Will Congress Enact This Terrible Farm Policy?
May 8, 2002
by Dennis T. Avery
America’s farmers are ecstatic. They think the huge new farm and ethanol subsidies being considered by Congress mean the public has finally realized their importance to the country. I wish that were true.
The unfortunate truth is that short-term politics are driving both Republicans and Democrats toward farm policies that betray both farmers and the nation.
The Senate energy bill commands a tripling of ethanol production from corn in the next ten years. That will push more of the world’s scarce farmland into a commodity where farmland cannot possibly make a significant difference.
Ethanol costs more to produce than oil, and it doesn’t give us cleaner air. The ethanol subsidy will simply be a short-run gift to corn farmers that will cost the taxpayers and drivers of the nation approximately $2 billion per year, and net the farmers perhaps 10 percent of that. Within a few years the ethanol subsidy will have to be revoked, leaving the farmers and ethanol investors in the lurch—and the nation’s energy system more heavily in thrall to the funders of radical Islamic terrorism.
Meanwhile, the Senate and House have drafted new farm bills that determinedly ignore the key realities of U.S. agriculture: 1) The reason for low farm prices is not overproduction, but trade barriers that stand between American farmers and newly affluent Asian consumers; 2) 110 percent of the future growth in farm product demand will be outside U.S. borders; 3) Asia is short of land, surging in affluence, and demanding more meat, ice cream, French fries, fresh fruit, and pet food; 4) the federal government will run out of money for farm subsidies long before the new farm bill runs its course; 5) in the meantime, the increase in commodity subsidies will recreate the old farm surpluses, and drive farm prices even lower.
All is hunky-dory now, of course. President Bush swept into South Dakota to applaud his own support for more ethanol. Ethanol is so popular with Dakota farmers that Senator Tom Daschle, Bush’s leading potential opponent for the 2004 presidential race, also showed up at the Bush ethanol speech. Both were trying to swing South Dakota’s Senate election—and thereby ensure control of the Senate for the next six years. The political stakes are worth far more to the major parties than a few billion taxpayer dollars for farm subsidies.
Bush at least wants to give U.S. farmers access to Asia’s growing consumer population—some time in the future. He’d give them ethanol subsidies in the meantime. Daschle’s party is still toadying to the Greens, who don’t like any trade, especially farm trade. (We must, after all, preserve the small Third World peasant farmers who are slashing and burning tropical rain forests to produce low-yield crops.) Therefore, Daschle would give U.S. farmers ethanol instead of more exports.
But free farm trade should double the current $50-60 billion per year in U.S. farm export earnings within a decade of the World Trade Organization (WTO) liberalizing its farm trade rules. The subsidy increase would be only about $7-9 billion per year.
Farmers don’t believe they’ll get farm trade reform. In fact, many of them don’t even understand that China and India are getting rich, because those countries aren’t buying U.S. exports—yet.
But farm trade liberalization is more certain than the Washington subsidies. The WTO is already in a farm reform negotiation, and the European Union (EU) has signed on to a mandate to end its own ill-considered farm export subsidies, the basis of its farm policy. China and India are now WTO members, bound by any WTO farm import liberalization.
Two farm-state congressmen, John Boehner (R-OH) and Cal Dooley (D-CA), wrote in the Washington Post on May 2, “The most likely scenario is that in two years we will be overwhelmed by surplus agricultural production, low commodity prices and excessive government payments. We will have lost cases before the WTO, and government outlays will exceed budget limits. We will be forced to cut benefits or rewrite this legislation. All the while, our deficits will swell, our trading allies will become more hostile, and the worst of all, the gap between the richest and poorest farmers will widen.”
It could be even worse than that. The new U.S. farm bill could completely derail the already-difficult WTO negotiations, and delay for another ten years U.S. farm access to surging Asian food markets.
The headline on the Boehner/Dooley commentary sums it up: “This Terrible Farm Bill.”
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.