Exports nearly forgotten in lobbying by farmers
April 1, 2007
by Morton I. Sosland Editor-in-Chief
Of the many impacts from exploding demand for corn as feedstock in ethanol production, one that has not received sufficient attention is how farmers appear to be abandoning their long-term backing for exports to focus on maintaining and building the fuel market. While not wanting to rank in importance the debate raging on matters like fuel versus food, the potential loss of support from producers for trade liberalization is hugely important. If this does turn out to be one consequence of policies aimed at establishing energy independence by increasing production of ethanol made from domestic crops, the repercussions will be powerful. After all, American agriculture has been a key backer of trade liberalization. If it turns away from these policies, the global implications are worrying.
The issue is framed by two developments. One that is also playing out in the E.U. and in many others parts of the world is the attitude of farmers toward completing Doha Round negotiations under the World Trade Organization. Central to Doha is lowering barriers to trade, a focus that in the past made farmers ardent advocates of reducing trade hindrances. Tariffs that are meant to limit imports of foreign-produced ethanol, particularly fuel made from sugar cane in Brazil, would obviously be challenged in such trade negotiations. Even when President Bush went to Brazil to establish a partnership with that country to expand ethanol-making technology, he refrained from even hinting at reducing or eliminating this tariff. In contrast with their past role as front-line fighters for American concessions to facilitate trade agreements, farmers and farm organizations have recently favored positions that show little or none of the previous enthusiasm for opening trade.
This year also is seeing major attention to decisions on the structure and cost of farm programs. In the past, this debate would have centered not just on support levels, including the subsidy-like tax exemption granted ethanol producers, but also on steps that would help build export markets. The latter apparently have been shunted aside in favor of making sure the ethanol tax concession remains. The result is that several leading farmer organizations have neglected building export markets. While the ethanol tariff and tax subsidy are not tied directly to crop production, they are negatives for trade growth.
Preserving and expanding the role corn has gained in producing ethanol have the upper hand in influencing these policy decisions. Further, it does not require a great stretch of the imagination to see how wheat is also caught in this policy shift. If grower organizations are going to press the administration and the Congress to do everything possible to preserve and build demand for corn in making ethanol, with little or no regard for steps to do the same for exporting, it becomes difficult to imagine how the importance of exporting for wheat will receive the lobbying attention given to these matters in the past. It seems inconceivable that promotion of wheat exporting could be forced to take a backseat as a result of these changes. After all, U.S. exports of wheat still are nearly equal to domestic demand, with both accounting for around 30 million tonnes. Yet, if producers are willing to put corn exporting on the backburner in favor of expanding the ethanol factor, that means a willingness to play with 56 million tonnes of foreign trade, accounting for about 20% of total disappearance.
Anyone at all familiar with the long-running efforts to develop export markets for wheat and corn will find it unbelievable that these steps could be relegated to lesser importance or even abandoned in the wake of the ethanol surge. Yet, if the farmer organizations persist in no longer pushing policies aimed at liberalizing trade, the pendulum of what accounts for world trade will have swung in a fashion unimaginable just a very few years ago. What this all may mean to the position of not just the U.S. but many other countries similarly affected by these developments requires urgent study. At this stage, the possibilities seem nearly beyond belief.