Over the years a variety of terms have been used to mystify the issues of farm trade, in order to push ‘free’ trade agendas against the interests of farmers and the US. A glossary of more adequate definitions is needed to begin to discuss trade in the real world.
Farm trade seems to be characterized by “doublespeak” (George Orwell, 1984,) more than many other topics. In recent decades we’ve seen a series of “trade” or “free trade” agreement negotiations, NAFTA (and other “AFTA’s), GATT (leading to the WTO organizational structure,) KORUS, TTIP and TPP, which was just opened up yesterday.
The Farm Bill is another place where the lexicon of trade shows up. Trends in the Farm Bill since 1953 have been to lower farm prices to the cheapest levels possible, and at the same time to argue that this would be a good thing for farmers and for the U.S. The majority of farmers have always disagreed with this approach, and they’ve been proven correct in these disagreements.
“EXPORTS” Trade involves exports and imports. The standard form of mystification by agribusiness exploiters has been to talk about increasing farm exports, and then improving our “balance of trade,” (by exporting more than we imported). The 1985 Farm Bill, for example, lowered Price Floors, (like minimum wage,) drastically. They claimed that this would help U.S. farmers, because we’d export a greater quantity, and later prices would rise, as farmers elsewhere were put out of business.
Within a year or two this appeared to be coming true. “Exports” were up. That is, if you define “exports” as export volume, then exports went up. If you define “exports” as export value, however, “exports” went down. So it was a bad deal economically that was spun as a good thing, by manipulation of the terms. We see then, that there are a variety of terms.
EXPORTS, can go up or down, but can mean VOLUME (QUANTITY) or VALUE.
BALANCE OF TRADE can be positive (a TRADE SURPLUS) or negative (a TRADE DEFICIT).
All of these terms can mislead us, as they don’t ask a more fundamental question: Are we making a profit on trade? We can increase the volume or the value or both and still lose money per unit. In that case, the more trade, the more money we lose, the more we subsidize foreign entities. So value is more important than volume, but it can still be misleading.
The same applies to balance of trade. We can have a trade surplus, or a trade deficit, but that still doesn’t answer the question of whether we’ve lost money on it or made money on it.
Unfortunately, there doesn’t seem to be a term in use for farm trade that tells whether or not we’re MAKING A PROFIT ON TRADE.
More than that, we also haven’t even been increasing the volume of our farm exports in the long haul, as we’ve maintained farm price levels below the cost of production! (See Daryll Ray links on this, below.)
The mystification is even more fundamental than these distortions, however.
For example, all of the trade agreements focus on what’s called:
FREE TRADE. The myth is that “free” trade gets rid of the red tape and makes economic life easy. You would think then that trade agreements would be short and simple, uncomplicated. In fact, the reverse is true. They’re huge (a 4 feet tall stack of papers?) and packed with endless regulations, telling us what we can’t do in our internal federal, state and local governments. They then can give procedures by which foreign governments can take our federal, state and local governments to trade court, as in the WTO. This is a huge burden to small, poor countries, as it takes a massive new legal infrastructure to respond to or instigate these lawsuits. Basically, it takes a “megamachine,” a power complex, something along the lines of the academic power complex that invented the atomic bomb, (the Manhattan Project) (on megatechnics see Lewis Mumford, “The Myth of the Machine,” 2 vols.).
TRADE versus GOVERNANCE. We see then that the new trade agreements aren’t mostly about trade at all, but are about internal matters of government. They’re global GOVERNANCE agreements, taking over part of our internal federal, state and local government functions. We see, then, in TPP it’s a huge and SECRET agreement that even Congress has NEVER seen, but that a large contingent of multinational corporate leaders HAS seen.
So “trade,” in these “trade agreements,” isn’t mostly trade at all. It’s a front for global corporate government, without any elected representation.
