The department will spend $154 billion in 2016, or $1,230 for every U.S. household. After adjusting for inflation, spending has increased 45 percent since 2000. The department operates about 268 subsidy programs and employs 90,100 workers in about 7,000 offices across the country.
These agricultural subsidies distort trade, which adversely affects poor farmers and environmental protection in developing countries. Subsidies also impose a fiscal burden on taxpayers. Conversely, reducing agricultural subsidies in the United States (and other developed countries) could help poor farmers in developing countries compete in the marketplace, reduce ecosystem degradation and help reduce federal spending
…the United States has been a major player in the global rice trade since the 1970s. The country may only produce around 2 percent of global output, but it is consistently among the top five exporters in the world. Arkansas rice is eaten around the world — from Japan to Mexico to Turkey — and roughly half of the rice grown in the state is sold in foreign markets.
The U.S. reached an agreement that would enable rice exports to China, according to a trade group, a development that would give U.S. rice farmers their first foothold in the world’s largest market for the grain.
USA Rice, which represents growers, millers and exporters, said late Friday that officials from the U.S. Department of Agriculture had informed it that Washington and Beijing agreed on a protocol to allow U.S. producers legal access to China, which has long barred American rice.
The article reports US rice production estimates for 2015-16 at 6.1 million tons, with over half, 3.1 billion tons, for export.
But federal rice subsidies distort rice production, encouraging marginal producers and artificially boosting rice supplies for export, foreign rice producers complain and lobby to restrict rice shipments from the US. Foreign governments also subsidize and protect domestic rice farmers, so trade negotiations often turn on “level of subsidy” claims.
“US files trade complaint over China’s ‘excessive’ ag subsidies“(CNBC, September 13, 2016) reports Obama Administration formal complaints to the World Trade Organization:
“China’s excessive market price support for rice, wheat, and corn inflates Chinese prices above market levels, creating artificial government incentives for Chinese farmers to increase production,” U.S. Trade Representative Michael Froman said in a release.
Froman noted that China exceeded its allowable subsidy limits on corn, rice, and wheat by $100 billion in 2015 alone. America’s rice, wheat, and corn industries typically average $20 billion per year in export activity, according to government figures.
The Congressional Budget Office estimates that under the previous farm bills, the U.S. government provided an average of $1.53 billion in annual support for rice between 2000 and 2004. Under the Agricultural Act of 2014, CBO projects the annual outlay for rice from 2014 to 2018 will average around $231 million.
Thailand’s government spent far more:
Thailand’s rice paddy pledging program is a textbook case of how not to run a farm subsidy program. What started as an effort to win farmer support during parliamentary elections in 2010-11 became an economic disaster that cost the government of Thailand $27.7 billion before it ended in 2014.
The Economist‘s leader, “Hare-grained,” (November 14, 2015), outlines the mess that Japan, South Korea, China, and other Asian countries have made of the international rice trade:
Tariffs, quotas, floor prices, ceiling prices, producer subsidies, consumer subsidies, state monopolies—no measure is too meddlesome (see article). As a result, the market for rice is more distorted than that for any other staple. Rice growers pocketed at least $60 billion in subsidies last year, according to the OECD, twice as much as maize (corn) farmers, the second-most-coddled lot.
The full article, “Paddy-whacked,” explains the problem in its subtitle: “By meddling in the market for rice, Asian governments make their own citizens poorer.“
Rice policy matters a lot for Asia’s 4.4 billion people, about 60% of the world’s population, as Asians consume 90% of the world’s rice,
Asia consumes 90% of the world’s rice. It is used to make flour, noodles and puddings. Babies and the elderly survive on rice gruel. Steaming rice porridge is eaten for breakfast in skyscraping hotels in Hong Kong and rustic village kitchens in Hunan.
The U.S. government supports domestic rice production through tariffs on imported rice and direct taxpayer subsidies based on production, prices, and historical acreage. Those programs make rice one of the most heavily supported commodities in the United States, with ramifications for U.S. taxpayers and consumers and rice producers abroad.
Back in 2006, Dan Griswold’s Cato Institute Trade Policy Briefing looked at “Grain Drain: The Hidden Cost of U.S. Rice Subsidies.” Here is part of the paper’s Executive Summary:
Americans pay for the rice program three times over—as taxpayers, as consumers, and as workers. Direct taxpayer subsidies to the rice sector have averaged $1 billion a year since 1998 and are projected to average $700 million a year through 2015. Tariffs on imported rice drive up prices for consumers, and the rice program imposes a drag on the U.S. economy generally through a misallocation of resources. Rice payments tend to be concentrated among a small number of large producers.
Globally, U.S. policy drives down prices for rice by 4 to 6 percent. Those lower prices, in turn, perpetuate poverty and hardship for millions of rice farmers in developing countries, undermining our broader interests and our standing in the world. The U S. program also leaves the United States vulnerable to challenges in the World Trade Organization.
