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Will raising rice paddy prices save farmers?

The Cabinet has decided to raise the prices of rice paddies purchased by the government starting next year. Although the policy is meant to improve the standard of living of local farmers, whether it can truly reach this goal remains debatable.

In response to the policy, some economics professors seem to have a different view, calling it a violation of the subsidy limit for agricultural products in WTO regulations. They suggest replacing the policy with a better, more advanced agricultural subsidy measure.

The low income of domestic farmers is undeniable and the income of rice farmers is the lowest of them all. If the government is sincere about improving their livelihood, the best way is to build a set of measures that work well with the market mechanism, along with certain incentive systems.

This month, National Central University invited James Mirrlees, the 1996 Nobel Prize winner in economics, for a lecture sponsored by Sayling Wen Cultural & Educational Foundation (溫世仁文教基金會). Sayling Wen (溫世仁), the late vice chairman of Inventec Co (英業達) has been praised on all sides for lending information technology assistance to the disadvantaged.

Mirrlees, who began as a math major, was influenced by the hardship of people living in underdeveloped countries to change his studies to economics.

Mirrlees' academic theories and Wen's philanthropy both teach how to fish instead of give fish, in accordance with free market mechanisms and containing effective incentive infrastructures. Government policies should do the same.

As some agricultural experts have suggested, the government should consider a policy of "small landlords and big tenant-farmers" (小地主大佃農), in which rice farmers with private land can stop sowing and rent their land to long-term professional operators to cultivate products of greater economic value in large areas using modern methods.

Meanwhile, the government could build a farmer retirement system by offering interest subsidies to operators, who would then pay farmers for their long-term leases in one payment. This would allow farmers to enjoy retirement pensions while maintaining property ownership.

The government should also encourage and assist farmers in cultivating high-value, brand oriented products. For example, the packaging of Hualien's famous organic produce is branded with a trademark and sold directly on the Internet. If resellers were eliminated from the sales chain, the benefit to farmers would far exceed the value of government subsidies.

But if the government is determined to provide subsidy measures, then the subsidies should not go into production but directly to farmers, allowing them to choose how they are spent.

According to agreements upon entering the WTO, Taiwan should have begun increasing rice imports starting from the first year of its membership. If purchase price is raised and, consequently, production rises, the public grain storehouse will contain large amounts of both imported and domestic rice.

In this case, the army may see little else on the menu and over-stocked grain may even be discarded.

At a time when there are shortages in the global food supply, this scenario is unbeneficial to say the least.

The income of Taiwanese rice farmers cannot be allowed to stagnate any longer.

We hope that the government is capable of providing a strategy to effectively assist and improve the livelihood of farmers in the long term.

Chu Yun-peng is a distinguished professor in the Department of Economics and the director of the Research Center for Taiwan Economic Development at National Central University.

Translated by Eddy Chang and Angela Hong
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