Free trade's dual impact down on the farm

With a wheat sale to the former Soviet Union and a call to plant "fence row to fence-row," American farmers jumped onto the export bandwagon in the 1970s and have never really gotten off.

Even today, the US earns more cash selling meat abroad than steel, more cash from wheat than coal. One out of every 5 rows of US corn finds its way overseas.

So as President Bush swung through the Midwest yesterday to push for authority to negotiate new trade deals, he turned to farmers for support.

"I'm confident the American farmer is more efficient and can raise more crops than anybody, anywhere in the world," Bush told workers at a John Deere farm equipment factory.

But much has changed in the three decades since the Soviet wheat deal. And new voices of caution are surfacing in agricultural circles.

"There's a split," says Pat Westhoff, an economist with the Food and Agricultural Policy Research Institute at the University of Missouri at Columbia. "People in many of the major commodity groups are in favor of trade promotion." But a number of dissident voices are also coming to the fore, he adds.

Some of these are traditional opponents of free-trade policy, such as the National Farmers Union. Others, such as sugar growers, have protective quotas they are loathe to put at risk.

But the last few years of frustration on the farm have prompted new skepticism about whether free-trade deals always benefit farmers.

"Since the Uruguay Trade Round a decade ago, US policy-makers have repeatedly told us that we must open 'lead by example' in supporting lilberalized open markets," a Sunkist Growers representative concluded in a statement last July. "For more than a decade, like good soldiers, we have. Unfortunately, and to our distinct disadvantage, many of our trading partners have yet to follow our national example."

US citrus growers have struggled to sell their products abroad while citrus imports to the US have risen ten-fold over the past six years. Imports of Mexican meats, eggs, fruits, and vegetables have almost doubled since 1994.

At one point in the mid-1990s, Chinese garlic producers devastated the domestic market by exporting to the US 21 times more garlic than the year before. (The US imposed a whopping 376 percent dumping duty to protect American producers.)

US growers are also seeing Chinese vegetable exports crowd out their own sales to the all-important Asian market. China's broccoli sales to Japan have soared while US sales have slumped.

Even without the distorting effects of trade tariffs, domestic producers of such high-value, labor-intensive crops may find it impossible to compete against China, where the average worker makes less than $2 a day and energy costs a fraction of what US farmers pay.

Of course, China is also feeling the heat from reduced trade barriers. It expects to lose an estimated 12 million farming jobs

because, by joining the World Trade Organization (WTO), it must cut tariffs and open its markets to more efficient producers of wheat, corn, and soybeans.

Many observers expect US grain farmers will be the big beneficiaries, since they can produce such bulk commodities at roughly half the cost that China's farmers can.

US Agriculture Secretary Ann Veneman estimates American exports could grow as much as $2.5 billion a year now as China and Taiwan join the WTO.

But even in bulk grain, American preeminence is waning. For example, Brazil and Argentina combined now export nearly half of the world's soybeans and soy-products, according to a report by the US Department of Agriculture (USDA) released last week. The US, once dominant in soybeans, now only accounts for just over a third of world soybean trade.

Similarly, in the past 10 years, Argentina's average share of global corn trade has more than doubled and now stands at 13 percent, according to the USDA report.

A major reason: lower production costs. By the late 1990s, Brazilian and Argentine farmers could raise a bushel of soybeans for 20 to 25 percent less than their American counterparts (although their transportation costs were higher).

Another huge change: the US now earns more export dollars selling high-value processed foods and beverages than bulk commodities. In 1980, better than two-thirds of US exports were bulk commodities: Now, it stands at one third.

This change means more diversified sales for food companies but not necessarily many more dollars for farmers. Typically, the more processed a food is, the smaller the farmer's share of the sale.

Even more troubling, from a farmer's point of view, are food companies that set up processing plants overseas. Processing foreign nations' agricultural goods allows US companies to more easily penetrate foreign markets but doesn't benefit US farmers.