TRADE WATCH : A Sticky Business

Peanut quotas and other U.S. policies distort peanut prices and unduly cost consumers. The nutty quota system makes for a double hit: All taxpayers pay, because government subsidies support peanut farmers, and shoppers feel it in the stores because import quotas restrict the supply of cheaper foreign peanuts and thus keep domestic prices higher.

Add an act of Mother Nature like last year’s drought in peanut farming areas and the result is short supplies of Georgia peanuts and sky-high prices. In fact, the cost of peanut butter has gone so high that most soup kitchens and food banks have eliminated the protein-rich spread from their menus and the Agriculture Department has dropped it from its food programs for the needy.

Even the bumper crop that’s expected this year will hardly puncture the price inflation caused by protectionist U.S. farm policies. Peanut imports are limited to a paltry 1.7 million pounds annually--less than 1% of total U.S. consumption. President Bush temporarily increased the import ceiling last month to relieve the shortage, but there was a catch: The additional 100 million pounds had to make it into U.S. ports by July 31. Only 22 million pounds got in.

Import quotas distort the market and protect peanut farmers at the expense of consumers. Now the United States is “looking at” resuming peanut butter purchases. But the Administration, an ardent backer of free trade, ought to seek a long-term solution: Stop making peanut butter into such a high-price spread.