On July 6, 1987, President Reagan laid down in Geneva the most ambitious agricultural subsidy reform plan ever proposed. Agriculture, now protected by a dazzling array of barriers, tariffs, and subsidies, would have those trade impediments totally phased out over a 10-year period or by the year 2000.
Unlike manufactured goods, for which trade restraints have been dramatically reduced in the postwar years, agriculture has become more protected. It is a time for boldness. Reagan's proposal is the "zero option" of nuclear arms negotiation applied to agriculture.
The plan has been called everything from "pie in the sky" to "visionary." Assessing the viability of the proposal depends as much on whether one is an optimist or a pessimist as it does on the specifics of the plan. Being an optimist, I believe that the plan is ambitious but achievable. Even if only half is accomplished, it will nonetheless be of historic proportions.
American farmers, Western Europe, and the developing world all have much to gain from a world in which food is produced, sold, and consumed more freely than it is today.
For most major crops, the American farmer is as efficient as any in the world, despite low land and labor costs found elsewhere. U.S. farmers - contrary to the popular notion - have not been subsidized to the degree that European farmers have and therefore are more in touch with production technologies and marketing strategies needed in a market-oriented environment. Moreover, the agricultural infrastructure in the United States, which employs more people than there are farmers and which would be immeasurably helped by this proposal, is second to none. Indeed, this infrastructure provides the decided edge for U.S. competitiveness. This country has good roads, rails, an extensive river system with locks and dams, deep-water ocean ports, unit train-car loading and unloading facilities, and grain storage facilities that extend all the way from farms to ports. No other system compares with this, and it makes movement of farm commodities to ports competitive with any in the world.
Undergirding American farmers and agribusinesses is a stable political and financial system and an economy that generally reflects the working of free enterprise. No other single agricultural producer and exporter can boast the efficiency of our farmers, the vastness of our agribusiness infrastructure, and the soundness of our political and economic system.
Hidden costs
European farmers produce great per-acre volumes of commodities like wheat, barley, oil-seeds, and sugar. U.S. farmers, however, would do the same if they received the same high subsidized prices. Efficiency cannot be measured by how much a farmer produces but by how much is produced at a given price. At current world prices, most analysts agree, European production would go down markedly.
That does not bode well for European farmers, but the effect on consumers, and hence on the European economy, might be so overwhelming that Europeans would decide to support their agricultural population some other way. As a percentage of income, European consumers spend around twice as much for their food as do U.S.
...
Read Full Article
|
