As the world is still reeling from last week's decision on
steel, the United States is preparing to drop another bomb.
Unfortunately, this one is not aimed at the Taliban. The target:
our friends and allies. The weapon will come in the form of a farm
bill worth $175 billion. The farm bill greatly increases subsidies
to American farmers. Subsidies are a non-tariff barrier and distort
the market. The United States lost respect in the global market by
imposing 30 percent tariffs on imported steel and will lose more if
the President signs this bill.
The United States needs more trade not less. Measures such as
the tariff on steel and agricultural subsidies invite retaliation.
With 96 percent of the world's consumers living outside the United
States, retaliation can be extremely painful when other countries
start putting high tariffs and quotas on our goods.
America is the largest agricultural exporter in the world. Every
one out of three acres grown is exported. According to the U.S.
Department of Agriculture, in 2000, Iowa exported nearly over $3
billion in agricultural products. Additionally, the USDA reports
that these exports helped support over 48 thousand jobs both on the
farm and off the farm in food processing, storage, and
transportation. Jobs supported by exports are estimated to pay
13-18 percent more than non-export jobs. As America emerges from a
recession, opportunities for American workers should not be gambled
If history is any guide, retaliation from other countries is a
sure thing, the European Union (EU) will not sit idly by while
America preaches one thing and does another. For instance the
recent case over U.S. tax treatment of Foreign Sales Corporations
(FSC) was most likely retaliatory. The Financial Times reported
that "The case was initiated mainly to hit back at U.S. harassment
over the EU's disregard for World Trade Organization rulings
against its beef ban and banana import regimes."
Though the bill is in conference and has not reached the
President's desk, the Europeans have already started to analyze and
criticize what its effects will be. If the President signs this
bill, a complaint to the World Trade Organization is likely as well
as an arms race of subsidies and tariffs between the EU and the
United States. President Bush should move forward with his free
trade agenda by vetoing this bill. Anything less will only hurt
American exports and America as a whole.
Sara J. Fitzgerald is a Trade Policy Analyst in the Center for International Trade and Economics.