CPA Op-ed: USDA program a helpful start for U.S. farmers

In response to years of China’s predatory economic behavior, President Donald Trump’s administration recently imposed tariffs on $50 billion worth of high-tech Chinese goods. Beijing has now retaliated against America’s agricultural sector, prompting a $12 billion program from the U.S. Department of Agriculture for affected farmers and ranchers. Some in Washington are criticizing the USDA plan. But as Agriculture Secretary Sonny Perdue explained, this is a “short-term solution that will give President Trump and his administration the time to work on long-term trade deals.”

Op-ed by Michael Stumo originally appeared in The Kansas City Star on August 10, 2018

The China problem isn’t new, however, and nearly all in Congress agree that China cheats. In fact, Beijing has long engaged in the largest commercial espionage and technology theft campaign the world has ever seen. The tariffs being imposed on China are simply aimed at changing this unlawful behavior. But instead of admitting wrongdoing, China’s ambassador to the WTO recently said “it was just wishful thinking” for the U.S. to believe it would change.

The president should indeed fully protect farmers from retaliation resulting from the U.S. safeguarding its national interests. The USDA plan will provide incremental support for producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. And it will purchase surplus commodities for distribution to food banks.

This is a good start, especially when one considers that two of China’s top grain-producing provinces are already providing subsidies for corn that could amount to 38 percent of the farm price, along with soybean subsidies of nearly half of the purchase price. And Beijing has now announced that it will reimburse its soybean buyers for the additional 25 percent duties being levied on U.S. exports.

Washington has long provided Trade Adjustment Assistance for U.S. workers hurt by free trade agreements. This shouldn’t come as a surprise, since unbalanced trade has cost the U.S. roughly 5 million manufacturing jobs over the past two decades. The administration’s plan amounts to an extension of this effort for U.S. producers of fairly traded agricultural goods, like soybeans, who have now been caught in the crossfire with China.

Since Beijing continues to follow a take-no-prisoners approach, the USDA program is a necessary step. But it should go further. Before the tariff fight, U.S. agriculture was suffering successive years of commodity prices running below the cost of production. And the worst farm meltdown since the mid-1980s preceded the president’s trade actions.

Few were discussing why domestic agricultural prices have been so depressed, and for such a long period of time. But clearly USDA’s longtime approach — of “trade, not aid” — has failed, since it facilitates cheap imports for the benefit of multinational agribusiness.

So why has the U.S. farmer’s share of the consumer dollar continued to decline?

First, America’s “strong dollar” policy makes U.S. farm commodities more expensive in global markets. Second, antitrust law has failed to protect farmers and ranchers from undue pricing power when they buy seed and other inputs, and when they sell to multinational food companies.

Third, Congress, with Obama administration support, repealed a country of origin labeling law depriving consumers of the ability to choose between domestic and imported beef. Fourth, Brazil, Canada, and other countries use tariffs and subsidies to overproduce and export their overcapacity, which keeps driving America’s farmers and ranchers out of both domestic and global markets.

Just as Trump threw out the old playbook on trade policy, he should do the same now on agricultural policy. Washington should pursue a competitively priced dollar, which could boost farm prices by 25 percent. And country of origin labeling should be reinstated. Perhaps more controversially, USDA should seriously consider a system of minimum prices and supply management to push back against the impacts of subsidized, overproduced agriculture in Brazil, Canada, and other countries.

America’s agricultural producers shouldn’t be collateral damage for failed free-trade policies, and they should not be frontline casualties as the administration responds to China’s longstanding trade war against the U.S.