Many U.S. farmers face financial difficulty. Look at corn, wheat and soybean prices—they’re below levels of 25 years ago.
Some believe that agricultural imports are to blame and are saying so to the congressional committees that are holding hearings before drafting a new farm bill next year.
In testimony a few days ago, one Minnesota farmer said: “We need to limit imports of agricultural commodities into our already depressed farm economy. I don’t care what (trade agreements) might say. We are an independent, free sovereign nation, and we need to take care of ourselves first.”
Not only do some farmers relate to this sentiment, but it appeals to the anti-trade instincts of populists in both political parties, but particularly among liberal Democrats.
That’s why it’s important for U.S. agriculture to realize where its long-term self-interest lies. Calling for increased restriction on imports is the equivalent of a cartoon goof taping a “kick me” sign on his own back. It just doesn’t make economic sense.
Why would limiting ag imports hurt U.S. farmers?
We export far more than we import because our farmers produce much more than we can consume. For instance, roughly half of all U.S. wheat and cotton is sold to other countries. So our valued export markets would be at risk of retaliation if we block the few imports that do directly compete with U.S. production. And we threaten the supply of products such as coffee, bananas or cocoa, which are difficult to grow here.
The farmer’s remarks smacked of the notorious mercantilist fallacy, which has caused so many nations so much damage over centuries.
Mercantilists believe that exports are good and imports bad. Other nations need what we export, but our country does not need whatever we import. Rather, we should “take care of ourselves first.”
This illogical and destructive belief has been popular for centuries. Abraham Lincoln was a mercantilist in his views on trade. So were two other Republicans, Senator Reed Smoot of Utah and Representative Willis Hawley of Oregon, who sponsored the 1930 tariff bill that bears their names.
At the time, the U.S. was in a situation much like today. The economy was in a mild slump after nearly a decade of strong growth and a dramatic run-up, then drop, in stock prices. As now, farmers had largely missed out on the good times. Prices were low, and unemployment was rising.
Smoot and Hawley wanted to “take care of ourselves first” by limiting imports. Their bill proceeded to raise import tariffs to the highest level in U.S. history and, together with disastrous monetary policy on the part of the Federal Reserve, turned what might have been a garden-variety recession into the Great Depression.
Today—as in the 1930s—nations would retaliate and U.S. agricultural exports would plummet. So it’s difficult to see how farmers would be better off if they suddenly lost one-third of their market for soybeans, for example.
U.S. farmers have been suffering from the increases in their productivity outpacing increases in the demand for their products. As in the late 1950s and 1960s, they also suffer from an overvalued U.S. dollar that raises the cost of U.S.-produced farm commodities to overseas buyers.
The farmer who testified probably represents a minority view among U.S. farm producers, but calling for protectionism in front of some of the congressmen participating in the hearings is like shooting off fireworks in a powder magazine. A protectionist solution would throw away nearly two decades of progress in world trade agreements and hurt U.S. farm income.
Senators Mark Dayton, Byron Dorgan and Paul Wellstone may care deeply about the farmers they represent, but they carry anti-trade biases deep in their political souls. Tempting such impulses is dangerous for U.S. agriculture.
We are a free and sovereign nation, which the farmer pointed out, and trade agreements are not some fort of international government. They are merely treaties that the U.S. has signed and ratified. Our participation is not irreversible.
To withdraw, though, would be folly and more than farm trade would suffer.
At a time when the world economy is increasingly pallid, it would be a self-destructive gesture that would make most U.S. households effectively poorer.
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.