Free Trade - The Scapegoat for bad government policy - Part 2 by Centinel

Free Trade - The Scapegoat for bad government policy - Part 2

by Centinel

Free trade part 1 blog was about general trade. A friend reminded me that we need to localize farming. That growing a head of lettuce (for example) and shipping it 3000 miles is “not sustainable”. For those that advance localization (I am one) this sounds good on the surface. Let's look closer. Look back to the day (50 years or more) where most produce was local. There was not many choices. NAFTA was one agreement that made growing produce in Mexico viable. Starting a farm in Mexico, raising lettuce and shipping it to the USA at a market price benefits us all. But the same should apply to local farmers. If I grow asparagus, find a Mexican market to sell, and they are willing to buy my product.  I should be able to sell there. This is free trade. We know this is not the case. The problem with NAFTA is that it was more about “leveling the playing field” than free trade. It stole the name free trade to sell itself to the American public, and in the process gave free trade a bad name. It was government intervention and nation building at the expense of American industry.

But it wasn’t all bad.
We are hearing talk of tariffs and protectionism because this is an election year.
Let’s look at the other side.

Americas population doubled since 1960. Yep. In my lifetime.
Some studies say since 1968 but we will be safe and use government numbers which say 1960.
This caused numerous changes in our country. What has caused the population boom?
Illegal immigration is partly to blame. Illegals make up approx. 12.2 million which causes a strain on our system. The biggest reason for the population explosion (US and Worldwide) is due to lifespan extension. Continuing the present growth rate of 1.1% per year, the U.S. Population will grow to half a billion people within the next 60 years. (approx 350 million now).

Let’s look at the strain this causes on our food system.
It is estimated that approximately one acre of land is lost due to urbanization and highway construction alone for every person added to the U.S. Population. This means that 0.6 acres of farmland will be available to grow food for each American in 2050. As opposed to 1.8 acres per capita available today. At least 1.2 acres per person is required to maintain current American dietary standards. Projections are food prices will increase 3 to 5-fold by 2050. Future millionaires may be farmers.

In the past crop yield per acre was low. Farming methods through the decades have changed yield. Farmers used to rotate fields by planting 3 years and and letting them set a year. This old method of farming was used in some parts of the US until the 60’s. Newer technology allowed them to farm every year - allowing greater yields. Currently, newer methods are available to allow more yield per acre. This is the future of localized farming. It isn’t the answer 100%, but will be important in the future. With micro-farming, people are making 100 to 150 thousand dollars per year on an acre of land. This cannot feed everyone though. We will still need corporate farming.

We need to give this careful thought - many of the poorest populations rely on subsistence farming - while being rich in other resources, minerals etc, the problem is management. We will get to that in a few.

From approx. 1940 to 1990, the world’s farmers doubled their output to accommodate a doubling of the world population. And they did it on a shrinking base of cropland. Agricultural productivity can continue to grow, but not by turning back the clock. Local foods may have a place in the market. But they should stand on their own. Land and water will be a premium by 2050 and the U.S. will no longer be a food exporter by 2025 - because of domestic needs.

Lettuce grown 3000 miles away not sustainable - why not?

In 2008, according to the USDA, Idaho averaged 383 hundredweight of potatoes per acre. Alabama, in contrast, averaged 170 hundredweight per acre. Why did Idaho out produce Alabama in potatoes?
This is simple to answer.
Different parts of the country are better suited to grow different products. Some areas are better suited at growing produce, others at industry. This applies globally also. Different parts of the world are better in some things than we are. Specialization is the key to understanding free trade.

Cranberries from Wisconsin?
If you want cranberries in Arizona you will get them shipped from Wisconsin 2000 miles away. It isn’t practical to grow cranberries in Arizona. Not saying you can’t grow cranberries in Arizona - it isn’t practical. A similar example would be something grown in Arizona won’t grow in Wisconsin because of environmental factors.

So yes, growing lettuce 3000 miles away is sustainable.
It has to be  in order for us to have an economy and to eat.