For our own national interest, the U.S. Congress and the president should work together to adopt a more market-oriented rice program in the upcoming 2007 farm bill, including repeal of tariffs and a rapid phaseout of subsidies.
Federal government rice subsidies have changed since 2006, but still involve significant taxpayer subsidies and price distortions internationally. The U.S. could be a leader in reforming damaging rice policies in China and across Asia.
Mercantilist policies still dominate across many industries, from steel to agriculture. Rice is no exception. Governments want to be self-sufficient in rice and where possible promote exports. Subsidies to domestic rice growers cost each country’s taxpayers millions, and tariffs on imported rice (and other grains) cost each country’s consumers millions more.
Public Choice theory explains how concentrated special interests (like rice growers, millers, and exporters) gain political leverage to enact legislation that benefits them while raising costs for consumers and taxpayers (benefits of rice subsidies are concentrated and larger per rice producers and lobbyist, while total costs, though higher, are spread out across tens of millions of consumers and taxpayers).
The same mercantilist thinking and public choice pressures distort rice production and trade in the U.S.. This July 12, 2015 Wall Street Journal article, “Should Washington End Agriculture Subsidies?” offers a debate on current agricultural policies, after 2014 reforms. Vincent Smith, arguing against farm subsidies, notes:
First, many people seem to believe that farmers, like the Joad family in John Steinbeck’s “The Grapes of Wrath,” are poor, when in fact the average farm household enjoys an income that is about 15% higher than that of the average nonfarm family. What’s more, the 10% to 15% of farm families that receive more than 85% of all farm subsidies—amounting to millions of dollars a year in a few cases—have annual household incomes many times as large as those of the average U.S. taxpayer. Some estimates suggest that the farmers who receive the bulk of all subsidies—many of whom mainly raise corn, cotton, rice, peanuts, soybeans and wheat—are worth somewhere between $6 million and $10 million on average.
Rice is one of the big grain crops still subsidized, and because rice is the major food of Asia, students could argue that it should be the first to be pulled out of the world of subsidies and left to market competition and international trade.
This May 15, 2015 Bloomberg View article, “Rice Gets a Bath Amid California’s Drought,” looks in depth at subsidized rice production in California: “much of it destined for sushi … shipped to customers, about half of them outside the U.S.”:
As you read this, farmers in the Sacramento Valley are flooding hundreds of thousands of laser-leveled acres under five inches of water as they prepare to plant the annual rice crop. After that comes my favorite part. From the California Rice Commission’s “How Rice Grows” tutorial:
Rice seed is then soaked and loaded into planes. Flying at 100 mph, planes plant the fields from the air. The heavy seeds sink into the furrows and begin to grow.
They will keep growing throughout the hot valley summer (temperatures regularly top 100 degrees Fahrenheit), in the midst of a historic drought. Harvest comes in September, after which the rice — mostly medium-grain, much of it destined for sushi — will be milled and then shipped to customers, about half of them outside the U.S.
The Los Angeles Times article, June 11, 2015, “California rice farmers find Japanese trade negotiators a bit starchy,” looks at other foolish rice policies, beginning with Japanese rice protectionism:
For years Charley Mathews Jr. has exported tons of his best Sacramento Valley-grown rice to Japan, but it grates on him that very little of that has ever ended up on the tables of sushi restaurants or Japanese households.
Instead, the Japanese government, which controls rice imports under a 2-decade-old quota system, has given away most of his and other foreign rice as food aid or sold it domestically as animal feed and an ingredient for rice crackers.
Again, however, U.S. rice farmers benefit from a range of water and price subsidies. Bloomberg View’s “Save California Farmers From Themselves,” April 27, 2015, looks at the water subsidy values for California rice farmers:
In a 2004 study, the Environmental Working Group estimated that the total subsidies for the Central Valley Project added up to roughly $600 million a year. While farmers dispute that figure, they don’t deny they have a very special deal. Why else would they fight efforts to make the pricing of water more market-based and defend their “rights” to it?
This competitive advantage has been worth tens of billions of dollars. All over the West, farmers served by federal projects have benefited from 50-year zero-interest loans, with generous repayment rates, plus low-cost power. And about 45 percent of the farmers who receive irrigation subsidies are growing commodity crops (such as rice and cotton) that qualify for price supports from the U.S. Department of Agriculture — a classic example of double dipping.
This giant international rice farming mess seems endlessly complicated. But at the least the U.S. could be a leader in saving hundreds of millions of taxpayer dollars by ending the rice subsidies that also encourage rice protectionism in Japan, South Korea, and other Asian countries.
Ending the Cuba trade embargo would shift sugar production back to Cuba and away from ecologically fragile lands in the U.S. “Protect the Everglades, not sugar farmers,” (Florida Sun Sentinel, Feb 16, 2017) argues:
Unfortunately, the most important state agency involved with Everglades restoration remains committed to the interests of sugar farmers instead of the environment.
At Wednesday’s hearing, South Florida Water Management Executive Director Peter Antonacci restated the district’s opposition to Negron’s proposal. Antonacci told senators that buying the land actually could hurt restoration efforts.
