Farms.com Home   News

Gredig: Trade disputes hurt farmers

Sep 25, 2009
Trade disputes hurt farmers
 
The impulse to circle the wagons and institute protectionist policies can be a strong one when economies falter as they did over the past year or so. When people are losing their jobs, politicians face pressure to do something to protect workers and it would seem to make sense to put some fences up at the border and keep out cheaper imported products.
 
The problem with this seemingly logical reaction to economic upheaval is that it doesn’t work. History suggests that the protectionist reaction to the stock market crash in 1929 actually deepened and extended the depression.
 
Policies that protect or support specific sectors of the economy may garner some votes and short term political support, but we live in a world where progressive economies live and die by trade, and if you single out one sector and attempt to protect it at the border, you will face a similar response from a trading partner. When these trade tiffs escalate, it’s the worker or farmer that pays the price.
 
Consider the minor dust-up between the US and Chinese governments. The US puts a 35 percent tariff on cheap tires entering the US from China. In response, according to an article at China.org.cn (http://www.china.org.cn/business/news/2009-09/18/content_18552555.htm), China is looking at US “dumping” of cars and chicken into China. The next step, according to the article, would be for China to “hit US farmers with curbs on soybean imports. This would enrage US farmers and put pressure on the Obama administration, while providing welcome relief for domestic soybean producers, who have been badly hit by massive imports of genetically modified beans from America.”
 
See how this goes? Like kids fighting in a sandbox, things escalate quickly and there are no winners. Unfortunately, there are politicians who love to engage in these trade tiffs. It’s all posturing and although these spats start easily enough, once the ball gets rolling, it can be very difficult to reverse the direction. Politically, neither side wants to lose face or appear weak. The problem is that the damage done by these trade disruptions can be severe and long lasting.
 
Farmers are vulnerable to trade disruptions. In the near term, upside for primary producers is directly linked to economic recovery and increased trade in foodstuffs with the rest of the globe. Trade squabbles can derail this process and must be avoided.
 
What do you think? Do you support border protection policies or are you in favor of freer and broader global trade? Click here to join the discussion.
 
Peter Gredig
Farms.com
Peter.Gredig@Farms.com
 

Follow me on Twitter. I’m Agwag.