Farmers Take Slow Boat to China

One of the least analyzed aspects of the recent enactment of "permanent normal trading relations" with China, the crucial step in that nation's pending WTO membership, is the impact it will have on world agriculture. China's entry into the global market has been celebrated as a potential boon to American farmers, with the vast Chinese mainland market fully opened to US wheat, corn, rice, meat products, and other commodities. Someone will certainly benefit, but it won't be the three-quarters of American farmers who shared just 7 percent of the market value of US agricultural products sold in the late 1990s.

It also won't be Chinese farmers. Free trade in agriculture is expected to displace an estimated 10 million peasant farmers in China, where two-thirds of the population still tills the land. Agricultural exports, heretofore subsidized by the Communist government, will now rise or fall according to the global marketplace, and drastically lowered food-import tariffs will open the door wide to American agribusiness. China's wheat imports from the US, for example, are expected to rise from two to five million tons a year, once Chinese WTO membership is finalized.

Sounds like a prescription for the return to health of the perennially struggling American family farm, doesn't it? Not so fast. For starters, China's primitive port facilities are not yet physically ready to receive the bounty of the American heartland, and according to the English-language China Daily, the Chinese farm population is "not mentally ready to accept the fact that the country's agricultural market will soon become part of a battlefield for international traders." China's predominantly rural populace has a tradition of self-sufficiency; its subsistence-oriented farmers grow and consume much of their own food and may continue to do so in large numbers for the foreseeable future.

But let's not dwell on the negative. Assume, for the moment, that American agricultural imports are welcomed with open arms and achieve dominance in the Chinese market. What then? There exists an intriguing precedent to suggest the answer. Since 1986, the booming US rice trade with Haiti (200,000 tons of exports per year), a result of IMF pressure on that island nation to open its protected markets in return for World Bank loans, has decimated native Haitian agriculture and made local consumers dependent on US corporate suppliers for their rice staple. Yet, it has done precious little for American farmers.

The modern American rice business is, in the words of grain-trade analyst Dan Morgan, a high-technology, capital-intensive enterprise," carried on with tractors, airplanes, elaborate irrigation and drainage systems, and few people. Although important as an export crop, rice occupies a minimal number of US farmers at the cultivation stage; its production and sale is essentially an agribusiness involving large economic units, and it could well be the model for a future, export-driven American agriculture.

Even with respect to more labor-intensive crops, the benefits of expanded trade will be unevenly allocated. The rewards for opening China -- whether to rice, wheat, or some other farm commodity -- will not go to small-scale growers, but to the agribusiness giants (Cargill, Continental and others) engaged in large-scale processing, trading, and exporting. As testimony before the House Agriculture Committee in 1999 made clear, American farmers (who average only a 2 to 3 percent annual return) sell almost their entire production at low domestic prices to local or regional processing and storage facilities, which act as conduits for the multinational exporters that control its ultimate disposition and set its final value. No matter what the outlook for exports, family farmers will still receive either a steadily shrinking market price from an increasingly monopolistic U.S. market, or a gradually diminishing support price, courtesy of the "reformed" federal farm program.

In short, the answer to the ongoing travails of America's family farmers lies not with globalized agricultural trade, but with a change in the domestic farm program -- specifically a repeal of the justly maligned 1996 subsidy phase-out legislation that reversed 60 years of imperfect but necessary agricultural price supports. Farming is one of those industries -- fishing is another -- that requires federal aid to survive hard times in a socially desirable form based on family ownership and relatively small units of production. By denying such aid, the ludicrously named Freedom to Farm Act has accelerated a slow, decades-long decline in economic democracy on the land to the point where the number of American farms (two million) is now one-third what it was 50 years ago. Worse still, only half of these remaining farms operate full-time, and only half make money for their owners.

Something is obviously amiss here, but the solution is not a simple return to the status quo ante of pre-1996, when wealthy, independent growers and corporate factory-farms got the lion's share of all federal agricultural subsidies and gave price supports a bad name. Rather, it lies with an old idea that has lain dormant for more than 50 years, but improves with age like good wine. I'm speaking of the Truman administration's far-sighted 1949 proposal to maintain a free market for corporate agriculture, while subsidizing more vulnerable family-sized farms in times of depressed prices.

The so-called Brannan Plan, named after President Truman's Agriculture Secretary Charles F. Brannan, would have shifted the emphasis from across-the-board "commodity purchases" (the indiscriminate buying and storing of surplus crops by the federal government, when prices fall below established parity or fair-price levels) to selective "production payments" (direct payments to certain farmers of the difference between any sub-parity free-market price and the parity or support price). The key provision: These payments would have been made only to those farms operating below a set production level, so that the program would (in the president's words) "maintain a decent standard of living for ordinary farm families," while at the same time "agricultural corporations would not be able to grow fat on it." As a salutary byproduct, consumers would have benefitted from periodically low free-market prices, instead of seeing crops warehoused to force prices artificially higher.

Regrettably, the Brannan Plan was rejected by Congress at the urging of the conservative American Farm Bureau Federation, and the existing commodity-purchase farm program, which Truman contended mainly favored acreage-rich corporations, continued on down to our own time -- until its 1996 demise. Now, however, in the wake of the Freedom to Farm Act's legislative overkill, the 1949 Fair Deal proposal is being talked about again. Senator Byron Dorgan (D-N.D.), whose state lost 10 percent of its farmers in the late 1990s, has proposed reviving the Truman-Brannan approach and substituting it for the currently disastrous phase-out of subsidies. It's an idea whose time may finally have come.

Harry Truman expressed the need best: "The old laissez-faire theorists tell us that the answer [to recurring farm problems] is to cut down on producing units until the fittest survive. But this theory is without humanity, for in human terms it means the breakup of homes, the destruction of families, and the surrender of the family farm to the absentee landlord or the corporate owner." Amen.

Wayne O'Leary is a writer in Orono, Maine.

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