Why does the water management district oppose the idea? Because U.S. Sugar opposes the idea, and U.S. Sugar has donated $425,000 to Gov. Rick Scott’s political action committee since the 2014 election cycle. The company owns only a portion of one of the two parcels, but U.S. Sugar doesn’t want any more farmland out of production.
Sugar production causes political and pollution problems. Since the Cuban embargo blocked sugar imports, acreage around the Florida everglades put into sugar production increased four-fold.
U.S. sugar prices are far higher than market prices because of federal sugar quotas, raising costs for American consumers and reducing competitiveness of U.S. candy and chocolate companies.
In “Protectionist sugar policy cost Americans $3 billion in 2012,” AEI’s Mark Perry looks at costs and consequences of sugar trade restriction:
…American consumers and US sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (29.1 cents for domestic sugar vs. 14.4 cents for world sugar…
See also Wall Street Journal: “U.S. Sugar Soars Above World Prices: Candy Makers Prepare Price Increases,” (WSJ, Dec 7 2014).
Apart from money costs to consumers are environmental costs from water diverted from and pollution seeping from sugar acreage into the Everglades ecosystem. According to colorful Grist article “Is sugar production still wrecking the Everglades?” (Grist, Jan 4, 2016).
As happens in so many places where agriculture butts up against nature, excess phosphorus in run-off contributes to algal blooms and otherwise mucks up the area’s ecological balance — in this case, feeding weedy plants like cattails and choking out native species like sawgrass. This kind of nutrient pollution can be traced back to several human sources, but a recent analysis by the nonprofit Everglades Foundation found that 76 percent of the phosphorus problem there comes from agriculture — and in that neck of the woods, that primarily means sugarcane.
New Study: Agriculture Industry contributes 76% of the pollution in the Everglades, pays only 24% of the clean-up costs.
The EPA is suing the state of Florida for not reducing nutrient flows into Florida waters. Nutrient runoff into Florida waters is caused in part by four hundred thousands acres of sugar plantations in south Florida producing some thirteen million tons of sugar in 2011 (Agricultural Marketing Resource Center, May 2012).
Reducing pollution from Florida sugar plantations seems costly, as does reducing sugar production. But actually it is sugar production in Florida itself that is costly for American taxpayers and consumers. Turns out much less Florida sugar would be produced without diverse Federal sugar subsidies and import restrictions.
This March 13, 2013 WSJ article, “Big Sugar is Set for a Sweet Bailout” explains the latest chapter in the decades-long interventionist dynamics of the sugar industry (may be paywalled).
Interventionist dynamics means the ongoing political and economic consequences of government intervention in the economy. Government programs to support sugar producers may be designed to be modest efforts but they soon cause sugar production to go up, which pushes sugar prices lower, which hurts producers. So government looks to further legislation to fix the overproduction problem, but that causes later problems inspiring further legislation. Over the years layer upon layer of legislation makes sugar production ever more complex and convoluted, and tends to benefit established sugar producers while costing consumers and taxpayers millions or billions of dollars.
Some history of US/Cuba sugar can be found in “U.S Sugar Subsidies and the Caribbean’s Sugar Economies,” (Council on Hemispheric Affairs, July 31, 2013):
The U.S. government heavily subsidizes its sugar sector, imposes quotas on sugar imports, and then hectors developing countries on the wisdom of cutting back on their own subsidies. These measures protect private U.S. sugar producers from foreign competition, allowing them to seek unreasonably high prices in the U.S. market. U.S. consumers are likely to lose from these policies, as they end up paying higher prices at U.S. supermarkets, and, moreover, Caribbean sugar prices also have been adversely affected by U.S. protectionism in the sugar industry.
The article continues with some history:
The United States now has an absolute trade embargo with Cuba after U.S.-owned sugar companies in Cuba were nationalized in 1961. Before the revolution, 69.1 percent of Cuban trade overall and 54.8 percent of its sugar trade was with the United States.  The revolutionary government nationalized the sugar industry, a move that was seen as against free market principles. Yet Washington violates similar principles by keeping its sugar policy narrowly in place. Such double standards that block sugar imports from struggling Caribbean markets will continue to impair and distort U.S.-Caribbean relations.
However, opposing the Cuban government’s seizure of privately-owned sugar acreage and then blocking imports of sugar from seized acreage isn’t a “double standard.”
If the Canadian government seized a Ford engine plant in Windsor, Ontario, and then tried to continue exporting engines made there to the U.S., Ford motor company would file suit for return of their plant and for damages. And the U.S. government would support Ford (or maybe send in troops).
But revolutions happen around the world, and when the bullets stop flying and dust settles, lawyers and title insurance companies begin the work of negotiating and litigating to determine compensation and the return or property to owners.
