US farm trade under pressure
Known as the world's breadbasket, the US now faces rising food imports and competition in export markets.
Wander down the aisles of most American grocery stores and you'll find a surprising choice of foods from foreign countries - ripe blackberries from Mexico, capers from Morocco, hearts of palm from Costa Rica, sweet peppers from South Africa. The list goes on.
While all these foreign imports may be a boon for consumers, they're one reason the once-huge US agricultural trade surplus is rapidly deflating. It's down from $9.6 billion just last year to only a projected $1 billion in 2005, raising the possibility of a deficit in the future.
How could the world's breadbasket be staggering when it comes to a traditional strength like the American farm? The question comes at an awkward moment as overall US trade deficits hit record highs of more than $600 billion a year.
The answer is a culinary tale involving changing consumer tastes, expanding global farm output, and the subsidies governments offer a politically sensitive industry.
"We're not doing enough to combat [foreign] protectionism," says Rep. Bob Goodlatte (R) of Virginia, chairman of the House Committee on Agriculture. He says other countries are raising barriers that make it harder for American farmers to sell their products abroad.
At home, American shoppers also share the blame. People enjoy - and buy - lots of foreign foods. "Our economy is growing, incomes are rising," says Parr Rosson, director of the Center for North American Studies at Texas A&M University. "As a consequence our imports have risen ... particularly in fruits and vegetables we like to have fresh year-round."
Last year, $62.3 billion in farm exports left the US, a number forecast to drop to $59 billion in 2005. Conversely, $52.7 billion in imports arrived in 2004 and are predicted to be up to $58 billion this year.
Representative Goodlatte runs through a list of reasons.
First, there are tariffs. The "United States imposes tariffs on food coming to our country that average 12 percent. The worldwide average is 62 percent."
Second, developed countries, particularly Japan and the European Union, subsidize their farmers at far higher levels than America. "Even though our agricultural production is higher and our population is lower, we actually have a trade deficit with Europe in agriculture, in part because of all these tariffs and subsidies," he says.
While subsidies can distort commerce, many experts see trade in general as beneficial. "If we didn't import oil, what do you think we'd be paying for oil today?" asks Mr. Rosson at Texas A&M. "You need to think of imports [as] ... sending a signal to domestic industry they need to compete or become more productive."
One agricultural industry -cheese - has long run an export deficit, but the industry insists it hasn't hurt them. "We have a healthy relationship with [foreign cheese makers].... They are the 'origin' cheeses. They've given the American consumer their palette," says John Umhoefer, executive director of the Wisconsin Cheese Makers Association in Madison.
Still, the rapid decline in the US dollar relative to other currencies should be boosting US exports and dampening imports. Why doesn't that happen? Rosson says, "Companies make deals well in advance ... and as long as that pipeline is full ... it takes [a year to 18 months] for that change to ripple through the system."
Gary Adams, chief economist with the National Cotton Council of America in Memphis, Tenn., offers another take: "As the dollar weakens or depreciates,... that does tend to support our ability to export.... [B]ut one other wrinkle is if China is your destination for your product, then movement of your dollar isn't affecting things so much because China's [currency] is pegged to the US dollar."
The top three destinations for raw US cotton fiber are Mexico, China, and Turkey. The cotton industry has been shipping more and more of its raw fiber out of the country as US mills close.
America's "biggest complaint" is over nontariff trade barriers, Goodlatte says.
The European Union "block[s] some of our major exports on what we think are unscientific and spurious reasons that really you'd have to think of as more protectionist than based on science." Prime examples are genetically modified corn and soybeans, he says.
The farmers' own representatives in Washington - the American Farm Bureau Federation - don't seem as concerned. "The things that we're importing tend not to compete with what [we're] growing in the US," says Megan Provost, trade economist with the federation.
Still, American government policies could add new worries for farms. In addition to its goal of reducing subsidies, especially for rice and cotton, the Bush administration would move $300 million from the US foreign food aid program to the US Agency for International Development. "This would allow USAID to buy food products overseas for foreign aid, rather than from US farmers," according to The Washington Times. Goodlatte says that would breach a "contract" with US farmers. America, with 6 percent of the world's population, some years provides 60 percent of the food aid, he adds.