On Farm Policy, Debate Reveals Bush-Gore Split
American Farmers Could Double Their Exports If Farm Trade Opened Up With India And China
October 25, 2000
by Alex A. Avery
CHURCHVILLE, Va.—The presidential debates finally got around to farm policy, and we discovered Vice President Al Gore has moved sharply to the left on yet another issue.
A year ago, Gore was asserting that American farmers needed access to the growth markets for farm products in China, India and Indonesia. This year he's written off exports and wants to re-install the government "safety net." Gov. George W. Bush was forthright: He wants free farm trade. U.S. farmers could earn another $50-$60 billion a year from overseas sales.
Lots of farmers like the idea of a government safety net for agriculture. Farmers suffer severely from the variability of weather, market cycles and roller-coaster currency values. It doesn't usually mean bankruptcy, but it's darned uncomfortable.
Farmers also like the idea that Washington and the urban voters care enough about farming to send them subsidies. It's nice to feel wanted, especially when there's cash involved.
There are two problems with the warm and fuzzy embrace of the subsidies, however. The first is that you can't get much export growth if you're subsidized. More subsidies would make American farmers even more dependent on Gore and his political allies.
American agriculture is already exporting $50 to $60 billion a year worth of products. It wouldn't be hard to double that if world prices were 25 percent to 50 percent higher (freed from export dumping) and China and India were eager buyers.
Chinese purchasing power was only about $100 a family a year in the 1970s. Today its around $10,000 a family, which is why virtually all the urban families have refrigerators and color TV sets. Their meat consumption doubled in the 1990s and is still rising.
India struggled for 40 years with the slow economic growth resulting from socialist policies. It ditched those policies in the 1990s for double-digit industrial growth rates. They're exporting computer software, buses and textiles.
China and India have one-third of the world's population, they're short of land and water and their food prices are well above world market levels. Both have begun giving signs they want to import more food and feed in the future.
But politically, they can't afford to anger their own farmers by importing subsidized farm products. U.S. farmers can either go after the Chinese and Indian markets or after Washington subsidies. You probably can't have both for any length of time.
If you're going after exports, remember the World Trade Organization is now holding a farm trade reform negotiation, the kickoff of which sparked the famous anti-trade demonstrations in Seattle a year ago.
One big reason Gore is talking about giving farmers subsidies again is that he doesn't want to offend the eco-activists or the autoworkers with a big push on free farm trade.
If you accept the Gore policy, you write off the current WTO trade round, letting the European Union keep dumping subsidized exports in the world market.
It's a way to tell the Indians and the Chinese to invest more money in dams, greenhouses and forest clearing to produce their own food. The United States probably don't get another shot at farm trade liberalization for at least 10 years, meaning U.S. agriculture loses $50 billion a year times 10 years—$500 billion in earnings.
The second problem with Gore's offer is that Washington may not have the cash to deliver on his promise. That sounds odd, looking at the current government surpluses. But the surpluses are building mainly because the Baby Boomers haven't yet retired. They're still paying into Social Security and Medicare, not drawing them down.
Ten years from now, we'll be making good on the vast sums we owe to Social Security and Medicare and don't have in the bank. Meanwhile, both the Democrats and Republicans are busy spending the federal surplus.
David Broder, the top political columnist for The Washington Post, says the current congress may already have spent two-thirds of next year's federal surplus and neither Gore nor Bush has yet started funding their election promises on education, prescription drugs or tax refunds. Politicians can't resist money lying around.
Gore is not trying to fix things, he's trying to get elected. He doesn't plan to fix Social Security, though everybody knows it needs it. His "Social Security Plus" plan would actually add to the debt without investing any money to draw compound interest.
His prescription drugs policy would add more costs to a Medicare program headed toward collapse. He wouldn't be fixing the farm problem either, just offering kind words and aspirin while farmers suffer the pain of trade barriers.
Bush isn't offering a quick fix, but at least it's a fix.
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Alex Avery is director of research and education for the Hudson Institute's Center for Global Food Issues.