The challenge of the Cuban revolution has been tied up in Cold War politics, and Florida politics. (See: “Why has the US embargo against Cuba lasted so long?” (The Telegraph, Dec 18, 2014) Cubans who fled Castro and prospered in the U.S. know the damage caused by the revolution then, and know from friends and relatives still in Cuba, the ongoing suffering and repression. Many believe opening trade for sugar imported from Cuban government lands would provide income to the communist government, helping sustain the ongoing repression of political dissidents and everyday Cubans.
For half a century the U.S. federal government blocked economic engagement with Cuba, forbidding trade and travel. Ending these restrictions would open the door for curious Americans to visit Cuba more easily, bringing goods and ideas to and from the long-suffering people of Cuba.
Balseros (DVD available on Netflix) offers a captivating look at life in Cuba as the economy’s downward spiral continued after the fall of the Soviet Union. The USSR had long subsidized communism in Cuba. This from an online review of Balseros:
…works like Joe Morris Doss’s recently published Let the Bastards Go: From Cuba to Freedom on God’s Mercy and Carlos Bosch and José María Doménech’s new documentary Balseros (Cuban Rafters) are much grander humanist statements because they give a particularly human face to the horror of two separate Cuban refugee debacles.
Balseros begins with a shot of a woman boarding a ferry in Cuba. An officer passes a hand-held metal detector over her body. “I only have sadness in my heart,” she says, a statement that lingers in the mind way past this devastating film’s final credits. But there are those who still cling to Castro despite the fact that he has left his people with nothing but the cold metal of resentment in their hearts. Bosch and Doménech focus on the struggles of seven rafters: Guillermo Armas, Rafael Cano, Méricys González, Oscar Del Valle, Míriam Hernández, Juan Carlos, and Misclaida. All of them struggle with leaving their families behind or reuniting with family members who left before them. One woman must whore herself to afford the inner tubes and canvas that will build the raft that may or may not succumb under the unpredictable force of the waters between Cuba and Florida.
The U.S. trade and travel blockade has long prevented both gains from trade but also knowledge and ideas crossing borders.
A friend who grew up in communist Hungary tells of all the propoganda she heard as a child of poverty and disorder in capitalist countries. But when she met tourists from the west, she notice they were wearing expensive clothing.
There is no reason Cubans in Cuba should be poorer than Cubans in Miami. Just as Chinese escaping communism by boat to Hong Kong quickly prospered, Cubans rafting to Florida prospered as well.
The Cuban government has long blamed Cuba’s economic problems on the US trade embargo. By removing that excuse, the US would open trade relations that would engage more Cubans and Americans in commercial relationships.
The Cuban government apparently believed it had an agreement with the Reagan Administration to accept Cubans wishing to depart Cuba. Later U.S. Administrations continued to block Cuban immigration due to anti-immigration pressure from conservatives and unions.
The problem for Castro was that Cubans were fed up with shortages and were willing hijack ships to escape. One group hijacked a ferry and headed to Florida, but ran out of fuel.
Castro announced in 1994 that anyone wanting to, could depart Cuba. Quickly thousands began building rafts from whatever materials they could find to try to cross the “Sea of Death.” U.S. policy though was to prevent relatives in the U.S. from assisting, and to intern Cubans wishing social and economic freedom in the U.S..
U.S. policy still restricts Cubans wanting to come to the U.S., even when relatives are willing to support them as they look for work.
Students and teachers have visited Cuba for many years, as educational travel has been allowed by the U.S. government. Categories of legal travel to Cuba have been expanded.
“U.S. High Schoolers Discover Cuba on Educational Trips,” (US News, March 21, 2016) notes travel restrictions were further relaxed last year:
President Barack Obama is visiting Cuba this week, making him the first sitting president to visit the country in nearly 90 years. And last week his administration announced changes to travel restrictions that will make it easier for Americans to visit the country for educational purposes. …
And Marienfeld thinks her students were impressed with the Cuban students’ outlook on the future. Many dreamed of one day visiting the U.S., she says.
“One of the kids said, ‘You know, I was very impressed with how little they had, and how happy they were,'” she says. She thought that was a pretty good observation because they do have – and exist – on so very little, but culturally they are so rich, she says.
In an episode of Comedians in Cars Getting Coffee, Jerry Seinfeld’s guest praises the amazing classic cars of Cuba. Seinfeld responds asking: “do you think that’s what they want?”
People in Cuba make the best of what they have. But their economy is too small to support automobile manufacturing. The U.S. embargo has blocked exports from the U.S. for over fifty years. So Cubans restore and maintain the Fords and Chevys already in Cuba before the 1959 revolution. For classic car enthusiasts, Cuba is wonderful. But for Cubans these cars are expensive to maintain, and their incomes are low. But why are Cubans in Cuba still so poor over a half century after the Batista regime? (Cubans who escaped to Miami have prospered.)
For decades the Cuban government has claimed the U.S. trade embargo is the cause of Cuba’s poverty. Economists agree the embargo blocked trade that would have allowed both Cubans and Americans to prosper.
