U.S. Farmers Skeptical of Trade Talks
Even before the ink dried on the last global pact, jubilant U.S. farmers were looking forward to billions of dollars in new sales as trade barriers fell like dominoes. That celebration now has become a wake.
Since the agreement took effect six years ago, U.S. rice and citrus growers have found themselves struggling to make inroads in protected foreign markets, while imports of tomatoes, roses, garlic and canned peaches have skyrocketed. Agriculture exports declined by 15% and imports rose by nearly 20% from 1996 to 2000, costing American farmers a fortune in sales as the trade surplus shrank from $27.4 billion to $12 billion.
To their dismay, U.S farmers discovered the biggest battle was at home. “We were told the U.S. has got to lead by example” on trade liberalization, said Michael Wooten, vice president of corporate relations for the giant Sunkist Growers, which has seen a tenfold increase in citrus imports over the last five years. “We were asked to be good soldiers in that effort. The problem is, nobody followed.”
Such past disappointments help explain why farmers are increasingly skeptical about seeing any kind of bonanza when the world’s top economic officials try to launch a new round of trade talks this week. These frustrations are particularly high in California, where the farm economy is dominated by specialty producers who receive little federal help and face tariffs as high as 100% when they try to sell abroad.
As the nation’s leading agriculture producer and exporter, California has a huge stake in the outcome of the five-day World Trade Organization ministerial that begins Friday in Doha, Qatar. The Bush administration has made reducing excessive tariffs and other barriers to U.S. farm products its top priority, which could mean new markets for a state that shipped $7.6 billion worth of agricultural goods last year.
But Lisa Dillabo, director of international trade for the California Farm Bureau, is finding it tough to drum up enthusiasm among farmers for another trade battle. In addition to the WTO talks, the Bush administration would like to get a hemispheric agreement stretching from Alaska to South America and bilateral pacts with Singapore, Chile and Australia.
This growing discontent among one of America’s most trade-dependent constituencies doesn’t bode well for the Bush administration, whose effort to promote a freer flow of goods already is threatened by anti-globalization critics, congressional skeptics and heightened concerns about security in the wake of the Sept. 11 terrorist attacks.
“Many farmers and ranchers are very discouraged with trade,” Dillabo said. “They feel it has not benefited them.”
Protecting the family farm and promoting food security is a priority from Tokyo to London to New Delhi, ensuring that agriculture will remain one of the most politically sensitive, emotionally divisive issues on the WTO negotiating table.
Export-Driven Policy Criticized by Some
Critics contend that America’s farm crisis exposes the limitations that come from a policy that places an export-driven profit agenda above the protection of rural communities and food independence. They said the September attacks highlighted the importance of having a safe, locally produced food supply.
“We need to shift our emphasis from believing we can export our way to prosperity to a recognition we need to build a sustainable farm economy based on domestic demand,” said Robert Scott, an economist with the Washington-based Economic Policy Institute, who advocates limiting output, encouraging conservation and seeking alternative uses for agriculture products.
Japan and the European Union have balked at further opening of their agriculture markets, citing concerns about protecting their food supply and small farmers. Third World countries dependent on exports of cotton, rice and grain have threatened to boycott a new trade round unless developed countries quit subsidizing those crops and open up their markets. The U.S. is under pressure to give up its controversial anti-dumping laws, which have been used to penalize foreigners accused of selling farm products in the U.S. at below cost.
“It would be an incredibly bad signal for the world economy to let this round of trade negotiations fall apart,” said Daniel Sumner, a UC Davis agriculture economist who recently returned from trade discussions in Europe.
“If you were looking for something that could tip the balance creating serious problems in the world, blocking trade or losing momentum toward opening markets would be that kind of signal,” Sumner said.
Though the Bush administration has taken the lead in promoting a new round of talks, it is up against powerful critics in Congress who contend that trade negotiators are bargaining away protections for farmers, the environment and labor. The critics have opposed efforts to provide the president with fast-track trade-negotiating au-thority and recently passed a multiyear $171-billion farm subsidy bill in the House. The White House opposed that legislation, saying it favored big farmers, promoted overproduction and undermined trade policies.
Given Congress’ lukewarm support for trade legislation, many foreign governments question whether the U.S. has the political will to relinquish some of its own sacred cows, such as sugar and peanut protections. That has lessened their enthusiasm for agreeing to market-opening measures that would hurt their own farmers.
“I think everybody around the world realizes that American farmers are not very pro-trade right now,” said Peter Lacy, executive director of the International Policy Council on Agriculture, Food and Trade in Washington.
Long dependent on foreign sales, California farmers understand the importance of opening markets abroad for U.S. vegetables, fruits and grains, particularly at a time when their most lucrative market, the U.S., is slowing. The state exports 80% of its cotton, 70% of its almonds and 40% of its rice.
