Paul D. Wellstone and David Frederickson
Last week over 3,000 farmers from across the country converged on Washington, D.C., to demand that Congress rewrite the disastrous 1996 farm bill and stop further concentration in agricultural markets. That was an unwelcome message to America's largest agribusiness conglomerates, who still support the 1996 bill. They urged farmers to focus instead on giving China permanent "normal trade relations" -- or what used to be called "most favored nation" (MFN) trading privileges.
That advice may be what's best for agribusiness, but it sure isn't what's best for family farmers. Some argue that passing permanent trading privileges legislation would allow farmers to benefit from a recent trade deal designed to bring China into the World Trade Organization (WTO). The Clinton administration claims Minnesota farmers stand to benefit from a reduction in Chinese tariffs on agricultural commodities, which will lead to increased exports.
There's only one problem with that argument. We'll get those tariff cuts regardless of whether Congress passes permanent trading privileges legislation. A recent report by the General Accounting Office confirms that the United States will be entitled to the tariff cuts under a separate trade agreement. Even the administration concedes this point.
So the issue before Congress is not tariff cuts. It's not whether China should join the WTO. It's certainly not whether we should boycott China, or isolate the Chinese, or refuse to talk to them.
The only issue before Congress is whether we should give up our annual review of China's trading privileges. But annual review is our best leverage over China, not only to promote human rights, including labor rights, but also to ensure that China complies with its trade agreements. Why should we give that up?
Besides, those tariff cuts -- which we get with or without permanent trading privileges -- are hardly the answer to the crisis raging in rural America. Farmers have been told before that exports are the answer to their cash-flow problems, but it hasn't worked out that way. Export volume grew for virtually every major commodity after 1996, but prices fell through the floor. More exports at prices below the cost of production don't put more money in farmers' pockets. The problem is low commodity prices.
Will Chinese tariff cuts bolster these record-low prices? Don't bet the farm on it. Any gains could be wiped out if China devalues its currency, as Mexico did after passage of NAFTA. China's domestic subsidies will also limit the likelihood of imports.
The Chinese seem to understand this. Their foreign trade minister said that in its agreement with the United States, Beijing only conceded a theoretical opportunity for the export of grain, but it is a "complete misunderstanding" to expect this grain to actually enter the country. He added that, "In terms of meat imports, we have not actually made any material concessions." Another Chinese official explained, "If you were the leader of a country with 800 million farmers, would you have them stand each year with their mouths open waiting for American wheat? Of course not. That's a security and stability issue."
Indeed, the Chinese have long been obsessed with food self-sufficiency. China has run a trade surplus in agricultural products for years. One U.S. agribusiness conglomerate concedes that "China will continue to produce most of its food needs." The "fundamental agricultural problems" facing China, according to the U.S. agricultural attache in Beijing, are "chronic overproduction and inefficient distribution."
Unfortunately, solving those two problems may mean more cheap Chinese exports. Our agribusiness conglomerates lobbied hard for a provision in the China deal that lets them set up distribution networks in China, for both imports and exports. Earlier last year one agribusiness predicted that China would need food exporters, a job for which the conglomerates are well-positioned. One of them boasts that it is already "a major exporter of Chinese corn and steel."
But is this good for family farmers? Unloading Chinese agricultural overproduction on world markets will tend to lower world prices. Low prices may increase the profitability of agribusiness processors and exporters, but they drive family farmers off the land. It makes perfect sense for the largest agribusinesses to spearhead the campaign for permanent trading privileges, but it makes little sense for farmers to follow in lock step. We cannot let permanent trading privileges be used as an excuse to stonewall action on the 1996 farm bill. Permanent trading privileges would give Minnesota farmers no tariff benefits they wouldn't get otherwise, and could even harm them by helping U.S. agribusinesses unload Chinese overproduction on world markets. If we really want to help Minnesota farmers, we must reject the advice of the conglomerates, rewrite the 1996 farm bill, and take immediate action to stop further concentration in agricultural markets. -- Paul D. Wellstone, a Democrat, represents Minnesota in the U.S. Senate. David Frederickson is president of the Minnesota Farmers Union.:
