Dear President Bush: I heard part of your Sioux Falls speech on the radio the other day. I was so surprised to hear some of your comments on agriculture and trade that I checked the printed text of your remarks on the White House Web site just to be sure I had not misheard you. The comments that surprised me were the following:
“I believe the South Dakota farmer and rancher is the best in the world. And if given the opportunity they can compete with the best in the world, so long as the opportunity is fair. . . . When it comes time to negotiating trade agreements, we’re not going to leave the farmer behind.”
Mr. President, take some friendly advice: Tone down this type of rhetoric. If you continue to make the explicit commitments to farmers and also keep your campaign promises on trade negotiations, something will come back to bite you in a particularly nasty manner.
First of all, respect your Republican predecessors in the Oval Office. While you do not openly charge that past trade agreements were unfair to farmers, many listeners might sense that implication. Remember that all three of the major trade agreements the U.S. had concluded in recent years–the Uruguay Round of GATT/WTO, the Canadian-U.S. Trade Agreement and NAFTA—were all negotiated by the Reagan and Bush administrations.
True, Bill Clinton was in office by the time of the signing ceremonies for NAFTA and the WTO, but your father negotiated the guts of these agreements. And Ronald Reagan, on whose administration you model your own, crafted the Canadian agreement, now much maligned by U.S. wheat growers.
Your implicit criticism of your father and President Reagan is a minor point. Much more important is the fact that throughout your campaign, you stressed you would press for establishment of a Free Trade Area of the Americas or FTAA. The people you appointed to head the Treasury and Commerce departments, as well as the U.S. Trade Representative you named, have stated that the FTAA is a key component of your administration’s economic package.
You need to know that Brazil and other Latin American countries will never sign a FTAA pact unless the U.S. removes its barriers to the agricultural products these nations produce.
While Western Hemispheric free trade may benefit the U.S. as a whole, it will be bruising for agriculture, particularly in Florida, where your brother is governor, and in the Upper Midwest, particularly Minnesota and the Dakotas.
As you observed, U.S. farmers are efficient and hard working. But they are not the most efficient in the world at producing every product.
Many Latin American countries can produce cane sugar very efficiently. True, some countries have subsidized these sugar producers at one time or another time in the past. But the current economic wave in the region is toward privatization and elimination of subsidies. In a stable economic environment, unsubsidized farmers in at least 10 Latin countries can produce sugar cheaper than we can in the U.S.
Brazil has some particularly good cane farmers and ideal soil and rainfall. Some experts feel that with free and fair trade, Brazil can produce 12 megatons of sugar per year and make money selling it at 15 cents a pound. No U.S. producers can match that over the long run.
Brazil also set up dozens of “autonomous distilleries” after the first OPEC embargo to produce ethanol for automobile fuel directly, rather than as a sugar byproduct. Burning the cane bagasse for fuel, these distilleries can turn out alcohol cheaper than the natural gas-fueled corn ethanol plants in Minnesota and the Dakotas.
Nor is Brazil alone. Peru, Paraguay, Argentina, the Dominican Republic, Venezuela, Colombia and smaller nations could all renovate their aging sugar infrastructure if price and trade conditions were right. Indeed, there are European and North American investors poised to do just that once a FTAA is concluded.
U.S. corn and beet sugar producers are technically efficient. But with truly fair free trade, U.S.-produced beet sugar, ethanol and high fructose corn sweetener will all lose market share to FTAA competitors. Nor can Florida orange growers compete with Brazil’s orange juice concentrate manufacturers, the world’s most efficient, at the relative wage rates and land prices that exist today.
Trade is beneficial to nations and to U.S. farmers. Contrary to what you implied in Sioux Falls, U.S. farmers were net gainers, on balance, from the agreements negotiated by Ronald Reagan and your dad.
But don’t try to pull the wool over anyone’s eyes. The FTAA you promised business interests during your campaign may be good for the nation as a whole, but it will force harsh and painful adjustments on many U.S. farmers. Face that fact squarely, don’t patronize farmers and don’t delude them.
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.