A Global Disadvantage

Recent rumors that NAFTA might be up for renegotiation have caused quite a stir. Farmers are concerned that their trade advantage might be taken away, and environmentalists are worried that industrial agriculture might gain the upper hand on sustainable land use. My point of interest herein has to do with the way that our trade policy affects small farmers and local agricultural markets around the world.

A recent report from the Institute of Agriculture & Trade Policy (IATP) (https://www.iatp.org/documents/counting-costs-agricultural-dumping) examines the effects of the United States’ agricultural trade policy on other countries’ food production systems. It focuses on the phenomenon of “dumping,” which occurs when crops that are grown in the U.S. are sold at prices below the cost of production. Why does dumping happen? Our agriculture policy incentivizes overproduction, and it does so via the subsidy scheme that we have in place (see my earlier post “Subsidy Scam” for a lot more on this topic). The massive demand levels create a need for farmers to use more and more expensive inputs, which in turn creates a need for them to have more subsidy funding, and so on and so forth. The cycle goes on forever, with input companies creating new products, government funding always increasing, and farmers continually stuck on an economic treadmill that incentivizes overproduction and keeps them from moving toward more sustainable land use methods (https://www.iatp.org/documents/food-and-farm-groups-call-new-nafta-address-dumping-and-support-farmers-all-countries?utm_source=IATP+Full+List&utm_campaign=7de7f1c4e0-IATP_News_January1_22_2016&utm_medium=email&utm_term=0_3f024f9ff8-7de7f1c4e0-74967457&ct=t(IATP_News_May_2017)).

The report goes on to list the ten primary ways that dumping is a threat to both U.S. and international farmers. It raises concern over the fact that farm incomes are at a lower point now than any point in the last five years, which means that farmers are more reliant than ever on government financial support in order to make ends meet. It points out that dumping creates an economic incentive to ignore environmental and ecosystem health. The staggering demand levels, combined with the large subsidies that many large producers are receiving, push the farmers to produce as much as possible with the land that they have, regardless of the effects on soil or water health. The environmental effects of agriculture are all pushed into one big externality that is largely ignored. Sadly, this makes sense when we realize that dumping is just the natural consequence of a food production system that exists by over-producing. Perhaps the most concerning side effect, as discussed in several other places in this post, is the destabilizing effect it has on local agricultural markets in developing countries. Rather than capitalizing on the food they have or investing in better agricultural production systems, developing world populations learn to wait for the imported American food and, in the process, shoot their own economy in the foot.

What exactly does dumping look like? I’ve seen it myself. I remember working with farmers in rural Uganda who were growing massive amounts of maize and looking forward to selling it into a regional market that promised positive returns. One afternoon, as I drove through one of the village centers, I saw a long line of people in front of a large tent. Upon closer observation, I saw that it was a USAID tent and the people were getting free bags of corn from the tent. I realized at that moment that our agriculture policy isn’t just ours – it affects every single farmer around the world. Our extra corn was getting dumped in rural Uganda on supposedly “starving” people, who were lining up for the free handout while their own beautiful maize crop was standing in the field and their own local agricultural market was fizzling out. In short, our agriculture trade policy is tanking local economies in villages around the world like the ones I worked in. A renegotiation of NAFTA is therefore also an opportunity for us to reexamine our deeply flawed and outdated agriculture policy system.

This is especially important when viewed in light of the world’s significant projected increase in food consumption over the course of the next 50 years. I would argue that the place to focus when it comes to feeding the world’s increased population is Africa. Africa has millions of acres of land that, if utilized properly, could become a vibrant part of the agricultural economy.

 

 

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