Asian Tigers Still Not Feeding On US Farm Imports
Protectionism Reigns In World Agriculture, As US Farmers Remain Shut Off From Asian Markets
May 28, 1999
by Dennis T. Avery
CHURCHVILLE, Va. - A fairly strong Asian economic recovery is likely over the next two years. The Wall Street Journal recently proclaimed the end of the Asian collapse in a Page One feature story.
This should be good news to farmers, who take it as an article of faith that the Asian economic collapse cost them billions of dollars in lost export sales.
Short-term interest rates in Asia have fallen from an average of 8.4 percent in February 1998 to 2.1 percent a year later. South Korea's bonds have been upgraded from junk to investment grade. The economy grew by 4.6 percent in the first part of 1999, after falling by 3.6 percent in the same period a year earlier.
Thailand's economy, which shrank by 8 percent in 1998, is expected to be stable in 1999, with falling inflation and lower interest rates.
The Chinese economy is still growing strong at 7 percent, compared with 8.8 percent in 1996. China's exports are down 10 percent from a year ago. However, Premier Zhu has pledged to slim the civil service and privatize loss-making companies to stimulate growth.
In India, the gross domestic product is projected to grow at one of the strongest rates in its recent history, 7 percent in 1999. There's a new government surcharge on taxes to reduce the government deficit. The country is also for the first time importing significant quantities of yellow feed corn, for its poultry industry.
Even in Indonesia, the worst hit of the Asian tigers, the economy has bottomed out after losing 16 percent of its GDP in 1998. Fortunately, Indonesia has been freed of the Suharto family's expensive nepotism.
Low tariffs mean Asian economies will recover rapidly, as investors seek to put profits where they can earn high returns in the first decade of the 21st century.
The world economy was put on a path for strong economic growth back in 1947. That's when the major trading nations agreed on tariff-reducing policies agreed upon in the General Agreement on Tariffs and Trade (now the World Trade Organization.) Since then, tariffs on nonfarm products among member countries have been cut from 40 percent to 4 percent.
The virtues of free trade were originally demonstrated by the continent-wide expansion of the United States. Without the Constitution's interstate commerce clause, New York and Massachusetts may never have imported cars from Detroit, or beef and wheat from Colorado.
But can U.S. farmers expect higher prices over the next two years? Unfortunately, no.
The harsh truth is that Asia has never yet imported much in the way of farm products, and WTO rules still don't give export farmers much opportunity.
Japan is the only Asian country importing many farm products. The country is still rich and still importing as much food and feed as ever, but it feeds only 125 million people.
Indonesia, with 200 million people, still clears tropical forest on its soil-poor outer islands for farming. The government wants to reduce crowding on the main island of Java, though no one wants to leave.
India's one billion people are importing about 200,000 tons of feed corn at the moment, but only after the domestic corn price rose nearly 50 percent to $160 per ton (compared with $120 per ton on the world market).
India tried in the past to import some of its farm products, only to re-erect the farm trade barriers under political pressure.
The Chinese government still insists "China will produce its own food" for its 1.3 billion population. Yet China has had 1,000 famines over the last 2,000 years, due primarily to its famously uncertain rainfall, making the public nervous about its food supply.
The government is also afraid that too many people will try to leave the farms for industrial jobs, creating volatile unemployment in the cities.
Why doesn't the World Trade Organization enforce its free trade rules onfarm products? Because WTO free trade policies don't currently apply in agriculture. After seven years of negotiations, the organization's last farm trade talks eventually sanctioned 95 percent food self-sufficiency for WTO members.
Unless farmers can make important changes in the WTO farm trade rules in negotiation this November in Seattle, the Asian recovery won't do much to ease the farm commodity price slump.
Dennis T. Avery is based in Churchville, VA, and is director of the Hudson Institute's Center for Global Food Issues.