Written by D. P. Throt for the Telegraph
One of the most contentious aspects of U.S. trade and domestic policies is the multitude of subsidies and other forms of direct and indirect assistance the United States provides to its farmers. A recent bill proposal by /u/Darthholo, a Fremont Democrat has revived that discussion, proposing the creation of a national commission that would ostensibly promote the interests of American agriculture. In truth, they advocate nothing less than the total cartelization of the American farm sector, a controversial move unseen since the days of the New Deal.
Perhaps the most controversial of these proposals is the proposal to allow the Agricultural Trade and Development Commission to negotiate its own trade agreements.
How is a Commission made up of special interest groups supposed to fairly negotiate our trade agreements on behalf of the United States government? Particularly when the US already has a Trade Representative to handle such matters.
It’s also worth noting that most trade agreements cover like NAFTA and the USMCA cover far more than just agricultural exports and since this commission’s exclusive mandate is to promote the interests of the agricultural sector by maximising the revenue of said sector they would have every incentive to pursue one-sided deals that favour agricultural interests over the best interests of the remaining 99% of the US economy. It makes no sense to prioritise an increasingly small minority of stakeholders over businesses and industries that employ many times as many workers as the agricultural sector and make up the vast majority of our revenue.
It also makes no sense to have the commission or more accurately cartel negotiate its trade deals separately from the United States as a goverment-sanctioned entity. Not only would such a move undermine our credibility on the world stage and cause trade retaliation unseen since the days of the trade war with China, but the new agricultural cartel would lose the bargaining power of the rest of the US economy.
Giving the agricultural lobby these powers simply don’t make sense as not only would it result in American farmers losing bargaining power, but it would also cause resentment and give our competitors an excuse to set up similar bodies and discriminate against American exports at a time when the US should strive to maintain its position as a world leader in free trade.
Cartelising agriculture would also kill innovation and competition as there would be little if any incentive to improve as most if not all American farmers would have no other option, but to join the Commission would simply piggyback off its bargaining power and hike their prices to maximise profit. To make matters worse he the US already imposes substantial tariffs and other forms of state aid that all, but lock out the foreign competition so not only would the agricultural sector be free to provide an inferior product at inflated prices, but there would be very little that American consumers and businesses reliant on these goods could do about it.
Putting aside, the clear impracticalities of HR 32 in terms of hindering trade and competition there is also a far more problematic side to this bill that anyone committed to the principles of free-market and internationalism ought to reject the proposal out of hand.
As per the text of the Act, the Commission is empowered to impose binding quotas upon all of its members ostensibly to artificially manipulate the crop supply, allow it to drive out foreign competition only to then hike prices for not just foreign, but also domestic consumers. This would be particularly unfair towards consumers both at home and abroad as they would find themselves paying substantially more for the same goods., resulting in a wealth transfer from the to the large farming conglomerates at a time when largest farms already receive 85% of all USDA subsidies and farmers on average earn more than most Americans.
All of that brings me to a simple point. Why should the agricultural sector get special treatment at all?
No one can deny that farming carries with it substantial risks, but so do most industries such as aviation, hospitality and high-tech industries. All three of these sectors are exposed to the same if not far greater risks than agriculture and yet they have managed to thrive without the Feds stacking the deck in their favour. Yet many continue to argue that mass intervention is needed to keep our agriculture afloat and competitive internationally.
There is plenty of evidence from New Zealand that this is not the case and that scrapping agricultural subsidies can improve the agricultural sector. In the 1970s and early 1980s, New Zealand was one of the most regulated and tightly controlled economies on the planet. This was also a time of crisis for the New Zealand economy as the country had lost its export market in Britain and faced rising oil prices. This was accompanied by goverment policies that shielded most industries from being exposed to foreign competition. In 1984 the country elected a majority Labour government, which oversaw a radical transition away towards a hands-off free-market agricultural policy.
Yet instead of the agricultural sector collapsing and the country plunging itself into famine as many lobbying groups would have one believe the agricultural sector simply became more productive and efficient. Total factor productivity growth in agriculture averaged 1.8% a year from 1972-84. Jumping to 4% per year between 1985 and 1998. Productivity growth in New Zealand’s agriculture sector outpaced that of the country itself. Land prices fell allowing younger Kiwis to become farmers and nowadays New Zealand’s agricultural sector manages to compete with our own highly subsidised and overregulated agriculture sector. New Zealand’s free-market experiment made farming more environmentally sustainable as farmers were incentivised to shift towards more cost-efficient less-polluting farming techniques and reduced their use of polluting fertilizers and improved water quality. Moreover, the policies of the Fourth Labour goverment allowed New Zealand’s agriculture sector to specialise and to move production to areas in which it had a comparative advantage in benefitting not only the farmers themselves but also consumers all around the world.
Compare this to the US model where roughly 40% of all farm income comes from government handouts and which needlessly incentivises the usage of environmentally damaging and cost-ineffective fertilisers and pesticides. Subsidisation has also resulted in the overproduction of crops, destruction of areas of natural beauty and a massive upward transfer of wealth away from American workers and productive businesses to a small minority of large agricultural conglomerates including some of the richest people in the country.
With many calling on Congress to address the historical inequalities and the New Zealand experience showing that American farmers can stand on their own two feet without the crutch of big government, Congress would do well to stop propping up Big Agriculture instead of embracing it as H.R. 32 proposes.
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