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FAO warns on impact of subsidies

Billions of farmers' livelihoods are at risk from falling commodity prices and protectionism, the UN's Food & Agriculture Organisation has warned.

Trade barriers and subsidies "severely" distort the market, the FAO report on the "State of Agricultural Commodity Markets 2004" said. As a result, the 2.5 billion people in the developing world who rely on farming face food insecurity. The most endangered are those who live in the least-developed countries. The FAO report said that support for farmers in industrialised nations was equivalent to 30 times the amount provided as aid for agricultural development in poor countries.

The FAO has urged the World Trade Organisation to swiftly conclude negotiations to liberalise trade, easing developing countries' access to the world market. It also criticised the high tariffs imposed by both developed and developing nations. It recommends that developing countries reduce their own tariffs to encourage trade and take advantage of market liberalisation.

According to the organisation, subsidies and high tariffs have a strong impact on the trade of products such as cotton and rice. Global exports of these products are mainly in the hands of the European Union and the US, who - thanks to subsidies - sell them at very low prices. In fact, almost 30 wealthy nations spend more than $300bn (£158.8bn; 230.9bn euros) in agricultural subsidies. The market situation has divided developing nations in two groups, the FAO said. The first group have a reasonably diverse range of agricultural products while in the second group, agriculture lies largely in the hands of small-scale producers. For 43 developing countries, more than 20% of their export incomes come from the sale of just one product. These countries are mainly situated in Sub-Saharan Africa, Latin America and the Caribbean.