When Trade and Aid Collide, Taxpayers Lose

If we had more free trade and less protectionism, farmers wouldn’t need this “emergency-aid.”

On July 25th, President Trump’s trade war took another toxic turn as he announced a $12 billion bailout for farmers affected by retaliatory tariffs from our trading partners on things like soybeans, beef, and pork. Ironically, the countries like Mexico and China who imposed these tariffs were merely responding to the trade penalties inflicted upon them by the United States.

Let’s review the Trump administration’s record on trade: They enacted tariffs, tariffs were levied against us in response, and then Trump bailed out the industries affected by his own misguided policies. How could that possibly be a good use of taxpayer money?

Passed every five years, the farm bill determines all agriculture subsidies, crop insurance, conservation, and food stamp programs.

These trade mishaps come at a time when the House and Senate are working out the details of the farm bill in conference after both chambers passed their own versions. Passed every five years, the farm bill determines all agriculture subsidies, crop insurance, conservation, and food stamp programs. The Senate version makes modest reforms to the subsidy programs, yet continues the status quo in others, while the House bill expands subsidies to farmers and does nothing curb the massive amount of money already given to rich farmers for simply doing their job.

Though the Senate bill only allows one person per farm to receive subsidies and does cap the amount awarded at $125,000, it fails to even address the broken crop insurance program that makes subsidies necessary in the first place. Taxpayers cover nearly three-quarters of the crop insurance program, while the farmers more than double their return for every dollar they invest in insurance premiums. In total, the farm bill will cost hundreds of billions of dollars over the next decade, only continuing the broken policies of past administrations.

The new $12 billion bailout for victims of Trump’s tariffs will be in addition to the farm bill, assuming the House and Senate are able to iron out their differences. The biggest aspect of the bailout is the “Market Facilitation Program,” which will send checks to producers of specific crops like corn, dairy, pork, among others.

If the Trump administration wasn’t blocking free trade, they wouldn’t need to buy back food that could be used to feed people all around the world.

But don’t let fancy pro-market language fool you: the government is stopping trade from happening and then forcing taxpayers to cover the losses from the problem they created. Additionally, some of the aid would be used to simply buy back food and distribute to food banks and various nutrition programs. That would include fruits, nuts, rice, beef, and other commodities. Yet if the Trump administration wasn’t blocking free trade, they wouldn’t need to buy back food that could be used to feed people all around the world. Bailout money will also be used to explore new trade opportunities, focusing on new export markets. But yet again, the federal government is only volunteering to clean up the very mess they made.

This “emergency tariff-aid package” is flawed in many ways, including its name. This bailout is not emergency, but an unfortunate outcome of a trade war gone wrong, resulting in taxpayers covering the costs of lost profits. There are farmers who are desperately in need of assistance, but increasing government dependency and sparking a trade war does not help anyone. Sure, many farmers may receive short-term relief from profits losses through this bailout, but allowing them to sell their produce in international markets is a much better solution than just giving their problems a payoff.

Tariffs could have negative effects on everything from businesses that sell farming equipment and tools to those that ship and distribute produce all over the world, and everything in between.

It isn’t just farmers who are affected by the tariffs. National Public Radio (NPR) highlighted a cold storage meat warehousing business that has seen declines in their toplines from the retaliatory tariffs, and countless other business will be impacted. Tariffs could have negative effects on everything from businesses that sell farming equipment and tools to those that ship and distribute produce all over the world, and everything in between. Though the impacts have only affected certain industries like pork, which has seen almost no exports to China since the tariffs were implemented, the problem could spread if more countries retaliate or the ones that have further those policies.

The farm bill that will likely pass this year is going to give wealthy farmers unnecessary aid. The top one percent of recipients received more than a quarter of all commodity subsidies from 1995 to 2016, while the bottom 80 percent received only nine percent of the commodity subsidies. When the government is involved in agricultural aid, it usually goes to the wealthy farmers who don’t need it.

President Trump has agreed with European Commission President Jean-Claude Juncker to work toward “zero tariffs, zero non-tariff barriers and zero subsidies on non-auto industrial goods”, a step toward a more free-trade approach. There are farmers who could use help, especially if their business has been negatively affected by the tariffs, but addressing the trade predicament has a much greater impact on their livelihood than a $12 billion “sorry for messing-up” bailout. If we had more free trade and less protectionism, farmers wouldn’t need this “emergency-aid.”

Further Reading

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