Friday, July 10, 2009

Economic toll

Published: July 10, 2009

President Obama is pushing a plan for the richest nations to contribute $15 billion to help farmers in poor countries. The object is to promote self-sufficiency by investing in the agricultural economies of poor nations, rather than sending assistance in the form of food surpluses from America.

Obama's plan would effectively triple the amount of agricultural assistance coming from the leading economic powers. But even that amount may not be enough if the United States and others do not also resist the kind of protectionist measures that are already hurting Third World nations.

The global recession has taken a toll in America and Europe, but it has wreaked havoc in developing nations that have knit their economies into the global economy. Nations such as Cambodia, Bangladesh, Thailand, the Philippines, Congo and Pakistan are highly dependent on exports to the United States and elsewhere. Since the onset of the recession Cambodia has lost 70,000 jobs in the garment industry.

Congo has lost 300,000 in the mining industry.Further, the poorest nations remain vulnerable to the protectionism practiced by the United States and Europe by way of agricultural subsidies. During the 1990s many followed the advice of the World Bank and curtailed farm subsidies in order to grow food for export.

The liberalization of the economies of Third World nations was supposed to be accompanied by the liberalization of trade policy by the West. The Doha Round of trade talks was supposed to result in a reduction of farm subsidies by Europe and the United States. But those trade talks collapsed because of the unwillingness of the Western powers to cut subsidies as they had promised.

Thus, farmers in Africa find they cannot compete with subsidized crops from the United States and elsewhere.So far, the United States and Europe have shown they believe free trade is good for others, but not so good for themselves. And yet protectionism remains a growing threat to world economic recovery.

The difficulty of curtailing farm subsidies can be seen by considering the question of dairy subsidies. Vermonters understand the importance of the dairy industry to the state, and pressing for federal support for dairy farmers is part of the job description of any member of Congress from Vermont.

The same goes for members from Alabama or Texas with regard to cotton, even if that means cotton growers in Africa cannot sell their product.It is hard to imagine Congress imposing draconian cuts in farm subsidies in the United States.

Obama had proposed limits on subsidies to corn growers, among others, but the influential committee chairmen would have none of it. And yet Third World nations that had bought into the idea of globalization are bearing the brunt. And it is not just corn growers in the United States that enjoy special protected status.

Farmers in France, Japan and elsewhere enjoy a degree of coddling that poor nations that have abandoned protective tariffs cannot afford.A protectionist trade war would make the present recession worse for everyone. Each nation that adopts protective measures is looking at the small picture, not the large one.

Thus, the economic stimulus bill in the United States contained a "buy America" provision that may be in violation of our trade agreements.Obama sounded more protectionist on the campaign trail than he does now because he needed to win votes from workers worried about the loss of jobs. To inveigh against foreign competition was the obvious way to win those votes. It is harder to make the case that free trade all around is better for job creation. Now that he is president, Obama needs to make that case.

In the meantime, providing seed, fertilizer, grain storage facilities and other agriculture supplies and infrastructure will help Third World farmers caught up in the grim circumstances of the present. We are glad Obama is showing leadership in helping the poor help themselves. We hope he also ensures that, economically, the deck is not stacked against them.

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