Trouble for Farm Subsidies

|

Brazil has won a preliminary ruling from the World Trade Organization in support of its complaint that U.S. cotton subsidies violate America's free trade commitments. Ken Cook, president of the Environmental Working Group, told The New York Times, "This could mean problems for all domestic subsidy programs, for corn, wheat, rice, everything that receives big direct payments from the U.S. Treasury."

NEXT: FCC Blue

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. matthew, I think Kerry understands that the rugged individualists standing in line to deposit the checks they get from Washington are probably complaining about northeastern liberals sticking their noses into their business.

  2. Sovereignty is an issue how? If you can’t take the soggy cookie stay out of the frathouse. We’ve been making other countries eat our love for so long, why would it be suddenly unfair when it comes around to us?

  3. Fair is fair, Americans protest Canadian subsidy practices while knowing that their farmers receive far more gov’t money than any Canadian farmer could dream of receiving. Either subsidy’s are all good or they are all bad, enough protectionism.

  4. Don’t let us forget that binding dispute resolution in the WTO was our idea..

  5. “I think Kerry understands that the rugged individualists standing in line to deposit the checks they get from Washington are probably complaining about northeastern liberals sticking their noses into their business.”

    Northeastern liberals ARE sticking their noses into their business – and everybody elese’s as well.

  6. The U.S. loves to preach to the rest of the world about “free trade”, yet they protect and subsidise agriculture while doing so.

    What we really have is mercantilism based on subsidies for domestic producers and exports and protections against imports through tariffs.

    Bravo Brazil!

  7. Blame it on Rio! Excellent news. Maybe the ruling will eventually lead to bringing the ag industry into 21st century market competition.

    Saturday’s media brought news that a gallon of milk will be $4.18 come May 1 thanks partially to gov’t mandates.

    Eric: “Who was it that said that often, the worst defenders of capitalism are those who practice it?” See non-fiction book “Saving Capitalism from the Capitalists”.

  8. fyodor,

    You summarized my position pretty well. Whether it’s nit-picking depends on the scale of the difference made by GATT in imposing a set of rules from the top and overcoming the transaction costs of organizing such sanctions on a nation-by-nation basis. IMO, it would be a lot harder for this to be done by individual countries and firms. To that extent, the existence of a state-organized legal framework is a kind of subsidy.

    Brennan,

    In 1787-88 it was speculators in war debt and land in the various states, who supported transferring power from the state governments to a new central government. The principle is the same today.

  9. This is exactly what the WTO is supposed to do, isn’t it?

    I don’t know that it is especially useful to act, as Kevin Carson would have us, as though governments and laws are just transactions costs, and that we are individuals that can simply choose to risk selling or not in the face of current political situations. Should we adopt the same theory domestically? “Oh, well, a tax of 1000% on toothpaste is a transaction cost. You can choose to buy toothpaste or not.”

    The fact on the ground is that free-er trade is better than more restricted trade, and all trade is currently restricted to some degree by governments. Setting the governments into competition for free trade seems like a perfectly reasonable policy to me.

    The WTO is optionally entered into, and allows for tit for tat retaliation for tariffs. Here’s hoping for a race to the bottom!

  10. If they include Europe’s, Canada’s, and Japan’s subsidy programs in the order, then I’m all for it. It’s way past time to roll all of these farm subsidy programs back. However, I will predict right here and right now that that isn’t the way it will go down. All of the other countries will be granted “cultural exceptions” (the WTO has already done this for Canada in a ag sub case) and the U.S. will be singled out.

    And while we’re at it, let’s talk European and Canadian media domestic-content restrictions…

  11. But Jason, when you say “governments entering into competition”, where is the individual in that?
    These institutions essentially sanction corporations to do business sometimes at the expense of individuals.

    Just look at the recent case in Florida where local municipalitites are using eminent domain to condem private property and then turning around and selling said land to developers.

    Is that right? Why not? It is, after all, state sanctioned capitalism….just like all these trade organizations, pacts, agreements, are.

    They are not tru free trade based on individuals from different nations, but trade based on developing nations dropping barriers to entry while developed nations(the US) keep some of theirs(agriculture, and on and on).

    It’s a double-standard. We don’t “practice what we preach” many times.

  12. “It’s a double-standard. We don’t “practice what we preach” many times.”

    True, but we don’t need the WTO to be hypocritical on trade, we could do that on our own just fine. Can you show how WTO participation increases such hypocrisy? And can you give an example of the WTO behaving like a municipality abusing emminent domain? I doubt you can because emminent domain is a coercive power and the WTO lacks that.

  13. fyodor, I’d say according to the article, WE ARE being hypocritical. That was my point. The WTO is a nation-state organization based on state-sanctioned capitalism/corporatism.