Tariffs raise prices to make a product appealing for a local producer to grow.
Let’s take the lettuce from Mexico example. If someone in Mexico grows lettuce, ships it to New York and it sells for $1 a head, a local farmer cannot compete with that price. So the local farmer grows something that he can compete with. Many NENC farmers grow soybeans and corn.
Let’s say a politician comes along and puts a .45 cent tariff on the Mexican lettuce, then the local farmer in NENC can grow the lettuce and sell it for $1.45 and make money. Great for the local farmer. Not so great for the poor consumer who has to pay $1.45 for a head of lettuce that was $1 before the politicians intervention. So the poor consumer is paying a subsidy to the local farmer to grow lettuce via government fiat. All done to artificially raise market prices. If you want to see subsidies at work, check out ethanol subsidies. Taking land available to grow food and turning it into alcohol to burn in our cars. Not smart, and would not exist without government and lobbying.

Trade agreements are the reason we have this problem. Businesses are leaving because of restrictions on local businesses to level playing field so overseas producers can compete. In this example, there’s a reason the local farmer cannot grow and sell a head of lettuce for a dollar. Regulations on US farmers are regulations overseas farmers do not have. Which translates to the overseas farmers advantage. One problem with this is standards. Research the listeria outbreaks due to unsanitary conditions in Mexico. Obviously, government creates these conditions by not completing the circle. One thing government is charged with is to keep us safe. Chasing food production overseas and then not holding the food to our same standards is not helping us. Same as sending chicken to China to be processed. We should at least be able to tell where our food comes from. This will allow the consumer to keep pressure on the markets. If the consumer chooses to.

This is a simplistic explanation, but tariffs are a simplistic solution to a complicated problem. The government has negotiated trade agreements and inserted itself into the free markets. Not for free trade, but for engineering a global economy and building nations through trade. Government is the culprit here. Much of this is done to line politicians pockets via lobbyists. Imposing regulations on domestic farmers making them noncompetitive in the market, then raising prices via tariffs so the local farmer can compete.

Make sense? Not to me.

Don’t forget government logic. Examples such as government subsidizing farmers to grow tobacco, at the same time spending millions to get people to stop smoking.

Such is government.

One side note. In Northeastern North Carolina we have leadership hell-bent on bringing manufacturing into our area. Aircraft and Auto manufacturing are two examples. Our leaders want this area to be a small urban area. We have some of the best farmlands in the world here. As we have pointed out how valuable land and farming will be in the future, and how suited this area is to farming, we have short sighted politicians trying to displace what we have - farmland. Our schools are tailored more and more to graduating hi tech students and then they leave to another part of the country to get work. Meanwhile, if you want an agricultural degree, you have get one out of the area. In some parts of the world starving populations are sitting on top of coal, oil, or mineral deposits. Their government policies are too narrow to realize that if they exploited their mineral wealth the people would flourish. Leadership here is no better than the third world countries with starving populations sitting on under-utilized mineral wealth. Our wealth in this area is our farmland - let’s don’t ruin it. We are seeing solar farms and windmills displacing farmland for electricity to go to another state.

How smart is that?

Again, future millionaires may be farmers if forecasts are right. Maybe we should be looking in that direction instead of trying to be another Research Triangle or Hampton Roads.

When I was a kid I remember limited produce in the supermarket (the 1960’s). Cucumbers, tomatoes, apples and oranges, (you get it). Look at the modern supermarket. Mangos, pineapples, coconuts and some things you have never heard of. Many could not be grown here. All because of free trade. Long ago, almonds came from some exotic land. Due to free markets, someone saw an opportunity and started growing in California. The Almond market has grown because of someone saw an opportunity to grow and market almonds in the USA.

Just one example of many.

Before we jump on to the tariff bandwagon, let’s think about free markets and why controls never work.

Controls lead to more controls.

http://www.dieoff.com/page40.htm

http://freakonomics.com/2011/11/14/the-inefficiency-of-local-food/