Helping Farms Thrive - A Tough US Row to Hoe
Washington seeks wider markets abroad and lower supports at home
SMOOTHING the way for America's farmers to compete in global markets is a daunting task. Especially now.
Top federal officials and other sources say agricultural policymaking is entering a delicate phase. In coming months:
The Bush administration will press for progress on agricultural reforms in the latest round of international trade negotiations. Reforms are high on the agenda of the talks, but time is running short for hashing out an agreement.
Work will begin in Washington on the 1990 farm bill - crucial legislation, since it must grapple with the issue of trimming US farm support programs. They cost taxpayers about $32 million a day but are popular with Congress.
The US will launch negotiations with the Soviets for a new, long-term grain agreement. The Soviets are a prime market for US grain exports, but they would prefer to boost domestic production rather than rely on US imports.
US Agriculture Secretary Clayton Yeutter is quietly implementing a strategy aimed at prying open foreign markets, while weaning farmers away from support programs at home. Both elements are necessary, he says, to groom US farmers for the next century.
``The long-run answer to the question of the economic well-being of American agriculture really lies in taking advantage of the global marketplace,'' Mr. Yeutter says.
The logic behind this is simple.
The days of deep-pocket spending to support US farm programs are over, Yeutter says. ``In agricultural policy, as everywhere else, there is no free lunch,'' Yeutter told a recent gathering of the American Soybean Association. Federal payments to farmers hit a peak in 1986, nudging close to $26 billion, before dropping down to the current $13 billion a year. These payments include everything from the cost of storing surplus grain to direct export subsidies. At the same time, the Gramm-Rudman-Hollings balanced-budget law requires Congress to squeeze the federal deficit down to zero by 1993. Yeutter says that if there's going to be less federal aid flowing to farmers - which is almost certain - the lost income will have to come from somewhere else.
That's where exports come in. Yeutter says the US has to press its trading partners to create a freer market - where US farmers would enjoy a competitive advantage in many commodities - and let market forces do the rest.
Yeutter emphasizes the firm support President Bush gives this approach. Bush's selection of Yeutter to head the Agriculture Department underscores the administration's determination to deal head-on with the agricultural trade issue. Yeutter, who served as President Reagan's top trade representative, has a reputation as a tough negotiator. He was also deeply involved in the early phases of the current multilateral trade negotiations.
US agricultural exports are already on the upswing. After slumping in the early 1980s, the value of US farm exports has grown for the last four years. Agriculture Department analysts predict the figure will reach $39 billion this year. The Soviet Union is one of the growing markets.
But analysts say it's hard to predict what Moscow will import from one year to the next. Last week, the Soviets announced a program aimed at boosting domestic grain production by offering their farmers payments in hard currency. Experts say it will take years for such a program to diminish the demand for imported grain significantly. ``The Soviet grain market has been a very good one for the US,'' says Christian Foster, the Agriculture Department's Soviet grain analyst. ``And I expect it will remain so in the future.''
Still, talks on a new US-Soviet grain pact, scheduled for December, could become tense. The US is eager to boost the minimum amount of grain that the Soviets are obligated to buy every year, while the Soviets are expected to push for more flexibility.
Meanwhile, opening up export markets will not solve all the problems that face US farmers.
``Part of the game is eliminating the global restrictions on the trade,'' says Robert Wisner, an agricultural economist at Iowa State University in Ames. But some problems are more deeply embedded. Last year's devastating drought, for instance, drove up the price of corn - but it still fell about 30 cents a bushel short of the target price set by the government. ``So it's quite a challenge to bring the world market to the point where farmers could function without some direct payments,'' Dr. Wisner says.
This helps explain the Bush administration's firm approach to the current round of trade talks.
The talks - conducted under the auspices of the General Agreement on Tariffs and Trade, or GATT - are supposed to liberalize trade in agriculture as well as in other sensitive areas, such as services. The US contends that its farm programs are at least partly designed to offset the trade-distorting subsidies that other nations provide their farmers.
But with pressure building to cut the federal deficit, some analysts say the US will be forced to roll back its support payments - regardless of whether other nations do the same. Administration strategists say this would be a disaster. ``Disarming unilaterally is not attractive militarily or in agricultural reform,'' one knowledgeable observer says.
The US approach - presented in a paper last month to international negotiators in Geneva - would be first to convert all agricultural support programs into simple tariffs and then negotiate their reduction. Analysts say this plan is the only way the complex web of quotas and other forms of import restrictions could be put on the negotiating table.
Time is also running short for the GATT talks. Begun in 1986, they are scheduled to last four years - which means that the next several months will be crucial to fleshing out any agreement.
US officials insist they have already done much to enhance the global position of American farmers. Indeed, almost anything would look better than the situation in the early years of this decade. In the wake of President Carter's grain embargo against the Soviet Union, implemented in retaliation for the Soviet invasion of Afghanistan, the US suddenly found itself unable to compete with foreign grain producers. Stockpiles quickly became mountains, while a growing number of foreign producers entered markets once dominated by the US.
``We've learned some lessons since then,'' says George Dunlop, a former assistant secretary of agriculture who helped draft the 1985 farm bill, which experts say helped turn the corner on the farm crisis. ``But there's still a long way to go.''