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Trump’s emergency aid to farmers could have negative side effects
NEW YORK, July 29, 2018 (BSS/AFP) – For US farmers affected by the trade
war unleashed by President Donald Trump, the $12 billion in emergency aid
from his administration’s is a temporary remedy, and it comes with several
potential negative side effects.
The Agriculture Department announced the aid on Tuesday to help farm
producers hurt by retaliation by major trading partners against US tariffs on
steel, aluminum and tens of billions of dollars in Chinese products.
USDA said it would use a Depression-era farm support fund to make direct
payments to producers of soybeans, sorghum, corn, wheat, cotton, dairy and
hogs.
It also intends to purchase excess production of commodities such as
fruits, nuts, rice, legumes, beef, pork and milk for distribution to food
banks and other nutrition programs.
The size of the aid program is “unprecedented,” said Joseph Glauber, a
former USDA economist now at the International Food Policy Research
Institute.
But its effectiveness will be limited, he said, and it creates a “moral
hazard.”
And ironically, depending on the criteria used, some of the benefits could
go to Chinese-owned companies.
“The pork industry is dominated by very large corporations,” said Chris
Hurt, agricultural economist at Purdue University, in Indiana. “The largest
hog producer in the US, Smithfield, is owned by a Chinese company.”
Agriculture Secretary Sonny Perdue said the new aid will not need
congressional approval, but the program drew sharp criticism from many
legislators, including Republicans.
National Farmers Union President Roger Johnson said crop prices are
falling and farmers’ “livelihoods are on the line with every tweet, threat or
tariff action that comes from the White House.”
Republican Senator Ben Sasse, a frequent Trump critic, said in a
statement: “This administration’s tariffs and bailouts aren’t going to make
America great again, they’re just going to make it 1929 again.”
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But after the US economy grew 4.1 percent in the second quarter, and the
European Union agreed to a ceasefire in the trade confrontation with the US,
Trump declared it a victory for his tough policies.
– Moral hazard? –
In announcing the aid for farmers, Perdue acknowledged that US farms were
being hurt by what he called “illegal retaliation” to the tune of $11 billion
so far.
And EU officials downplayed Trump’s claim they had made a commitment to
buy more US soybeans.
Meanwhile, analysts say that other industries caught up in the trade war
may now expect relief from the government.
“Knowing this administration, they’ll design a bailout to help only
massive agro-businesses who will use the money for stock buybacks,” said
senior Democratic Senator Chuck Schumer said.
“And where does the bailout stop? What about people who use steel and
aluminum? What about other goods that have been targeted by our foreign
competitors? Are they going to get bailouts too?
US farmers already receive about $20 billion a year from the government
through various programs.
But the new aid “creates a bit of a moral hazard,” Glauber told AFP. “If
you compensate producers right now, there is no real urgency to resolve trade
disputes for the farmers.”
And the longer-term loss of markets for American crops is far worse that
the short-term financial hit, he said.
Farmers want trade not “a Band-Aid on a broken leg.”
China currently buys a third of US soybeans, and while importers
stockpiled them in the two months before punitive tariffs hit in July, they
likely will turn to Brazil to buy what they need, and it may be hard to win
back market share.
And even if the EU starts buying more from US farmers, China is the
destination for two-thirds of the world’s soy shipments.
USDA said part of the aid funding will go to help fine new markets for
farm products.
Another question remains how the program will impact falling crop prices
and even the cost of farmland, once the payments begin, which the USDA said
should be in early September.
“The land market could get distorted. Crop farmers are often willing to
invest the extra money in land, that would hike the prices,” Purdue
University’s Hurt said.
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