But economists also argue that Cuba’s socialist economy system is a major source for the poverty of everyday Cubans. Still, the debate over Cuba’s lack of economic progress continues online, and students asking Google “Why are people so poor in Cuba?” will find a variety of links with opposing views.
For American tourists Cuba may seem a low-cost Disney-like “Fifties World” vacation. But for most who live and work in Cuba and can’t leave, living “on so very little” is not what they wish for if they could choose their government or do depart for the U.S.
This Miami Herald 20-year retrospective video on the 2004 Cuban Rafters story gives a glimpse of life in Cuba then and why so many were willing to take flimsy rafts for the U.S.
“Should the United States Maintain Its Embargo against Cuba?” on ProCon.org lists about a dozen arguments both for and against ending the embargo.
HBO offers a 2016 documentary, “Patria O Muerte: Cuba, Fatherland or Death”
A raw, unvarnished look at contemporary Cuba through the lens of its people, who are at once fiercely loyal to their country while being extremely dissatisfied after decades of neglect.
A sponsored Quartz post from the Lee Kuan Yew School of Public Policy: “Asia will soon be the world’s economic center—if it isn’t already” looks at the rise of nationalism:
In the wake of Brexit, ascendant European nationalism, and the US elections, much has been written about populism’s threat to global trade growth and the international economic institutions established after the Second World War. There are a number of explanations for the turn inward. Many have blamed growing economic inequality within developed economies—some blame outsourcing or technological transition.
The post then notes falling income inequality may be a challenge for the U.S. and Europe:
Others posit that a decline in inequality may be a motivating factor. Danny Quah, Professor of Economics at Singapore’s Lee Kuan Yew School of Public Policy, and Kishore Mahbubani, the school’s Dean, blame populism’s rise on improved income equality across all nations. During the 1990s, a 70% income gap stood between emerging economies and the G7. That gap shrunk to under 14% in 2016 and will disappear by 2020.
For those born in the 1940s, experiences in the U.S. labor force in the 1960s and 1970s framed their worldview. The United States was the world’s powerhouse economy after World War II, especially as the world’s number 2 and 3 economies Germany and Japan had been bombed flat, as had France, England, and Italy. In 1950 the U.S. produced 80% of all automobiles in the world, by 1960s US auto manufacturing was about half world production, and by 2000 the US produced 4 million more cars a year than in 1980, but that was one-fifth of world production. By 2015 twice as many cars were manufactured in China than in the U.S. and some 90 million were produced worldwide (according to Wikipedia page).
If you look at 1950 in the Infogr.am chart at right from you can see how dominate the US (green line) economy was from the 1950s to 1980s.
It should be no surprise that everyday Americans along with politicians and military leaders growing up and living through those decades believed the U.S. to be the world’s major economy and society. Though the US economy continued to expand, faster economic growth in China led many to believe something had gone wrong with the U.S> economy, and many blamed “unfair” trade deals.
The chart seems to show the US economy declining after the 1950s, but that is an illusion. Instead, the US economy has expanded since the 1950s and 60s, with occasional recessions and slowdowns. From the 1960s on, Germany, Italy, and Japan grew rapidly, then later Taiwan, Hong Kong, South Korea, and the UK expanded (and Italy slowed down). The economies of China since 1980s reforms and India since 1990s reforms took off as well. International investment and trade were major drivers of rapid economic expansion.
In a presentation some years ago Michael Cox of Southern Methodist University asked teachers to imagine five people dropped in a jungle, and just one had a machete. The machete, a tool analogous to industrial revolution in the U.K. and U.S.–enables the lucky owner to cut a path through the jungle. But when the others pick up that trail, they can run faster and catch up. The complex technologies and factories developed in the UK, Western Europe, and the U.S. can and were duplicated for production in Mexico, South Korea, and China.
The blue line of China in the chart above soars from hundreds of millions of Chinese working long hours in “duplicate” Chinese factories, but also from new firms and factories developed by Asian entrepreneurs with new technologies and innovations (which then benefit consumers in China and around the world).
The Quartz article continues:
Whether US or Asian, industries that succeed will be those that don’t pit humans against machines but use the latter’s speed and precision to let humans perform better. Asia has learned that lesson—it’s the global hub for advanced manufacturing and sophisticated logistics.
What’s more, China is now the world’s largest consumer market for smartphones and other gadgets. And regardless of East or West, shrewd businesses will always look to capitalize on the opportunities available to them. Asia holds many.
The diffusion of manufacturing and agriculture technology have helped raise hundreds of millions out of extreme poverty over the last few decades. The people of Peru in South America have more recently found the trail and are advancing rapidly, exporting goods to the U.S., China and other Asian consumers. “Peru Leads Region in Putting New Faith in Global Trade” (Wall Street Journal, February 8, 2017), notes:
In Peru, which has emerged as South America’s strongest free trade proponent, thousands of workers are planting asparagus, mangos and peppers for export as part of a diversification effort to lessen reliance on mining. China is a key consumer. …
Increased trade and foreign investments have been central to Peru’s economic growth, allowing 9 million Peruvians, about a third of the population, to escape poverty since 2004. In recent years, Peru implemented free trade accords with the U.S., China and the EU. …
“Our big bet is on Asia,” said Luis Torres, the head of exports at government agency, PromPeru. “Blueberries are going to be the next star export, along with asparagus, avocados, citrus fruits and grapes.”
