OUTSIDE INFLUENCES

More Subsidies, Fewer Exports Forevermore?

Despite Trump's promises of even more aid to farmers, the administration still prioritizes manufacturing jobs over agricultural exports.

In this July 18, 2018 photo, soybean farmer Michael Petefish stands inside a bin with soybeans from last season's crop at his farm near Claremont in southern Minnesota.
AP Photo/Jim Mone
May 15, 2019, 8 p.m.

President Trump’s announcement that his administration will provide a second package of trade aid to farm producers whose exports to China are down this year is a dangerous signal that American agriculture will become more dependent on subsidies and less on exports, perhaps for decades to come.

Earlier this year, after China imposed tariffs on U.S. farm products in retaliation for tariffs that Trump imposed on Chinese products, the administration announced up to $12 billion in aid—a combination of payments to growers of soybeans and other commodities and purchases of meat, fruit, vegetables, dairy products, and nuts for distribution to schools and other institutions.

After U.S.-China negotiators failed to reach an agreement last week, Trump announced that the administration would provide up to $15 billion in additional aid this year.

“Out of the billions of dollars that we’re taking in [from tariffs], a small portion of that will be going to our farmers,” Trump said on Monday. “We’re going to take the highest year—the biggest purchase that China has ever made with our farmers, which is about $15 billion—and do something reciprocal to our farmers.”

The administration has managed to create these special subsidies without going through the congressional appropriations process because the Agriculture Department has authority under the 1933 Commodity Credit Corporation Charter Act to make payments to troubled farmers using a line of credit with the Treasury and to buy surplus foods under Section 32 of the 1935 Agricultural Adjustment Act.

The next round of aid will use the same system, according to Sen. John Hoeven, chairman of the Appropriations subcommittee that oversees agriculture.

The program is justified because "our farmers are being targeted by the Chinese," Hoeven told reporters on Tuesday.

Making matters worse in farm country, commodity prices are down and natural disasters have afflicted large swaths of the country in the last two years. No one dares speak out against the latest package even though farmers and their allies in Congress have said repeatedly that they’d rather export their products than receive aid. Senate Finance Committee Chairman Chuck Grassley of Iowa, who has been one of the strongest free-traders in Washington, told reporters Tuesday that the package is justified and that Trump should continue to “stand strong” against Chinese business practices, such as insisting that U.S. companies turn over intellectual property.

The National Pork Producers Council said, “Pork producers have been innocent bystanders in these trade disputes. It is fair and right that the U.S. government purchase significant quantities of pork over the next 18 months to ship as food aid to help ease the financial burden placed on producers.”

The longer the dispute with China goes on, however, prospects for future U.S. farm exports diminish. More and more analysts are writing that the dispute with China is not just about trade but about competition between the two countries for world dominance. If the United States and China are in continual conflict, will China want to import U.S. farm products?

Whatever the reasons, aid to farmers is an easy to way for Republicans to try to buy off a key constituency. But the aid won’t go on forever. At some point, piles of unsold grain and lockers full of frozen meat will become a scandal.

The American Soybean Association, whose members sold the most products to China and who have also gotten more aid than any other farming sector, has been particularly outspoken in urging the administration to conclude an agreement. "While we support the administration's overall goals in these negotiations, ASA cannot support continuing and escalating the use of tariffs to achieve them,” the group said this week.

Perhaps more troubling for farmers, Trump and his allies have signaled that their priority is returning manufacturing jobs to the United States.

Just this week, Steve Bannon, his former strategist, wrote in The Washington Post, “Getting tough with China to bring manufacturing jobs back to the United States was the linchpin of President Trump’s electoral march through the Rust Belt during his 2016 victory.”

CNBC’s Jim Cramer told his viewers Monday that it’s important to broaden U.S. manufacturing output and to ignore the complaints of farmers because agriculture is highly subsidized.

Agriculture is indeed subsidized more and more. But even if the aid convinces farmers to vote Republican in 2020, the country’s export agriculture industry could face ruin—and rural America could be changed forever.

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