subsidies in terms of a more comprehensive view of long-term needs.

"So the definitions of small farm, large farm, family farm, corporate farm are not even the same in different parts of the world. What then is to be the standard for an agreement about what kinds of subsidies are permissable in a trade agreement, and what kinds are not?"

If subsidies are capped overall, why can't each individual country decide where its allowed subsidies go?

I'd also like to mention that all this business of liberalizing agricultural trade not helping small-scale farmers in poor countries is a bit of a shock to me. Maybe I've been reading the wrong publications...

A few points to get things in perspective:

. the fight over subsidies in the WTO comes down to the fact that they impede an efficient global allcoation of resources. US and EU farm policies (subsidies and border protection) deliberately shield farmers from downside price risk, with the inevitable consequence of overproduction that has to be disposed of on world markets below cost. This depresses the world price and reduces returns to efficient farmers elsewhere. With the current patterns of production, liberalisation would benefit Australia, Brazil, Argentina and others who have done the work of improving productivity to be competitive at a depressed world price. What the European argument against liberalisation ignores is that a higher world price for a commodity, and more open access, would spur a supply response, not just in Brazil but in other areas where agriculture is undercapitalised. There is already evidence, for example, the countries like mali and Sudan are increasing investment in sugar processing to take advantage of future duty free and quota free access. The dispersion of this investment would not be uniform but it would be just. The Euros want to micromanage agriculture trade as a mechanism of international redistribution. Managed trade is highly inefficient at this process.

. The evidence clearly shows that US subsidies have blunted the international competitiveness of US crop industries. Taking exports as a proxy for competitiveness, "program" crops - cotton, soybeans, corn and wheat - are, in real terms, less than half their levels of the late 1970s. So even with subsidies, unsubsidised producers have outcompeted US program crops. This raises the question: why are US taxpayers putting this money into producing a product that the world doesn't want to buy at the price US producers can produce it at? Interstingly, non-program crops in the US have doubled their export share in the same time period - being exposed to market signals they are producing what the world wants and competitively.

Alex, trade liberalization can help some small-scale farmers. Their costs of production -- more accurately, their costs of production plus the costs of getting their product to market -- just have to be low enough to be competitive. New Zealand dairy farmers are one example of smaller operators who can prosper on a world market. But this example is a little less encouraging if one realizes what a fantastic place New Zealand is to raise milk cows. Most countries in the world are not so blessed.

Among the ones that are, costs of farm production are often most easily lowered by substituting capital for labor. This can also be good for smaller farmers who get bought out as their neighbors expand, provided they have title to their land now and something else to do later. But this will not always be the case.

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Liberalisation is good, it prospers all involved, but how much are we willing to change?

The economic liberalisation of the agricultural sector would mean than agricultural products would be transported from further a field, they would be being transported more miles than is necessary simply because the cost of labour is cheaper in another part of the world. The major drawback here is that the environmental impact of increased haulage is not translated into a monetary form and thus the market does not take account of them (market failure).

The idea of any economic structure is to benefit society.

Does the environmental impact of increased (and arguably unnecessary) haulage, outweigh the prosperity this may bring to some of the poorest parts of the world?

Further does cheaper food in the West worth the sacrifice of our countryside as we know it?

Alastair