”Protecting Markets: U.S. Policy and the World Grain Trade,” by Ronald T. Libby, Cornell University Press, 152 pages, $26.50
High summer is always good for a few laughs if you can keep your eyes open long enough to observe what isn`t happening at the gathering of the so- called leaders of the industrial world.
Early July`s economic summit in Munich produced promises, as had its predecessors, to work for acceptable solutions to agricultural disputes that have tied world trade negotiations in knots since 1986. Yeah, sure.
Talks aimed at reducing trade barriers have been stalled because of a fight between the United States and the European Community over farm subsidies.
The U.S. argues that the EC should sharply reduce ”trade distorting”
support to its farmers (particularly subsidized exports of surplus grain), which presumably gives them an edge in world markets over more efficient American farmers. EC politicians (particularly from France, where farmers are a potent voting bloc) vow to support agriculture with high subsidies to keep its 10 million farmers on the farm.
A new book makes a convincing case that the U.S. has been pursuing the right policy for the wrong reasons. Ronald T. Libby, professor of political science at Southwest State University in Marshall, Minn., argues persuasively that the Reagan and Bush administrations, while espousing a traditional liberal, or free trade, policy, really were taking effective mercantilist, or protectionist, actions in their export subsidy battles with Europe.
Mercantilism, Libby says in this thin but ponderous volume, didn`t die with the age of sail but lives on in most nation-states that adhere to two principles: National economic security is a primary goal, and it is the responsibility of the state to guarantee economic security.
Thus, protectionist economic and political self-interest, not free trade, is the way of the world. Libby approvingly points to the example of the Export Enhancement Program (EEP) begun by the U.S. in 1985 to counter the European Community`s sale of surplus grain at subsidized prices, which was taking markets from American farmers.
EEP offered grain, mostly wheat, to targeted countries at prices sharply lower than the U.S. domestic price. Grain companies that closed deals at the cheaper price received government bonuses to make up the difference.
Libby says the program was successful not only in cutting a huge surplus of wheat, much of it owned by the government, but also in restoring markets for U.S. farm products.
Politically, it may have been more important because of the pressure it put on Europeans to match the U.S. subsidies, resulting in a strain on the European Community budget. The EEP also gave the U.S. leverage in the world trade talks by forcing the Europeans to seriously consider farm subsidy cuts. ”It will take more than the EEP or a comparable trade policy, however, to persuade the Europeans to reduce their farm export subsidies,” he writes. ”It will be necessary to have a negotiating position that does not threaten their perceived national interests. Doctrinaire positions arguing for total elimination of farm subsidies must be modified.”
Libby`s solution is frustratingly short and really demands another chapter of explanation. He backs the 1987 bill proposed by Sen. Tom Harkin (D- Iowa) that would empower the president to engage in multilateral negotiations on world market shares. Libby should defend a position that sounds suspiciously like support of a world food cartel, more massive government interference in agriculture and a straitjacket approach to U.S. grain production.
An outstanding feature of the book is an appendix listing the 92 companies that received a total of $3.7 billion in EEP bonuses through last September. Almost half the subsidies went to three big grain companies-$688.9 million for Cargill Inc., $632.9 million for Continental Grain Co. and $503.7 million for Louis Dreyfus Corp.
Cargill executives have opposed the subsidy program from the beginning, saying the EEP encourages customers to look to the U.S. government instead of the grain companies, which tends to discourage rather than stimulate export sales.
That sounds a little like complaining about being forced to spend a lazy summer afternoon sipping aperitifs with, say, Michelle Pfeiffer.
