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Anyone want to trade?On any given weekday, in the lunchroom of any given elementary school, you can witness students engaging in a wide array of trade negotiations. These trade deals can be a simple bilateral exchange involving one student's cookie for another's pudding; or they can be a complex multilateral exchange involving several students and several desserts. No matter what the snack or how many students are involved, they all understand the importance of "lunch trade." If one day, "lunch trading" were closed or a large group of students decided to no longer participate, many students' appetites would be left unsatisfied and who knows, maybe the detention rate would increase. If elementary school students understand the importance of trade, one could hope global leaders would do the same. This week the World Trade Organization ruled against the U.S. in favor of Brazil's complaint that the U.S. cotton program unfairly disadvantages Brazilian producers. This is the second such ruling by the WTO on the cotton program in recent years. Brazil claims the current counter-cyclical program and the marketing loan program based on price continue to negatively affect the world market. The U.S. has 60 days to appeal the ruling and it is likely such an appeal will be made. The U.S. Trade Representative has publicly criticized the WTO's ruling. However, cotton isn't the only program catching the attention of the Brazilians. Ethanol programs have also shown up on their radar. To refresh your memory, U.S. ethanol has a three-headed incentive structure. First, companies who blend ethanol with gasoline receive a 51 cent per gallon tax credit. Second, any ethanol imported into the country is hit with a 54 cent per gallon tariff. Finally, the federal government mandates that refineries blend 7.5 billion gallons of "renewable fuels" per year by 2012. (Some in Congress want to increase this mandate to 35 billion gallons per year.) While Brazil hasn't filed a claim against the U.S. ethanol policy, they certainly are making a lot of noise and hinting that a complaint could come in the future. There are several other trade concerns floating around Capitol Hill. For example, Canada doesn't like our corn policy, South Korea has a problem with U.S. beef (although their concerns seem based in fantasy rather than reality), and bilateral trade agreements have stalled. With all of these impediments to trade, what are our elected officials doing to ensure that trade continues to flow relatively smoothly? Well, brace yourselves . . .not much. With the exception of trying to resolve differences with beef trade to South Korea and Japan, Congress has little to show for their efforts. Members and USDA have been consistent in their efforts to encourage South Korean and Japan to adopt scientific standards regarding beef trade but have been less helpful when it comes to addressing global concerns over the farm bill. House Agriculture Chairman Colin Peterson has been nearly defiant to the WTO. He's essentially said that the WTO shouldn't be considered when writing a farm bill. The farm bill that passed the House is a prime example of this attitude. It increases the two programs that have come under intense scrutiny, that's the counter-cyclical target prices and loan rates. While Senate Chairman Tom Harkin has yet to release his final proposal, many expect he'll do the same. There's a fine line between standing up for the autonomy of our farm programs and turning your back to the importance of trade. Hopefully, if and when a farm bill is completed, it will contain a healthy respect for both, because no one's happy in detention. Date: 10/17/07
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