Juan José Gal’Lino, the executive director of Delaware-based Agro Vision Corp., said his workers at Olmos will ship the larger blueberries to China, where he says consumers pay a 30% premium for the bigger fruit. Smaller berries will continue to be exported to North America, where consumers don’t care so much about the size.
Peru is following the successful path opened by Chile since the 1990s. Chile was among the poorest country in South America after trying protectionist and socialist policies. A few decades after reducing trade barriers and welcoming foreign investment , Chile is South America’s wealthiest country, continues to expand agricultural exports (“Chile aims to double agricultural exports in a decade,” AgPro, November 5, 2015):
Chile, the world’s top exporter of fresh grapes and blueberries, posted record exports of food, including fruit, livestock, wine and salmon, of just over $16 billion last year. That was about three times what it shipped abroad 10 years ago.
According to Fred Landis (Investigative Reporter) on Quora: Chile has fallen from “one of the most egalitarian countries in Latin America to one of the most unequal.” He argues that President John F. Kennedy promoted egalitarian reforms which Chile’s socialist government expanded, but that President Nixon the villain, directing the CIA to help overthrow the Chilean government. But economic policies matter apart from political turmoil, Though income inequality is likely far higher in Chile now than it was in 1960, average income is far higher too. For everyday people in Chile, average income per person in 1960 was just $550 per year. Yet by 2013 people in Chile enjoyed average income of $16,000 per year, according the the World Bank. Inequality can be far higher in a market economy, but even the very poor in Chile have higher incomes than people did on average in 1960.
The story so far: reducing trade barriers and welcoming foreign investment helped Chile’s economy grow rapidly, raising average per-person income from $550 a year in 1960 to $2,400 in 1990, to near $13,000 a year in 2010. Earlier posts discussed similar rapid economic growth in China after the economy was opened to private enterprise, international trade and investment
Average income per person in China rose from $70/year in 1960 to $330/year in 1990, to $940 in 2000, to $4,340 in 2010, and to $7,930 by 2015. Income inequality in China increased a some grew wealthy far faster than average. But income inequality between Chinese and U.S. workers decreased, as productivity in China’s textile mills and factories rose thanks to access to modern technologies.
In Chile, Peru, and China before market reforms, incomes of everyday people were more equal but also far, far lower.
In the news: ” U.S. Ends Ban on China Trade; Items Are Listed“:
The President’s action lifts a 21-year-old embargo against trade with China permitting selected exports to China and the import of goods from China on the same basis goods from other Communist countries are admitted.
Why did the U.S. government relax trade restrictions with China, the USSR, and communist countries in Eastern Europe in the 1970s, but not with communist Cuba?
In an April 19, 1971 press conference, President Nixon said:
“If the want to trade … we are ready,” he said. “If they want to have Chinese come to the United States, we are ready. We are also ready for Americans to go there, Americans in all walks of life.
Chinese could visit America and Americans could visit China. Why weren’t similar doors opened for travel between Cuba and the U.S.?
By the time of the Cuban revolution United States had a long history of “engagement” with Cuba. The U.S. military occupied Cuba from 1989 to 1902 and again from 1906 to 1909 and again from 1917 to 1922. U.S. firms controlled much of Cuban sugar and other industries.
Cuba’s political and economic history is complicated, and U.S. interventions in Cuba, as in many other countries, led to unexpected and unwanted consequences.
But Cuba’s independence was stunted by the heavy-handed United States, which doubted that the republic (over half of whose population was black or mulatto) could govern itself. The United States aided Cuba’s fight but then re-occupied the island in 1906 at the request of the feckless Cuban president, Tomás Estrada Palma. A bitterly disappointed Emilio [Bacardi] left government and returned to Santiago, where he penned a 10-volume history of the city and tended his business affairs for the remainder of his life.
Some years ago a war veteran mentioned returning to Ft. Lewis, a Washington state military base, from Korea and being recruited by federal agents for a new assignment in Cuba. I asked: “So we were trying to get rid of Castro even then?” No, he said, he would be helping put Casto into power to reform the corrupt Batista government.
That didn’t turn out well.
This New York Times review (April 23, 2006) of The Man Who Invented Fidel explains how Fidel Castro’s reputation as a democratic reformer was shaped by NYT reporter Herbert Matthews who interviewed Castro in the mountains:
The front-page scoop that followed and two additional articles predicted “a new deal for Cuba” if Castro’s insurgency won and reported that the romantic revolutionary was no Communist; in fact, the local Communists opposed him. The exclusive was a sensation at the time and transformed Castro’s image from a hotheaded Don Quixote into the youthful face of the future of Cuba. Unfortunately for Matthews and The Times, it didn’t age well….
