Jul 27, 2018

Farmers Need Trade, Not Bailouts

Christine McDaniel Senior Research Fellow

The Trump administration is planning to spend $12 billion dollars on a bailout for farmers. This decision comes as many farmers have expressed dismay at the tariff escalation between the United States and many of its top trading partners. The President will bypass Congress and fund the plan through the Commodity Credit Corporation, a program funded through the authority to borrow from the Treasury. This aid will take various forms, including direct payments to certain farmers, the government purchase of surplus agricultural goods, and increased effort to expand domestic and international markets for US goods.

The administration, it seems, wants to mitigate the effects of trade restrictions on American food producers. While this bailout may provide some short-term support to farmers, it is not a practical or sustainable way to address the harms created by trade restrictions.

The bailout will hit the average American household with a double whammy. Americans have watched as prices climb higher as a result of the tariffs. Because of the tariffs, American households are already starting to face higher prices on a range of goods, from household appliances like a washer or dryer, to building or renovating a home. On top of that, they will now be expected to foot the bill of increased government spending to bailout farmers that are being hurt by trade wars their own government has started.

The American farmer is also getting hit twice, but in different and almost more painful ways. Tariffs are cutting them out of their key export markets, and they are left to rely on handouts from the government.  

Farmers have made it clear that they want market access, not subsidies or handouts. It’s not hard to see why. Trade is essential for the American farmer. Nearly one out of every three American hogs is exported and consumed overseas. Nearly half of US soybean production is exported.

Yet farmers’ access to Canada, China, and Mexico—their three largest export markets that comprise forty two percent of US agriculture exports—is getting entangled in the escalating trade disputes.

Many American farmers are suffering from the Administration’s misguided protectionism. The administration is attempting to alleviate the effects of one self-inflicted, market-distorting government action with another. Instead, they should sit down with trade partners and resolve the ongoing trade conflicts, just as the administration has announced it will do with European leaders.

The best way to help farmers is to let them trade. The first priority should be to eliminate the tariffs that are slashing their profits and threatening their viability. Expanding market access should be the quick second. That means finding a solving the steel and aluminum disputes, working with our allies to address China’s unsavory trade practices, modernizing NAFTA, and re-engaging in the Trans-Pacific Partnership. This is an ambitious list, but public policy has never been easy.

The recent Japan-EU free trade agreement and the Trans-Pacific Partnership moving ahead without the United States are signs that the world is moving on. The longer it takes this administration to find sustainable solutions to its trade disputes and eliminate the tariffs, the more painful and costly it is going to be for American farmers.

Photo credit: Nati Harnik/AP/Shutterstock

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