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How We Gonna Keep 'em Down on the Farm?

December 21, 1986|Gregg Easterbrook | Gregg Easterbrook is a Newsweek contributing editor. His novel, "This Magic Moment" (St. Martin's), was recently released.

WASHINGTON — A few months back there were howls when President Reagan, as a favor to farm-state Republicans, announced a transfer of subsidized wheat to the Soviet Union. Knowing what we know now, perhaps we should be grateful Reagan didn't ship the Soviets anti-tank weapons in exchange for journalist Nicholas S. Daniloff. But in the hubbub over the dizzying notion of U.S. taxpayers bailing out Kremlin agronomists, the why went unnoticed. Weren't Soviets almost pleading for U.S. grain just a few years ago?

They were, but no more. The key to understanding current agricultural economics is: The United States is no longer the only country awash in excess food. Almost every country that exports food has more than anyone knows what to do with. And though there is still not as much food as the hungry of the Third World need, supply far exceeds demand for the countries that can afford to buy.

Unfortunately, the legislation Congress will consider next year in yet another attempt to resolve the seemingly endless "farm crisis"--and to contain federal farm spending, which in fiscal 1986 hit $25.6 billion, more than 10 times the 1980 level--focuses mainly on domestic agriculture, leaving the world situation for somebody else to figure out.

How overstocked is the world market? Before their bequest from Reagan, the Soviets were buying ample grain at low cost from Canada and Australia--which protested stoutly when our subsidy undercut their subsidies. Several developing nations, such as Brazil and Argentina, have become important agricultural exporters. The European Economic Community countries, once enthusiastic buyers, now produce more than they consume. Some EEC members resisted the recent admission of Spain and Portugal, because the Iberian nations are looking to unload farm products, too.

Even China has started exporting farm goods. Although modern farming techniques and limited forms of capitalism are just being introduced, China might rival the United States as dominant farm producer of the next century, given the country's land expanse, agricultural tradition and innumerous citizens accustomed to hard work for minimal wages.

Much of this international surplus is the unanticipated product of U.S. aid programs. As a nation we should take pride in having freely shared agricultural technology with the developing world and for underwriting foreign agriculture projects. Our influence on other nations wasn't purely altruistic, however. During the 1960s and '70s, when U.S. domestic programs set most world food prices, the fact that we kept prices relatively high encouraged other nations to jump into agricultural production. U.S. domestic prices were propped up mainly to allow U.S. farmers to live well--a wrinkle most conveniently overlook when listing their many grievances against Washington.

The significance of all this is that the United States can no longer manage its agricultural sector by tinkering with U.S. domestic programs. Trade agreements have become just as important.

For example, newspaper reports tend to portray as a "mystery" the fact that the U.S. agricultural balance of trade is falling even as the Reagan Administration replaced the policies that propped up the price of U.S. exports with a new subsidy program to keep export prices down.

This isn't mysterious if one takes into account the increasing volume of farm products being imported into the United States--even though U.S. farmers produce far more than their countrymen need. Foreign supplies are economically attractive when they cost less, which they sometimes do given other countries' lower labor costs and subsidies even higher than ours. Meanwhile, total world food trade has fallen in dollar value, because of lower prices caused by international oversupply and because fewer countries are buying.

World food oversupply stems from several factors, including increasing subsidy levels in our nation and many others that encourage continued production increases in defiance of economic logic; declining population growth in consumer nations, and the fact that businessmen in the West and government planners elsewhere expanded agricultural production during the go-go 1970s, hoping for profits. Many of those Western businessmen were family farmers, who borrowed to the hilt to increase output. Now, many demand protection from the very economic forces they helped set in motion.

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