Likewise, if you’re against ‘free’ trade, against losing money on farm exports (and losing money internally in farm states,) then you’re said to be AGAINST TRADE. That is, TRADE is defined in the mainstream corporate media as only meaning ‘free’ trade. If you’re for fair trade, that’s called being anti-trade.
A related term, GLOBALISM, is used to refer to ‘free’ trade and losing money on farm exports, for example. The assumption in the dominant (corporate spoon fed) narrative is that those for fair trade are against global interactions, (against trade). Really, what’s called “globalism” means only CORPORATE GLOBALISM, and it’s not at all in the interests of the global 99%. Really, those for FAIR TRADE are very much in favor of global interaction and trade. What we oppose is the trade war that’s hidden behind terms like “trade” (meaning only “‘free’ trade,”) and “globalism,” (meaning only global corporate domination of our governments and our economies).
PROTECTIONISM is a term used for any effort to maintain profitability in a country against trade regulations that prohibit those measures. So if countries try to maintain profitable farm prices, that’s labeled protectionism, that’s bad. Really, the ‘free’ trade of these trade agreements is massive corporate protectionism.
Related to this is the term COMPETITIVE. Basically, for farm trade, it’s said to be COMPETITIVE when the U.S. has lost money on trade, (although that’s never mentioned). That’s supposed to be more CAPITALISTIC, and even more GREEDY, as we’re seen as bullying other countries around, and running their farmers out of business. Really, we’re losing money massively in our so-called “capitalist” “greed.” (We’ve lost hundreds of billions of dollars on farm exports in recent decades, with the exception of 2007-2014 for 3 crops). On the other hand, being “competitive” goes directly against the basic business value of making a PROFIT! All of this has been clouded in mystification.
We see how U.S. agriculture has been losing money in USDA figures for “Commodity Costs and Returns” (http://www.ers.usda.gov/data-products/commodity-costs-and-returns.aspx). Most of the major farm crops, (grown on most of the land,) have lost money (vs. full costs) almost all of the time since about 1980-81. The data begins in 1975, so it’s not clear how often US farmers lost money prior to 1975, when we also had lower and lower and lower farm prices from 1953-1972, (as Price Floors were lowered by Congress). I’ve calculated this by taking cost/acre figures for 8 crops, then multiplying this by the yearly production of each, and then adding all 8 crops up for each year and for all of the years 1981-2006. The crops are: corn, wheat, soybeans, cotton, rice, grain sorghum, barley and oats. What this shows is that US farmers lost money on these 8 crops as a whole every year 1981-2006, except 1996. At that point, we had about 7 years when 3 of these crop prices, (corn, soybeans and rice,) were above full costs. Meanwhile, the other 5 crops (cotton, wheat, grain sorghum, barley, oats,) continued to lose money, 6 out of 7 years, 2007-2014.
Dairy is another category, and has been below full costs every year 1993-2014, except for 2007, when prices were a few pennies per gallon above full costs. (See link above.)
Today all 8 crops (and dairy) are below full costs, and projections at present are for more of the same through 2024.
Losing money versus FULL COSTS means that farmers got paid a wage equivalent, but lost money on their investments in land, facilities, and machinery.
What we really see in these trade agreements, then, is CORPORATE PROTECTIONISM, protecting the privilege of corporations to buy from farmers at below our costs, and to drive down global farm prices in order to accomplish that world wide. The protection comes from the fact that ‘free’ market ideology fails, leading to huge opportunities for the corporate buyers of farm products to purchase at below the cost of production. This was fixed by the New Deal Farm Bill, with parity (living wage) farm price floors from 1942-1952. Under corporate pressure, Congress reduced (1953-1995) and eliminated (1996-2023) these programs as a sort of ‘free’ market entitlement for the international corporate buysers, at the expense of U.S. and global agriculture.