Though barriers have fallen around the world, the U.S. is still far more open than its leading trading partners with an average import tariff of 12% compared with 62% for other members of the WTO.
Import Battle Affects California Most Strongly
California, which produces 58% of the nation’s fruits and nuts and 39% of its vegetables, is bearing the brunt of the battle with imports, particularly from Mexico. From 1994 to 2000, U.S. imports of meats, eggs, fruits and vegetables from Mexico shot up 89.4%. In vegetables alone, the increase was 60%.
From 1996 to 1998, imports of fruits and vegetables from the European Union increased by 141%, while U.S. exports to that region declined by 12%, according to the California Farm Bureau.
Farmers are warily watching China, which is slated to join the WTO along with Taiwan at this week’s meeting in Doha. Though the Asian giant has proven to be a promising market for California oranges and almonds, it is already a formidable competitor for U.S. growers of garlic, apples, broccoli and rice.
The list of foreign challengers grows by the day. Chilean grapes, Spanish oranges, New Zealand lamb, Greek peaches, Mexican tomatoes. These imports have kept food prices down and dramatically increased the choices for U.S. consumers, expanding the produce list at the average grocery store from 140 items to more than 400. But they also have undermined U.S. farm sales at home and abroad.
The sword has cut both ways for Vito Chiesa, a second-generation California farmer, who has watched exports of almonds and walnuts soar in recent years while the global market has collapsed for his canned peaches because of subsidized competition from Greece.
In 1998, California sold 800,000 cases of canned peaches in Mexico, where the growers had opened a processing facility south of San Diego. Last year, the state’s peach producers sold fewer than 5,000 cases in Mexico and have closed their plant there.
Chiesa believes American farmers were “sold short” in previous trade talks, but still thinks the only way to survive is to pry the door open wider overseas. He has reduced his peach orchard from 200 to 20 acres and instead farms 500 acres of nuts that can be harvested more cheaply by machine.
“In California, trade is paramount,” he said. “We’ll slowly wither if we don’t grow. Some commodities will be hurt tremendously, but for most commodities, growth will come through international trade.”
State’s Farmers Have Other Burdens to Bear
Trade barriers aren’t the only dark cloud over the California farm. Water shortages, energy hikes and rising labor costs have increased production costs. Improved efficiency around the world, particularly in China and other developing countries, has contributed to a glut of farm products and a collapse in prices. A strong dollar has raised the price of U.S. products overseas, making it even tougher to compete against farmers with cheaper land and labor costs.
Though the U.S. is pushing its trading partners to lower their support for farmers, it increased its agriculture aid to a record $32.3 billion last year. But the American Farm Bureau points out that Europe still spends nearly four times as much as the U.S. on domestic farm supports and 40 times more on export subsidies.
Agriculture experts predict the U.S. will have to give up something at the negotiating table, if it wants its foreign trading partners to challenge their own powerful farm lobbies. The most vulnerable are controversial U.S. programs to protect sugar producers and peanut farmers.
“There’s no question we’ll have to lower tariffs on sugar and dairy products and we’ll probably expand minimum access for dairy products and peanuts,” said Sumner of UC Davis. “Though other people have much more than we do, we have very high tariffs for things like frozen concentrated orange juice and tomato paste.”
But Ben Goodwin, executive manager of the California Beet Growers Assn., contends that domestic sugar producers can’t compete against more heavily subsidized European and Latin American competitors who sell their product on the world market at half of what sugar sells for in the U.S.
With sugar prices at a 20-year low, California producers still are struggling, even with government help. The closure of two sugar processing facilities two years ago reduced California’s sugar production by half.
“Back in the mid-70s, we were producing roughly half of the beet sugar in the U.S.,” Goodwin said. “Today it’s less than 5%.”
Tom Suber, head of the U.S. Dairy Export Council, said American dairy farmers are willing to give up their export subsidies and import protections, but only if the playing field is truly level.
“In cheese, the Europeans are allowed to export 360,000 metric tons of subsidized cheese and we’re allowed 3,000 tons,” he said.
The battle over farm subsidies has created a rift in the U.S. agriculture community between the heavily supported grain, cotton and rice growers and the largely unsubsidized fruit and vegetable producers.
Groups such as the U.S. Apple Assn. want the Bush administration to pursue separate negotiations for specialty producers, fearful their concerns will be overshadowed by the contentious battle over farm supports. Some have even joined in foreign criticism of U.S. agriculture subsidies, arguing that it is time for the U.S. to come clean if it is asking others to make painful political commitments.
“I think we would find a good many allies throughout the rest of the world, particularly in the Southern Hemisphere,” said Kraig Naasz, president of the U.S. Apple Assn., referring to the Cairns Group that includes Australia, Brazil and Indonesia. “We’ll let the grain, cotton and rice industries figure out their own game plan.”
