American farmers are generally supportive of the Trans-Pacific Partnership trade agreement, the House Agriculture Committee was told this week — but at the same time they want to know that commitments made in these agreements will be met by other countries.
“If countries continue to find ways to offset the concessions made during agreements, there will be little reason (for farmers) to continue to support trade liberalization,” said Dermot Hayes, professor of economics and finance at Iowa State University, who was among those appearing before the committee.
Hayes, who holds the Pioneer Chair in Agribusiness at ISU, testified regarding the economic impact that the subsidies other countries give their farmers has on U.S. wheat and rice producers. The predominant forms of support are input subsidies, as well as market interventions aimed at insuring a minimum price, which is often above the world price.
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A study he conducted for U.S. Wheat Associates to quantify the impact of price supports and input subsidies on wheat by just four countries — Brazil, China, India, and Turkey —showed if the trade-distorting programs were removed, global wheat prices would increase by almost 5 percent, and U.S. net exports would increase by over 9 percent. He and representatives of U.S. Wheat and the National Association of Wheat Growers released the study in September.
He cited a study by DTB Associates LLC, a Washington firm providing consulting, legal, and business services in trade, agricultural policy, and legislation, that showed some of the countries had “dramatically increased the minimum government support for wheat by as much as $50 to $100 per metric ton since a previous study in 2011.”
Leads to over-production
Those four countries, he said, “have structured their agricultural support programs in ways that lead their farmers to over-produce, and subsequently deflate the price of some commodities on the world market — particularly wheat, corn, and rice.”
Ultimately, Hayes said, “This means that U.S. wheat farmers are missing out on nearly $1 billion a year in lost revenue,” Hayes told the committee. And he said, “Given the similarities in wheat and corn policies, I suspect the results for corn would have been very similar.”
It’s “important to recognize,” Hayes said, that the manner in which a country subsidizes its producers can have a significant impact on world markets. The four countries “have continually exceeded their trade commitments and, as a result, have driven down prices received by (U.S.) producers.”
In a “comprehensive investigation” of the competitiveness of U.S. rice by the U.S. International Trade Commission, Hayes said, “the results indicate global disruptions caused by foreign government rice policies that hurt U.S. producers.”
Elimination of all trade barriers, except tariffs, Hayes said, would have increased U.S. paddy rice production by almost 3 percent and exports by almost 6 percent. Eliminating tariffs in addition would have boosted U.S. production by over 21 percent and exports by 45 percent.
As a result of new programs created in the 2014 farm bill (Agriculture Risk Coverage and Price Loss Coverage), as well as the federal crop insurance program, Hayes said, U.S. farm programs are not now considered as trade distorting.
Agriculture Committee Chairman Michael Conaway, R-Texas, said testimony in the hearing constituted “a warning to our nation’s trade negotiators that patience … is wearing very thin” for passing future trade agreements.”
In many cases, he said, “What foreign countries are doing is patently illegal under their World Trade Organization commitments,” and in other instances, they are “extending support to their agricultural sectors in ways that fly below the radar of WTO discipline.”
In still other cases, countries are “getting a free pass to ignore WTO rules by declaring themselves ‘developing,’ despite their having very mature, strong, and in some cases, globally dominant agricultural sectors.”
TPP may go into 2017
Conaway said some in Congress speculate that consideration of the Trans-Pacific Partnership may have to wait until a lame duck session, or it “could just as easily slip into 2017.
“In short, it doesn’t take a trade expert to recognize that these are not good omens for the future of our nations’ trade agenda. Put simply: Americans are losing confidence in our trade deals,” a problem, he says, “that has been brewing for a long time, and there is plenty of blame to go around.”
One remedy, Conaway says: “Our government must begin to take on those who are cheating on their trade commitments. These actions by our foreign competitors are undermining our trade agenda, and … cheating by foreign countries is also causing serious injury to our nation’s farmers and ranchers.”
Cotton farmers, “who are substantially excluded from the farm bill’s safety net, are being whipsawed by communist China’s erratic policies. China has driven global cotton prices to record highs, only to send them into a total free-fall. Despite these circumstances, there was little to no help for American cotton producers made available under the farm bill.”
While Congress is limited in measures it can take to deal with “this serious situation,” Conaway said, “we can highlight the cheating going on around the world and how it is harming the American people, jobs, and our economy … We can maintain a strong U.S. farm policy and, when warranted, we can further strengthen that policy in order to give our farmers a fighting chance against the cheating.
“Business as usual is no longer good enough,” he said. “Things must change. Our agreements must be enforced. I hope that one day our trade agenda is able to zero out subsidies, tariffs, and other trade barriers around the world, including here at home. But until that day becomes a reality, we cannot — and we will not — unilaterally disarm America’s farmers an