September 6, 2004

The Candidates' Tariff Dodge

This election year is even worse than usual when it comes to avoiding tough issues. And of all the hard choices the candidates are not confronting, the question of agricultural subsidies may be the one they're ducking most energetically. Both John Kerry and George Bush must know that the current budget-busting farm subsidy program is ruinous on multiple counts. At roughly $15 billion a year, the program is part of the deficit problem. While the subsidies do little or nothing to help American family farmers, they place a crippling burden on poor farmers elsewhere. Their inability to compete with subsidized farm products from rich nations distorts trade and hurts developing countries.

Yet from Mr. Kerry and Mr. Bush, there's never a discouraging word.

But while the candidates are ignoring the issue, a lot has been happening at the World Trade Organization, where poor nations see the subsidies as the most pressing trade issue. The W.T.O. ruled in favor of Brazilian complaints against America's cotton and Europe's sugar programs. And its members finally agreed last month, at least in principle, to start rolling back subsidies that allow American farmers to unfairly undercut competitors from poor nations.

A lot remains to be worked out. The agreement does call for an end to all direct export subsidies, relied on mostly by the European Union, although the timing is still undetermined. But there's a gaping loophole: countries may rush to protect some of their crops under an ill-defined exemption for "sensitive products." Unless it is tightened in further negotiations, the agreement leaves plenty of wiggle room for governments.

It's not clear, also, if the ultimate deal will bar Washington's so-called countercyclical payments, which kick in when a crop's market price dips below certain levels. Such subsidies, a staple of the 2002 farm bill, allow American farmers to increase their share of the global market by defying basic economics: they grow more crops than would be profitable without the subsidies.

Even one of the seemingly hard numbers already in the W.T.O. framework offers the United States and Europe plenty of time to dawdle. The deal commits countries to cut their offending subsidies by 20 percent in the first year of its implementation. But the language really refers to 20 percent of the maximum legal subsidies, which previous agreements set at $50 billion a year, not real world numbers. Hence, as the United States trade representative, Robert Zoellick, rushed to assure Senator Tom Daschle, the United States wouldn't have to cut its subsidy checks by anything close to 20 percent now. The Democratic leader, disgracefully, had denounced the Bush administration for agreeing to even the modest framework.

A few members of Congress have had the political courage to rail against the hypocrisy of the subsidy system, which is sold as a means of helping the family farm while actually encouraging large-scale concentrated agriculture. Among that small band, for instance, there's Senator Charles Grassley, the Iowa Republican, who has been proposing sensible limits to any one farmer's check.

But the lack of candor in the campaign is disheartening. That's particularly true of Senator Kerry's protectionist trade rhetoric. The White House is beginning to take steps to reverse its disastrous embrace of the 2002 farm bill, but don't expect Mr. Bush to acknowledge that if America's farm program isn't radically overhauled, the nation will become an international trade scofflaw.

The best hope is that beyond the election, the W.T.O. legal verdicts against subsidies will combine with budget realities and the interest of other industries not to have the nation's trade agenda held hostage by the farm lobby. The cumulative weight might force Washington to live up to its pledge to liberalize agricultural trade.

That doesn't mean the United States has to abruptly terminate rural aid programs. The next farm bill simply needs to emphasize land conservation and other forms of support that do not give farmers an incentive to dump surpluses overseas at prices that do not begin to cover their costs.

The European Union has been a bigger culprit over the years in distorting agricultural trade to the detriment of poorer nations. Its member nations, however, are coming to terms with the fact that the status quo is unsustainable, that the industrialized world cannot continue to have it both ways by benefiting from a global trading system that forces poor countries to lower their barriers to manufactured goods and services while insulating its own farmers from global competition. Whoever wins the presidential election in November will have to lead Congress to dismantle, and reinvent, the current farm support system. A failure to do so would ensure the failure of the effort to make the trading system fairer to all nations, with catastrophic consequences for the global economy. It's too bad no one is mentioning this simple fact during the campaign.

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