U.S. Farm Policy Helps Farmers Fight Bad Actors on the World Stage

October 23, 2015

The full-scale reality of what American farmers are up against when it comes to competing with foreign treasuries rather than foreign farmers was the topic of a hearing at the House Committee on Agriculture this week.

“We [have] learned that in many cases what foreign countries are doing is patently illegal under their World Trade Organization (WTO) commitments, while in other instances, foreign countries are extending support to their agricultural sectors in ways that fly below the radar of WTO discipline,” said House Agriculture Committee Chairman K. Michael Conaway during opening remarks at the hearing. “And still in other cases, we [have] learned of countries getting a free pass to ignore WTO rules by declaring themselves ‘developing’ despite these countries having very mature, strong, and in some cases globally dominant agricultural sectors.”

Indeed, as the United States reformed its own domestic support for producers during the reauthorization of the Agricultural Act of 2014, commonly known as the farm bill, foreign governments were propping up their own farmers with massive subsidies while using tariffs and nontariff trade barriers to discourage American exports.

On Wednesday, witnesses representing major commodity trade associations, as well as a university economics professor, ticked off examples for the Congressional panel to demonstrate how these practices have depressed U.S. prices and farm income and put the world’s largest agricultural exporter at a distinct disadvantage.

“Foreign governments subsidize their producers so egregiously that many of these countries produce far more sugar than the market demands,” stated Jack Roney, the Director of Economics and Policy Analysis at the American Sugar Alliance. “Rather than store these surpluses, or close mills and lose jobs, as the United States has done, these countries dump their subsidized sugar on the world market.”

This dumping happens so frequently continued Roney that the “world price” for sugar does not reflect the market forces of supply and demand. “Sugar producers are responding not to world market signals but rather to domestic market prices and the government programs that sustain those prices,” he added.

A similar situation applies for U.S. cotton, where the government of China has been stockpiling cotton supplies and then increasing support for domestic producers. The result has been erratic price swings and reduced demand that have hurt American cotton growers who are operating largely without any kind of safety net.

“China’s fiber polices have been one of the largest factors influencing cotton markets over the past five years,” explained Dr. Gary Adams, the president and CEO of the National Cotton Council.

This reality flies in the face of farm policy critics who would have you believe that if America eliminated its farm support then other nations would follow suit. This hearing series on foreign subsidies coupled with a handful of studies on the trade-distorting policies of our international neighbors demonstrates, quite persuasively, why farm policy is essential for the survival of American agriculture.

Unilateral weakening or even outright elimination of U.S. farm policy won’t take us to a free market utopia without concessions from our foreign counterparts Roney concluded. “We would be sacrificing good American jobs in a dynamic, efficient industry in favor of foreign jobs in the countries that continue to subsidize.”

The point is well made. There are no more efficient farmers in the world than U.S. producers. But we cannot and should not expect them to compete against foreign governments.