Take The Gloves Off And Fight For Fair Agricultural Trade

With the World Trade Organization’s failure to reach an agreement on an agenda for future negotiations, there has been no shortage of people willing to take credit or assign blame. Anyone who went into the meetings with even modest hopes, as I did, left disappointed.

In retrospect, I believe the ministerial was probably doomed to failure from the beginning. The reasons have a direct bearing on what the United States needs to do concerning the Freedom to Farm Act of 1996, as we move forward on the next farm bill.

The underlying promise of Freedom to Farm was that our producers would have a level playing field in international trade. My chief disappointment with the Battle in Seattle wasn’t the protests or lack of agenda. It was the realization that the United States cannot make good on that promise until we are willing to take a much more aggressive posture with our trading partners.

The U.S. agricultural agenda going into WTO focused on opening new markets by eliminating export subsides, tightening rules on trade-distorting domestic subsides, reforming state trading enterprises and improving market access by reducing tariffs.

Our reasons for focusing on these issues were simple. As of 1996, The European Union accounted for over 83 percent of world agricultural export subsides. The United States accounted for 1.4 percent. U.S. producers face average tariffs of over 50 percent when they try to sell overseas. On the other hand, imports face tariffs of less than 10 percent.

Facing not only foreign competitors but also the economic clout of those competitors’ governments, it’s no wonder our producers feel the deck is stacked against them.

In reviewing the reasons for failure, we must be careful about assigning blame. The U.S. government had skilled, hard-working negotiators who did an excellent job representing our interests. Agricultural organizations also did an excellent job. But, negotiations can only succeed when both parties are willing to negotiate. So why did WTO fail? Bluntly put, both parties are not willing to negotiate.

The EU will only agree to reduce export subsidies when forced to reduce export subsidies. Protectionist, tariffsetting countries will only reduce their tariffs when they are forced to do so. Neither the EU nor the protectionist, tariff-setting countries will act unilaterally. Their internal politics simply will not allow it. Their farmers will revolt if they try.

Is a confrontational strategy needed? I think so. After Seattle, there were reports the EU had tentatively agreed to a draft agreement that would have led to a progressive elimination of farm export subsidies. However, EU Farm Commissioner Franz Fischler quickly issued a statement disclaiming any agreement. France, Japan, Norway, Switzerland and South Korea also stated they would reject the text. This led Canada’s Agriculture Minister, Lyle Vanclief, to announce that Canada may reinstate subsidies to its farmers in light of WTO’s failure. Specifically, Canada is considering reinstating a grain transportation subsidy to replace the one withdrawn in 1995. There seems to be growing support in the U.S. Congress for boosting agricultural subsidies as a tool to force negotiations with the EU and others.

Over the last several years the United States has, in effect, unilaterally disarmed itself in its attempts to reach trade agreements and balance the federal budget. Since we did not succeed, at least in the short term, in eliminating subsidies and tariffs by our chief competitors using that strategy, we ought to look at another strategy to level the playing field. We need to re-arm our producers so the deck is not stacked against them. If we can’t lower the competitors’ advantages, we need to raise our end of the field.

There are at least two types of responses necessary.

First, is to increase export subsidies. We must significantly increase funding to at least five key federal programs: 1, Export Enhancement; 2, Market Access; 3, Dairy Export Incentive; 4, USDA export guarantees; and 5, PL-480 loans. These enhance promotions and provide financing assistance to fight foreign subsidies.

How do we pay for this? Rather than putting $8.7 billion every other year into Band-Aid disaster payments, let’s put real money back into knocking down barriers to open markets.

The second response will be even more controversial. We must be willing to ensure that those who use protectionist tariffs on our agricultural products do so at their economic peril. Although it will be unpopular with those who want inexpensive imports, we must be willing to fight tariffs with tariffs until our competitors come to the table. With our balance of trade, they have the most at stake.

When the United States is willing to support its farmers and ranchers with an aggressive program of export subsidies and retaliatory tariffs, our producers will have a fighting chance in the international arena. Only when we force the EU and others to the table in good faith can we hope to level the playing field for our producers.

Obviously, this is a short-term strategy. Our best long-term hope will always be truly free international markets, unrestrained by tariffs, subsidies, quotas or other trade barriers. This is the goal of WTO. It is also what our producers want. In an ideal world, we would not need subsidies because it would be profitable for producers to simply farm and sell their products for profit.

Unfortunately, we are a long way from that ideal world. Unless the U.S. government makes this commitment to its agricultural industry, critics of the Freedom to Farm Act will be accurate and history will remember that piece of legislation as, in fact, the Freedom to Go Bankrupt Act.