Note that these U.S. farm trade policies have been the opposite of what OPEC has done for their oil exports. With something like 40% export share, they reduced production, (managed supply,) and made a lot more money. The U.S., in contrast, has had even bigger clout than OPEC, with bigger export market shares for major crops, sometimes well above 50%, (and even up to 90% at times for soybeans). Instead of using this clout to make money, we reduced and ended supply management and price floor programs in order to make less on farm trade, in a global TRADE WAR, a race to the bottom. The goal of these efforts was to increase our export share, but in fact, it’s gone down, so it was all for nothing. While in the past we had international agreements to prevent trade wars, those have mostly ended.
TRADE WARS are supposed to be when countries prohibit cheap, below-cost imports, leading other countries to make similar restrictions. What’s misleading is that the various countries are really blocking our ability to lose money on exports, that then drive the prices for all farmers down, running us all out of business, and making less money for the United States, the dominate farm exporter. Absurdly, we’re supposed to then say “‘Them’s fightin’ words!”
So there again the truth is the reverse of the dominant narrative. The real agricultural TRADE WAR comes with CORPORATE PROTECTIONISM that forces all farming countries to lose money both internally and externally for the benefit of giant multinational corporations. Since 1953, these trends have run most US farmers out of business.
This is also what STARVES THE WORLD. We’re told by our corporate overlords that we must FEED THE WORLD via overproduction and cheap food. Really, however, 80% of the “undernourished” are rural, mostly farmers, as is 70% of the population in the poorest or “Least Developed Countries.” Until a few years ago, the rural population made up more than half of global population, so impoverishing rural economies is an enormous problem, not just a problem for a tiny fraction of the U.S. population. Our FARM JUSTICE activism here, (activism for fair trade, living wage farm prices,) is especially important, as the U.S. is the dominant exporter. This is a fight on behalf of our country and our government against the multinational corporate overlords who have colonized our government (i.e. USDA, Congress, the Presidency,) to force us to lose money on farm exports for their direct benefit. It’s also a fight for all of the agricultural regions of the world, and against hunger.
Free trade is based on FREE MARKETS, and free markets have not worked very well at all for agriculture under most market conditions we’ve had for 160 years, on into the 21st century. As Williard W. Cochrane has put it, in summarizing the evidence, (The Development of American Agriculture, p. 371,) “We now have an aggregate demand relation and an aggregate supply relation for the agricultural food industry. Both relations are highly inelastic in terms of price.” Or as Daryll E. Ray put it, (see links below) farm products are characterized by a “lack of price responsiveness” “on both the supply and the demand sides for aggregate agriculture.” ‘Free’ markets don’t self correct with an “invisible hand,” (again, not very well at all under most market conditions …). Supply and demand don’t automatically fix themselves on either the consumer (demand) or farmer (supply) sides for the main groups of crops grown in the various farming regions (i.e. in the real world of agriculture).
We see then, (in direct contrast to some of USDA secretary Tom Vilsack’s recent rhetoric, [http://www.usda.gov/wps/portal/usda/usdahome?contentid=2015/10/0274.xml&…) that trade agreements like TPP are UNSCIENTIFIC. They’re based upon economic illusions unsupported by any valid body of evidence. The whole purpose is to provide huge profits to a tiny few giant agribusiness corporations at the expense of farmers, of farming states, and of farming countries, including the United States, the dominant farm exporter.
Toward this end, a lexicon of mystification has played a major role.
League of Rural Voters, “Trading Our Future? Defining Agricultural Trade Rules for the Next Century,” YouTube, Institute for Agriculture and Trade Policy, posted 1/16/15. https://www.youtube.com/watch?v=YjSGgTXauUo&list=PL7K_XwGI3jVS4AMDeEdFfHALIOYnoWg53&index=15
Mark Ritchie, “Alternatives to Agricultural Trade War,” IATP, 12/1/87, https://www.iatp.org/documents/alternatives-agricultural-trade-war.