DePalma shows that Matthews was a determined liberal but not a faker like Walter Duranty, the Times correspondent who won a 1932 Pulitzer Prize for his fawning coverage of Stalin and was probably in league with the Soviet secret police. Matthews’s articles were for the most part factually accurate. But he comes across as a self-righteous and credulous analyst who sided with those who gave him access and then refused to reassess, whatever the changing facts. While other reporters who also misread Castro toughened their coverage after he began ordering summary executions, Matthews stuck stubbornly to his original myth.
Okay, maybe that’s seems too much background to the long-standing trade and travel embargo with Cuba. But Castro’s communist revolution including seizing land, buildings, and factories owned by U.S. citizens and companies.
Exports from Cuba after the 1959 revolution would have been seized and tied up in litigation since they camp from farm lands or factories that U.S. Courts would support as seized illegally.
“In Talks Over Seized U.S. Property, Havana Counters With Own Claim” (New York Times, Dec 13, 2015) reports:
Some of the thorniest conversations in the long road toward full relations between Cuba and the United States have only just begun in recent days: The two sides are sitting down for the first time to discuss the American properties Cuba confiscated decades ago.
The very idea of compensation for property and businesses seized in the wake of the Cuban revolution sent a quiver of excitement down the backs of the thousands of people who lost everything from sugar mills to family homes to oil refineries.
People started dusting off yellowing deeds. Lawyers were called.
Similar property confiscation problems followed the fall of communist governments in Poland, Hungary, Romania, and other Eastern and Central European countries.
The Cuban government has claimed it is due compensation for income lost due to the long-standing trade embargo, plus from damage caused by the Bay of Pigs invasion. Hungary could on similar grounds request compensation from Russia for the USSR’s invasion and 1956 suppression of the Hungarian Uprising (Freedom’s Fury is documentary on uprising and bloody Olympics match between Hungary and USSR).
Opening trade relations with Cuba has another connection with similar challenges opening trade with China:
In 1979, China agreed to pay $80 million to a China Claims Fund, which allowed American claimants 39 percent of the value of their lost properties, according to the Brookings study. Vietnam, to normalize relations with the United States, agreed in 1995 to apply its assets frozen by the United States government to pay claimants 100 percent of the principal and 80 percent of the interest they were owed.
So, in summary, property claims from the Cuban revolution can be dealt with as they have in other similar upheavals. Time magazine’s Oct. 19, 2015 article “The U.S. Trade Embargo on Cuba Just Hit 55 Years,” begins:
It’s been exactly 55 years since President Dwight D. Eisenhower’s State Department imposed the first trade embargo on Cuba on Oct. 19, 1960. The original embargo covered all U.S. exports to Cuba except for medicine and some foods. President John F. Kennedy expanded the embargo to cover U.S. imports from Cuba and made it permanent on Feb. 7, 1962.
Although relations between the two countries warmed this year, the embargo is still in place and an act of Congress is required to remove it.
The origins of the embargo go back even further, to when Fidel Castro came to power Jan. 1, 1959. He quickly lost American support as he publicized private land and companies, and imposed heavy taxes on imports from the U.S. In the first year of Castro’s regime, U.S. trade with Cuba decreased 20%.
(When Time reporter writes “publicized private land and companies” he doesn’t mean advertise or promote.)
So ending the embargo with Cuba requires a procedure to address past seizure of U.S.-owned assets.
Also, according to “Tillerson would recommend veto of bill ending Cuba embargo,” Washington Examiner, Jan 11, 2017)
Secretary of State nominee Rex Tillerson said Wednesday that he wouldn’t support legislation to end the U.S. embargo against Cuba, a major goal of the Obama administration that now seems likely to go unfulfilled for the next several years.
The Obama administration did all it could to ease trade and travel restrictions against Cuba, but the embargo against the island nation is federal law, and can only be undone through an act of Congress. But Tillerson indicated he wouldn’t support any such move on his watch.
U.S. federal government policies with the People’s Republic of China (PRC) involve trade and investment plus travel for tourism, education, and employment, plus migration. People and firms in the U.S. make agreements (contracts) with people and firms in China to import or export goods and services, and to invest in companies that produce goods and services. Governments make rules and regulations limiting these investment and trade agreements between Chinese and U.S. people and firms.
Trade agreements generally restrict as well as promote trade and investment in various ways, and are influenced by lobbyists trying to protect the interests and advance the agendas of various business, union, and environmental groups.
Current and proposed trade and investment agreements tend to be complex and confusing and the interests of both China and the U.S. could be advanced by simplifying or abolishing some.
Trade agreements like the Trans-Pacific Partnership (TPP) are shaped by interest groups advocating various social, labor, and environmental agendas. The TPP excludes China as a way to promote these social, labor, and environmental policies in China.
NSDA debaters have U.S./China policy reform as their 2016-2017 resolutions:
Resolved: The United States federal government should substantially increase its economic and/or diplomatic engagement with the People’s Republic of China. (NSDA website link)
NCFCA debaters has a similar topic for the 2016-2017 school year:
Resolved: The United States Federal Government should substantially reform its policies toward the People’s Republic of China.
