US farmers aid China trade, A strategy in search of a problem

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US farmers aid China trade, A strategy in search of a problem.

As Trump ramped up a trade war with China on Friday, one group of constituents wasn’t far from his mind: farmers.

He even suggested that the extra revenue brought in from higher duties on Chinese goods could be used to buy grain and other commodities from U.S. growers hurt by the trade war, which in turn could be sent to impoverished countries.

But such a plan could sow even more chaos in world markets and take many months to implement, and would do little to alleviate the pain farmers are experiencing as the result of years of gluts and low prices.

“Simply being able to position U.S. government programs to do that is not an easy task. It’s not like the government can just purchase the grain and ship it out tomorrow,” said Darci Vetter, who served as chief agricultural trade negotiator under the Obama administration.

Talks between U.S. and Chinese officials ended Friday without resolution. The Trump administration decision to push up tariffs on $200 billion worth of Chinese goods from 10 percent to 25 percent will be a huge cost to those in the U.S. economy who rely on imports for furnishings, clothing, manufacturing and parts.

Farmers have been in the center of the economic blast zone caused by Trump’s tariffs as countries like China, Mexico and Canada — major U.S. export markets — have aggressively retaliated against U.S. agricultural goods with tariffs of their own.

The administration has already pledged $12 billion in aid to farmers, most of which as direct payments. Around $1.2 billion was spent on purchasing commodities for U.S. food banks and school lunch programs.

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(The farmer aid totals the $12 billion the Treasury has collected through February from Trump’s tariffs against China, according to an analysis by Laura Baughman, president of Trade Partnership Worldwide, a Washington-based analytical firm. So Trump’s contention that the U.S. is making a lot of money off the tariffs hasn’t proved true.)

Trump seems to be getting ready to bail out the agricultural industry again for the consequences of the latest round in the trade war.

Agriculture Secretary Sonny Perdue tweeted Friday that Trump directed his department to “work on a plan quickly” to assist farmers. “@POTUS loves his farmers and will not let them down!” Perdue tweeted.

The president suggested in another tweet that the government could buy $15 billion of agricultural goods from U.S. farmers.

That would be a major undertaking, though. In 2018, the U.S. exported $9.2 billion worth of farm goods to China, according to the Agriculture Department.

Farmer sentiment toward Trump has held steady despite the beating tariffs have meted on producers already suffering from a years-long downturn in incomes and crop prices. Although farmers have not rejected the payments offered as compensation, the aid has not been distributed equally. Most of the trade aid money has gone to so-called row crop farmers who have faced retaliatory tariffs from China and other allies.

Farmers are also quick to point out that they would rather have “trade, not aid” — an enduring mantra of groups like Tariffs Hurt the Heartland, a campaign organized by agriculture and business groups that mobilized in opposition to Trump’s tariff moves.

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Some groups, however, were steadfast in defending the president’s actions. National Pork Producers Council president David Herring called Trump’s effort to help with more aid “fair and right.”

“We stand ready to work with the USDA to facilitate U.S. pork exports as food aid to a number of nations,” Herring, a North Carolina pork producer, said in a statement. “This assistance should not cannibalize commercial trade. Rather, it should help people in need who otherwise would not have access to this high-quality U.S. protein.“

But any efforts to boost to U.S. international food aid programs through what’s known as in-kind or donated shipments would be a 180-degree turn from a two decade effort of trying to get away from “dumping U.S. commodities in foreign markets,” said Kim Elliott, a visiting fellow at the Center for Global Development.

“It sounds to me more like a political gesture than anything else,” she said.

The Trump administration itself hasn’t been a fan of food aid programs. In its most recent budget proposal to Congress, the president proposed the elimination of three in-kind food aid programs housed at USDA and the U.S. Agency for International Development.

While in-kind programs still remain the foundation of U.S. food aid programs abroad, efforts have been made to make programs more cash-based. That involves giving nations financial aid to allow the purchase of food products from within the country or region, rather than shipping in food from far away countries like the U.S.

“A major influx of commodities from outside that market has serious market implications. It is very disruptive to local economies,” said Vetter, the former U.S. trade official who now work as general manager for public affairs at Edelman.

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An extensive U.S. food aid program could also run afoul of international trade laws. In 2015, the U.S. and other World Trade Organization members agreed to rules that required international food aid to be needs-driven. Countries also agreed to refrain from in-kind food donations if they would undercut local and regional producers.

Most of the stockpiles of soybeans and corn caused by the trade war were grown primarily for animal feed instead of human consumption.

“Can we deliver it to countries as just bulk soybeans or do we need to turn it into meal? Does it need to be fortified with micronutrients so that it’s usable by food aid recipients?” asked Vetter.

There’s also the big question of whether boosting foreign food aid will achieve the broader objective of helping U.S. farmers. It’s unclear, both from a legal and pragmatic view, how much commodities U.S. food aid programs would be able to absorb to clear out excess capacity — and thus raise prices farmers can get for their crops, said Joe Glauber, senior research fellow at the International Food Policy Research Institute who was formerly chief economist at the USDA.

It’s unlikely that the scale of U.S. stockpiles could be significantly reduced through food aid programs, he added.

“You have to show a humanitarian need for this stuff, otherwise it just looks like an export subsidy,” he said. “If you start throwing grain into markets, you‘re going to start making a lot of people unhappy.”

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