    And do you think the U.S. will follow the WTO rules it helped to write?

    There is little reciprocity.

  14. Complaining about an organization that the US created is truly ironic.

    Kevin Carson,

    The GATT no longer exists; it was replaced by the WTO.

  15. It just seems ridiculous for the U.S. to go to poor, undeveloped nations and say: “Free trade is great. Have an open market.” and then turn around and subsidise our own producers and exports.

    Now, why would we urge them to lower their trade barriers and industries while erecting our own?

    Lining the pockets of multi-nationals maybe? Nah.

  16. I predict that soon, thanks to U.S. government research grants, a gasoline additive based on cottonseed oil will make the air safer for children everywhere. So clean that legislators will be compelled to require all fuel sold in the US be at least 10% cottoline.

  17. Yeah, and 80% corn.

  18. Jean Bart,

    The WTO is part of the Uruguay Round of GATT.

    See, I can be even more pedantic. πŸ˜‰

  19. “Lining the pockets of multi-nationals maybe? Nah.”

    This is where you anti corporatist folks have it all wrong. Politicians maintain trade barriers because it is political suicide not to. Try to win an election in this country on the platform that we will have no more ag subisdies.

    It is not corporatism that drives protectionist measures, it is populism.

  20. Will the Environmental Working Group actually advocate smaller government after this preliminary finding? * fingers crossed *

    Brazil was joined in the W.T.O. case as third parties by Argentina, Australia, Benin, Canada, Chad, China, the European Community, India, New Zealand, Pakistan, Paraguay, Taiwan and Venezuela.

    Guess we’re not getting any support from our free trade allies.

  21. “This could mean problems for all domestic subsidy programs, for corn, wheat, rice, everything that receives big direct payments from the U.S. Treasury.”

    One could only hope, but I must admit, I don’t like being told this by some international organization. You know, sovereignty and all.

  22. Yes, but we traded a bit of our soverienty for the right to tread upon the soverienty of others, so fair’s fair. πŸ™‚

  23. Eric: Hey now. The EWG is made up of primarily American money. Goldman, Schuman, Ford, Hewlett, Heinz and Rockefeller I believe are Americans. πŸ™‚

  24. Hmm…talk about feeling conflicted.

    American ag subsidies ending–good thing.

    American trade policy being dictated by an international organization–bad thing.

    I suppose this could be “breaking even”, though I think that achieving a desireable policy goal at the long-term expense of our sovereignty is probably a net loss.

  25. Brennan,
    “The EWG is made up of primarily American money. Goldman, Schuman, Ford, Hewlett, Heinz and Rockefeller I believe are Americans.”

    Who was it that said that often, the worst defenders of capitalism are those who practice it?

  26. I can sympathize with those grousing about US sovereignty being violated and being directed by an international organization, but only up to a point. Bear in mind, we can always just IGNORE what this organization says. It has no coercive enforcement powers, so our sovereignty is not REALLY being violated and we are not REALLY being “dictated” to. All this organization can do to us is sanction us economically, which of course its member states could do without a WTO to coordinate them. Like a trade union, the aspect of organized action gives it more clout. Now maybe, as a Kevin Carson might argue, this clout skews what might otherwise be a more organic and grass roots resolution of the matters at hand and so maybe we should be entangling ourselves with international bureaucrats and financiers like this (although he’d go a lot further than that!). But I don’t think we need sweat the sovereignty issue beyond an irritated shrug because there really isn’t one.

  27. “should be entangling ourselves…” should be “shouldn’t be” πŸ™‚

    To go further, this action by the WTO can easily be seen simply as a bunch of states getting together to say we’re screwing them with these subsidies and they ain’t gonna stand still for it! And of course, they’re right, we are screwing them, and ourselves as well. I can see Kevin Carson’s point that we should let the businesses and people being screwed do the talking themselves, but I’ve always seen this as little more than nit-picking, myself.

  28. The end of agricultural subsidies? God, no!!! Make it go away!!! Say it isn’t so!!!

    [tee-hee]

  29. I’d be curious to hear what Kerry says in response to this. You know he can’t come out in favor of removing subsidies, his platform revolves around going around the country and buying votes. You also know that he can’t come out as a unilateralist that doesn’t care about world opinion, because that’s how he paints Bush, and his only good quality (electionwise) is not being W. I’m sure he’ll find a way to either come out on both sides or neither, but I can’t figure out how off the top of my head.

  30. If it takes a WTO case to end our cotton subsidies…fine. Maybe the WTO can prove useful for once.

    Farm subsidies (not just cotton subsidies) are some of the most egregious, expensive and utterly stupid forms of government interference in the free market today.

