Bush economic report says subsidies harm future U.S. ag trade
President Bush’s Council of Economic Advisors said in a comprehensive report this week that continued farm subsidies will ultimately harm U.S. agriculture’s position in the global market.
The 2006 “Economic Report of the President” noted that total government payments to farmers were about $20 billion in 2005 and are expected to increase to about $21 billion this year. These payments cause “market distortions” by encouraging farmers to overproduce, the report said.
“Trade barriers, export subsidies, and domestic support programs distort the price signals that farmers receive and limit the potential economic gains that consumers and producers can obtain from trade,” the report said.
Subsidies reduce U.S. agricultural commodity prices by about 12 percent below levels that should be expected in a free market. The removal of subsidies by all countries would increase the volume of U.S. agricultural exports by 12 percent, the report said.
In specific, the report highlighted the impact of the U.S. tariff rate quota system for sugar imports on the price paid for this commodity by domestic consumers. The U.S. sugar price is about twice the average price in overseas markets.
U.S. agricultural commodity producers of wheat, rice, oilseeds, cotton and tobacco have traditionally received the bulk of farm subsidies. However, these commodities are faced with increased competition from overseas producers and shrinking import requests from developing countries.
Since the 1990s, the U.S. exports of high-value agriculture products, such as meats, poultry, live animals, meals, oils, fruits, vegetables, and beverages, have shown, “steady growth” with little to no subsidies, the report said.
For the complete report, access online: http://a257.g.akamaitech.net/7/257/2422/13feb20061330/www.gpoaccess.gov/eop/2006/2006_erp.pdf .