Brad Wilson, “Why U.S. Farmers Oppose ‘Free’ Trade,” Zspace, 6/22/15, https://www.youtube.com/watch?v=YjSGgTXauUo&index=2&list=PLA1E706EFA90D1767.
Steve Suppan, “Agriculture and Supply Management in the TPP,” Institute for Agriculture and Trade Policy, Think Forward Blog, 8/13/15. http://www.iatp.org/blog/201508/agriculture-and-supply-management-in-the… This is a great update of some of the first insights into the secret TPP trade and governance agreement, related to this discussion of farm-side issues. For example, it expands upon what I wrote above about the 1985 Farm Bill. Learn more about trade from IATP here (http://www.iatp.org/issue/trade).
Lori Wallach, “Trade Act Hearing,” Public Citizen, 5/28/09, http://www.citizenarchive.org/trade/tradeact/. This is a positive alternative to TPP and similar agreements. Public Citizen is one of the best sources on information on these trade agreements.
“Noam Chomsky on Trans-Pacific Partnership,” YouTube, Representative Press, (Laura Flanders show,) 5/31/15, https://www.youtube.com/watch?v=bgqwfCyZpao. A great, brief summary related to my post.
DARYLL RAY COLUMNS ON FREE MARKETS AND FREE TRADE
Daryll E. Ray, “It’s Price Responsiveness! It’s Price Responsiveness!! IT’S PRICE RESPONSIVENESS!!!” APAC, (U of Tenn.,) 5/6/05, http://agpolicy.org/weekcol/248.html.
Daryll E. Ray, “Are the five oft-cited reasons for farm programs actually symptoms of a more basic reason,” APAC, (U of Tenn.,) 10/27/06, http://agpolicy.org/weekcol/325.html. Historical context.
Daryll E. Ray, “Policy premise correct three times a century,” APAC, (U of Tenn.,) 9/23/05, http://agpolicy.org/weekcol/268.html.
Daryll E. Ray, “Exports: Does Lowering the Price to Capture Market Share Work in the Grain Markets?” APAC, (U of Tenn.,) August 4, 2000 #5, http://agpolicy.org/weekcol/005.html.
Daryll E. Ray, “Allowing Grain Prices to Fall Does Not Stave Off Loss of Export Market Share,” APAC, (U of Tenn.,) August 11, 2000 #6, http://agpolicy.org/weekcol/006.html.
Daryll E. Ray, “Free-Market Ag Economists and Agricultural Markets: Premises and Results,” APAC (U. Tenn.,) August 25, 2000 #8, http://agpolicy.org/weekcol/008.html.
Daryll E. Ray, “Our Export Competitors Harvest 36 Million More Acres Following 1996 FB,” APAC, (U of Tenn.,) June 01, 2001 #46, http://agpolicy.org/weekcol/046.html.
Daryll E. Ray, “Will trade liberalization bring about better prices for farmers worldwide?” APAC (U.Tenn.,) December 19, 2003 #176, http://agpolicy.org/weekcol/176.html.
Daryll E. Ray, “Export measures often need to be put into context to reflect reality,” APAC, (U of Tenn.,) November 5, 2004 #222, http://agpolicy.org/weekcol/222.html. This discusses export “volume” vs export “value,” etc.
Daryll E. Ray, “25 years of export competitiveness and what do you get…”, APAC, (U of Tenn.,) November 10, 2006 # 327, http://agpolicy.org/weekcol/327.html.
Daryll E. Ray, “Export-led prosperity: That sounds familiar,” APAC, (U of Tenn.,) September 7, 2007 #370, http://agpolicy.org/weekcol/370.html.
Daryll E. Ray, “Current farm policy is based on an export-centric narrative,” APAC, (U of Tenn.,) March 26, 2010 #504, http://agpolicy.org/weekcol/504.html.
Daryll E. Ray, “Betting the farm on ‘market access,’” APAC, (U of Tenn.,) August 11, 2006 #314, http://agpolicy.org/weekcol/314.html.