The U.S. Department of Agriculture (USDA) recently announced a $12-billion plan to support farmers and ranchers harmed by China’s retaliatory tariffs.
Sen. Michael Bennet (D-Colo.) slammed the move in a tweet: “This solution is as insane as the policy that got us into this mess. … @POTUS cannot fix this self-inflicted crisis w/a $12 billion slush fund.”
Bennet is a free-trade supporter, so the criticism is not a surprise. But he apparently forgot his vote in 2015 for a similar “slush fund” to compensate workers and farmers harmed by the very free-trade agreements he supports.
That slush fund is called Trade Adjustment Assistance (TAA). CNBC reported at the time, “Since TAA's inception, the Department of Labor has certified nearly 4.8 million workers as hurt by global trade.” That displaced worker number nears the size of Colorado’s population.
Bennet is not alone. Free-trade supporters, when pressed, must admit that there is harm to workers and farmers from disrupting our economy with globalization, import facilitation and domestic job loss. That is why the Trade Adjustment Assistance “slush fund” was established in 1974 and has continued for decades.
The administration is disrupting the offshoring rush and instead prioritizing the relocation of jobs in the U.S. through its trade policy shift.
Readers may be surprised to learn that nearly all in Congress agree that China cheats and has engaged in the largest commercial espionage and technology theft campaign the world has ever seen. If we expect to have an economy in 20 years, we must respond.
The administration imposed tariffs on $50 billion of Chinese imports in response. Rather than changing their unlawful behavior, China retaliated with tariffs against fairly traded goods like soybeans. The stock market has shrugged off the tariff conflict. The agricultural commodity markets, so far, have not.
The new USDA program is, in effect, Trade Adjustment Assistance to ease the transition toward more production located in the U.S. rather than, as before, easing the transition to offshoring production.
The USDA plan will provide incremental support for producers of soybeans, sorghum, corn, wheat, cotton, dairy and hogs. It will also purchase surplus commodities for distribution to food banks. And it aims to open new markets for U.S. exports.
The USDA program is a good start, 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. The worst farm meltdown since the mid 1980s preceded the president’s trade policy.
Few were discussing why domestic ag prices have been so depressed for such a long period of time. USDA’s longtime attitude — "trade, not aid"— has failed by facilitating cheap imports for the benefit of multinational agribusiness.
Prices were depressed, the farmer's share of the consumer dollar continued to decline, and rural America became more impoverished.
Why? First, America’s “strong dollar” policy makes U.S. ag 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 U.S.-grown beef 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 President Trump threw out the old playbook on trade policy, he should do the same on ag policy. Washington should pursue a competitively priced dollar, which could boost farm prices by 25 percent. 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 overproduction of subsidized 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 the frontline casualties when we respond to China’s trade war.
Michael Stumo is CEO of the Coalition for a Prosperous America (CPA), which advocates for policies to balance U.S. trade and protect American sovereignty to create jobs, growth and prosperity.