Re: Balance of payments...

On Oct 19, 5:23 pm, