Subsidies Must Go rev. 04.16.2009
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From Neil Georgeat, 11.12.2003

"The tariffs were enacted simply to appease some of the last of the domestic cold- and hot-rolled steelmakers in the US. In addition, the move was so obviously meant to appease unions in key electoral states such as Pennsylvania--even if they were blatantly in violation of the WTO's mandate.

Nearly everyone sued the US. From the European Union to Korea, members of the WTO went to court and finally had their definitive victory. This comes as the US has lost a series of other suits concerning its WTO treaty violations, and could result in authorized punitive tariffs and embargoes that could strike any industry or locality in the US, from Florida citrus to southern textiles.

Any of these actions would run contrary to the interests of incumbents seeking national office. You can just imagine the protests by labor and other interests playing on the evening news.

So, we're going to have to scrap the steel tariffs. This is something that I've been writing about since day one. And from where I sit, the US will benefit more by the elimination than the imposition of the tariff. After all, steel-dependent goods producers have suffered due to the tariff. Supply constraints, quality issues and just flat-out higher prices have cost many of our manufacturers gobs in foregone business and tighter margins.

And it's not the costs of production that are giving local steel producers headaches; rather, the cost of pension and health benefits are weighing on the industry. Take any of the fading old-line steel producers and you'll find that these two expenses are what cause the corporate woes.

Eventually the old-line companies will go Chapter 11 and shed their pension and healthcare liabilities onto the Pension Guarantee Corporation (a government-sponsored insurance deal) and move along. But, instead of just letting it happen--and in the meantime supporting the more progressive manufacturers--we decided to throw good money after bad.

That's done now, thanks to the WTO. Lots of manufacturers in the US using steel in their businesses will benefit. In addition, foreign makers will fare nicely."

Reminds me of the days of the Gas Shortage of 1973 in New Jersey. Gasoline was plentiful just across the border in Pennsylvania. Guess What? PA had voted for Nixon for President. NJ voted against him. Just amazing. Lucky there were no politicians or politics involved, right? Go Unions!

The story continues, from the New York Times, September 15, 2003....

Banding together in what was known as the Group of 21, the developing nations thought they had made their case that the $300 billion in subsidies paid every year to the world's wealthiest farmers undermined the livelihoods of millions of poor farmers around the world. But they said the proposals made by the United States and Europe to redress what the developing nations regard as a major injustice fell far short of their expectations.

A good Start.... From the New York Times, August 14, 2003

ABSTRACT - US and European Union agree on way to reduce subsidies and import duties used to protect their farmers; agriculture subsidies have been chief obstacle in current round of talks at World Trade Organization; delegates from 146 member nations of organization will meet in September in Cancun, Mex, and poorer nations have said that trade talks would be doomed unless developed nations cut back sharply on subsidies; Pascal Lamy, Europe's top trade official, says agreement moves talks 50 percent or 60 percent forward; Allen F Johnson, chief agriculture trade negotiator for office of US trade representative, gives equally cautious welcome to accord;

From the New York Times, August 9, 2003

Some Trade Barriers Won't Fall


In 2002, the 30 industrial nations of the Organization for Economic Cooperation and Development spent $311 billion on domestic agricultural subsidies, which is more than the combined gross domestic products of all the countries of sub-Saharan Africa. The World Bank calculated that the European Union's annual subsidy to dairy farmers comes out to $913 per cow; this dwarfs sub-Saharan Africa's per capita gross domestic product of $490.

Likewise, America and Europe subsidize sugar production through a complex web of subsidies and tariffs that raise prices for consumers and force sugar-dependent businesses to move their factories to more competitive nations. Sugar farmers in South Africa alone lose $100 million in annual exports to these subsidies.

Sugar farming is just the tip of the iceberg. It is completely inconsistent for the United States and Europe to preach the virtues of capitalism and open markets while using statist policies to strip struggling countries of one of their few comparative trade advantages.

In addition, agricultural subsidies also undermine our national security. One lesson of the 9/11 attacks was that we need to relieve poverty in the failed states that become recruiting grounds for terrorists. "Persistent poverty and oppression can lead to hopelessness and despair," said President Bush last March. "These failed states can become havens for terror."

So, in a way, subsidies lead to terrorism.
What do you say to that, Nebraska corn farmers who get subsidies to grow corn for methanol to send to California so our gasoline costs more than anywhere else in the USA?

From the New York Times, July 11, 2003,

Your Farm Subsidies Are Strangling Us

After too many years of Africa's being pushed to the global background, it's heartening to see the world's attention being focused on our continent. International support — both financial and otherwise — is certainly needed to help combat the severe poverty and disease gripping our nations. But first and foremost, Africa needs to be allowed to take its destiny into its own hands. Only self-reliance and economic growth and development will allow Africa to become a full member of the world community.

With the creation of the New Economic Partnership for African Development in 2001, African leaders have committed themselves to following the principles of good governance and a market economy. Nothing is more central to this goal than participating in world trade. As the presidents of two of Africa's least developed countries — Burkina Faso and Mali — we are eager to participate in the multilateral trading system and to take on its rights and obligations.

Cotton is our ticket into the world market. Its production is crucial to economic development in West and Central Africa, as well as to the livelihoods of millions of people there. Cotton accounts for up to 40 percent of export revenues and 10 percent of gross domestic product in our two countries, as well as in Benin and Chad. More than that, cotton is of paramount importance to the social infrastructure of Africa, as well as to the maintenance of its rural areas.

This vital economic sector in our countries is seriously threatened by agricultural subsidies granted by rich countries to their cotton producers. According to the International Cotton Advisory Committee, cotton subsidies amounted to about $5.8 billion in the production year of 2001 to 2002, nearly equal the amount of cotton trade for this same period. Such subsidies lead to worldwide overproduction and distort cotton prices, depriving poor African countries of their only comparative advantage in international trade.

Not only is cotton crucial to our economies, it is the sole agricultural product for our countries to trade. Although African cotton is of the highest quality, our production costs are about 50 percent lower than in developed countries even though we rely on manual labor. In wealthier countries, by contrast, lower-quality cotton is produced on large mechanized farms, generating little employment and having a questionable impact on the environment. Cotton there could be replaced by other, more valuable crops.

In the period from 2001 to 2002, America's 25,000 cotton farmers received more in subsidies — some $3 billion — than the entire economic output of Burkina Faso, where two million people depend on cotton. Further, United States subsidies are concentrated on just 10 percent of its cotton farmers. Thus, the payments to about 2,500 relatively well-off farmers has the unintended but nevertheless real effect of impoverishing some 10 million rural poor people in West and Central Africa.

Something has to be done. Along with the countries of Benin and Chad, we have submitted a proposal to the World Trade Organization — which is meeting in Cancún, Mexico, in September to discuss agricultural issues — that calls for an end to unfair subsidies granted by developed countries to their cotton producers. As an interim measure, we have also proposed that least-developed countries be granted financial compensation for lost export revenues that are due to those subsidies.

Our demand is simple: apply free trade rules not only to those products that are of interest to the rich and powerful, but also to those products where poor countries have a proven comparative advantage. We know that the world will not ignore our plea for a fair playing field. The World Trade Organization has said it is committed to addressing the problems of developing countries. The United States has convinced us that a free market economy provides the best opportunities for all members of the world community. Let us translate these principles into deeds at Cancún.

Amadou Toumani Touré and Blaise Compaoré are the presidents, respectively, of Mali and Burkina Faso.

US Catfish Farmers are pussies. New York Times, 07.22.2003

First rev: 07.11.2003; © Copyright 2003-2009 by plusaf. All Rights Reserved