  31. Jason,

    Is ADM a family farm?

    And remember the Freedom to Farm bill the republicans passed in the mid ’90’s?

    That was a popular(ist) proposal, yet it reduced ag subsidies.

    It’s a romantic notion most subsidies go to individual family farms and not corporate farms.

    Ag subsidies = corporate welfare.

  32. Jason,

    Is ADM a family farm?

    And remember the Freedom to Farm bill the republicans passed in the mid ’90’s?

    That was a popular(ist) proposal, yet it reduced ag subsidies.

    It’s a romantic notion most subsidies go to individual family farms and not corporate farms.

    Ag subsidies = corporate welfare.

  33. Jason,

    “Lining the pockets of multi-nationals maybe? Nah.”

    This is where I was talking about U.S. corporations opening business overseas after developing countries lowered their trade barriers.
    In other words, the U.S. reaches an agreement with a developing nation thru the WTO to make it easier for a U.S. firm to open up in the developing country. Fine, that’s great.
    But when the U.S. keeps up its barriers to protect those domestic industries, it hurts the chances for the developing country to, in turn, open a business here or export their products here.

    It’s hypocrisy for the U.S. to talk other countries into quitting agriculture subsidies while subsidising their own.

    U.S. firms can then go over to the developing country, hire the cheaper labour, and still have their domestic protections intact. That is U.S. corporatism.

    And the U.S. has veto power in the WTO while many other nations who are members do not.

    Lou Dobbs has it backwards. It’s not a threat to our national sovereignty, but to free individuals throughout the world.

  34. Jason,

    “Lining the pockets of multi-nationals maybe? Nah.”

    This is where I was talking about U.S. corporations opening business overseas after developing countries lowered their trade barriers.
    In other words, the U.S. reaches an agreement with a developing nation thru the WTO to make it easier for a U.S. firm to open up in the developing country. Fine, that’s great.
    But when the U.S. keeps up its barriers to protect those domestic industries, it hurts the chances for the developing country to, in turn, open a business here or export their products here.

    It’s hypocrisy for the U.S. to talk other countries into quitting agriculture subsidies while subsidising their own.

    U.S. firms can then go over to the developing country, hire the cheaper labour, and still have their domestic protections intact. That is U.S. corporatism.

    And the U.S. has veto power in the WTO while many other nations who are members do not.

    Lou Dobbs has it backwards. It’s not a threat to our national sovereignty, but to free individuals throughout the world.

  35. “Ag subsidies = corporate welfare.”

    Not disputing that. What I’m saying is that whatever their actual effects, they are friggin impossible to vote against. If you are right, the Dems should be unharmed in the corn states on a platform of eliminating subsidies to farmers, right? Whatever happened to the Freedom to Farm bill, anyway? It kind of looks like ag subsidies are as high now as they ever have been.

    The same is true with your perfectly accurate observation about how corporations benefit from opening foreign markets while closing domestic ones – but you again gloss over that closing domesting markets is the first priority of the AFL-CIO and their ilk. Watch the rhetoric. These things fly becuase people want THEIR jobs protected. The fact that it helps the coroporation and harms foreigners is incidental. Protectionist policies are driven by large voting blocks of people, which CEOs ain’t.

  36. I agree with you Jason as far as the domestic side is concerned.
    My only contention is that the U.S. doesn’t see the hypocrisy of preaching to developing nations to drop subsidies and barriers to entry in markets, and then turn around and do just that.

    That is why the WTO decision was the correct one. The U.S. multi-nationals benefit from protectionism at home and open markets and low tariffs abroad.
    That is how the U.S. government is protecting corporations abroad and contributing to the “lining of their pockets”. Those same corporations that contribute to politicians campaigns and lobby Congress.

    I have no dispute with you on the domestic side. My comments refelcted the hypocrisy of the U.S. not following at home what they preach abroad.

  37. But lets go back to our original comments.

    You correctly pointed out that the WTO encourages less-restricted trade, not true free-trade.

    I agree. That is why the WTO is a nation-state institution benefitting those nations generally at the expense of free individuals. The U.S. basically uses the organization as a way to help domestic firms open markets overseas.
    But the cotton decision reflects the hypocrisy of what the U.S. government does.
    We have a state capitalist system and the WTO and all the other nation-state institutions are ways in which large corporations move overseas with the sanction of our government.
    It’s not a true system of reciprocal trade between a business and a customer, but one where corporations use the power and influence of the state to gain advantage in the marketplace.

    That’s unfortunate. It is better than ultra-protectionism, but still far from free and open trade. The WTO and others would be unecessary if that were the case.

Please to post comments

Comments are closed.