And posts here started a year ago for the similar Stoa Asia Trade resolution:
Resolved: The United States federal government should substantially reform its trade policy with one or more of the following nations: China, Japan, South Korea, Taiwan.
Early posts on the Asia Trade topic emphasized that these listed economies, along with the U.S., have become tightly integrated over the last two decades. For example Foxconn, a Taiwanese firm that assembles Apple and other gadgets, is China’s largest private employer. South Korean and Japanese firms have vast investments and manufacturing operations in China. General Motors sells more cars in China than in the U.S. And in March, McDonald’s announced:
… that in the next five years it plans to add about 1,500 restaurants in China, Hong Kong, and South Korea—up from its current count of 2,800—including more than 1,000 in China alone.
For an overview of major U.S./China policy debates, I recommend three articles (and recommend earlier posts).
On the the economic benefits of trade: Douglas Irwin, “The Truth About Trade
What Critics Get Wrong About the Global Economy” in the July/August, 2016 issue of Foreign Affairs. Valuable analysis and recent history that answers most concerns and claims in the next two articles that are critical of today’s mostly open trade policy with China and other Asian countries.
This November, 2015 post in The Conversation argues: “The Trans-Pacific Partnership poses a grave threat to sustainable development.” The key here is that critics of the TPP trade agreement want it to include “enforcement mechanisms” to advance U.S. policy preferences for gender, labor, environmental, and climate issues.
The labor-backed Employment Policies Institute says trade with China has caused extensive job losses and wage stagnation in the U.S.: “Hearing on U.S.–China Economic Challenges: The impact of U.S.–China trade” (February 21, 2014).
These three articles should give debaters a sense of the claims and clashes with U.S./China policy reform proposals.
(Revised September 4, 2016)
Additional notes and links to recent posts:
Pdf with more recent China posts: ET Report-JanuaryChina2017
• China and Cuba Trade, Labor, and Migration
What issues should be on the table when negotiators from two governments hammer out what trade rules are relevant and reasonable? … A couple things connect the China policy topic and the Cuba Public Forum topic. First, the refugee policy that allowed those smuggled from China to be legal citizens of (then British) Hong Kong as soon as they touched land. … U.S. policy was similar and allowed those escaping communist Cuba, once they made it to U.S. territorial waters, to stay legally…revise in 1995 to a “wet foot/dry foot” policy. Then Obama Admin. shifted policy again, as part of normalizing relations with Cuba
• US/China Engaging in Nationalist Policies
Apart for the money governments spend directing research and development to area they deem strategic (ballpoint pens?), such subsidies and policies stoke nationalist responses in Japan, the U.S. and Europe…
• Bootleggers and Baptists Agree to Restrict Trade with China
When the President and Congress consider trade legislation, a wide range of interest groups gather to advance their agendas. These agendas are not always obvious, and sometimes corporate and union interests misdirect the public about their motivations.
• For Still-Poor China, Coal Pollution from Home Heating
The Chinese government energy policy goals are to reduce air pollution around Chinese cities, and to reduce CO2 emissions in order to address climate change. These goals overlap, but are not the same. Wind farms and solar installations don’t emit air pollution, but neither does less-expensive natural gas combined-cycle power, which can be located closer to cities and customers. New coal power plants emit less air pollution, especially compared to the dense pollution from antiquated coal-fired power and home coal burning.
• US/China Farm Wars
In “United States Challenges Excessive Chinese Support for Rice, Wheat, and Corn” (September, 2016), the Office of US Trade Representative announced new action against China. … The U.S. government also subsidizes US farmers growing and exporting rice, wheat, and corn. Comparing government between countries is complex. … reducing and reforming farm subsidies would help rationalize commodity farm production in US and China, reduce environmental harms, and reduce financial burdens to taxpayers in both countries.
There is no more important bilateral relationship than that between the United States and China. Yet the Congressional Research Service warns that ties have “become increasingly complex and often fraught with tension.” Relations appear likely to become even more fractious with the election of Donald Trump as president. Every four years the People’s Republic of China (PRC) becomes a presidential election issue, but Americans deserve [more on] U.S.-China political and economic relations than candidates’ sound-bytes.
• China’s Sustainable Agriculture: “the biggest threat to humanity?”
“How Antibiotic-Tainted Seafood From China Ends Up on Your Table,” (Bloomberg Businessweek, December 15, 2016), describes the traditional “sustainable” Chinese use of animal waste to feed fish. Since the beginning of agriculture, animal waste has fertilized crops (it’s the organic way!). But the addition of antibiotics to boost animal size and disease resistance shifts the microbe ecosystem in animal waste. Some microbes gain resistance to antibiotics, and are then flushed into Chinese fish ponds, adding antibiotic resistance to microbes in fish later shipped (or transshipped) to the U.S.. (read more)