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Farm Subsidies Must Go

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In Washington, hypocrisy knows no bounds. The latest example is the U.S. government’s response to the World Trade Organization’s preliminary ruling that subsidies to American cotton farmers distort international trade and violate WTO rules.

The first response from U.S. officials was that Brazil, which brought the complaint, should address the issue through multilateral negotiations, rather than by filing a grievance against the United States. But at last year’s WTO meeting in Cancun, Mexico, Brazil and other developing countries tried to start a discussion about farm subsidies in the rich countries. They got nowhere, so they walked out and brought the meeting to a halt.

Hypocrisy is nothing new when it comes to U.S. farm policy. There’s little else in it. The U.S. government talks righteously about free enterprise and free trade, but it fails to live up to its own declared standards. Farm subsidies have been on the rise. The 2002 farm bill boosted them to $19 billion a year. Both political parties are at fault.

Rather than repudiate its double standard, U.S. officials prefer to get legalistic. Subsidies don’t violate WTO rules, they say. Or, they don’t distort trade. The White House promises to defend the farmers’ interests. Trade Representative Robert Zoellick told the farmers not to worry: the appeal could take years.

Brazil argues that the subsidies lower costs to American cotton farmers and enable them to grow more crop. The surplus is then exported to the developing world, depressing the price and undercutting local growers. It’s funny to hear American officials pooh-poohing this argument. How often have Americans complained that foreign subsidies create unfair trade advantages for other countries’ producers?

We can’t know what the world supply and price of cotton would be without the subsidies. If they were ended tomorrow and the price rose, as the Brazilians maintain it would, we could expect the higher price to summon forth additional cotton from somewhere. So the Brazilians might be no better off.

But that does not change the fact that the subsidies interfere with the free market, whether they are aimed at boosting exports or not. Even if they do not increase the world supply or price over the unsubsidized levels, they still might be distorting production, since the additional supply could be produced outside the United States. That would free up resources here for other products.

The real injustice caused by the subsidies is not to Brazilian cotton growers, but to American taxpayers. Why should they have to cough up money for rich cotton farmers? If cotton is so important, it’ll be produced without compulsion. Not all crops are subsidized. How do unsubsidized farmers manage?

Let’s not be distracted by the fact that it is the WTO that has criticized the policy. One need not like the WTO, a bureaucracy dedicated more to managed trade than to real free trade, to agree with the ruling. Moreover, the alarm about a loss of U.S. sovereignty is misplaced. If patriotism, as Samuel Johnson famously noticed, is the last refuge of a scoundrel, the next to last refuge must be sovereignty.

The WTO can declare the cotton subsidy a violation of its rules, but it cannot compel Congress to repeal it. The worst that can happen is that Brazil will retaliate with a tariff against some U.S. goods. But it could do that even if the WTO did not exist. Sovereignty here is a red herring.

Americans should use the WTO ruling as a reason to reconsider the entire outrageous system of taxpayer subsidies to farmers. America is in no position to teach the world to embrace the free market as long as its government sticks to this obviously two-faced position.

But this is an election year, and no year is far from the next election year. So don’t expect any serious political challenge to this rape of the taxpayer.

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    Sheldon Richman is vice president of The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.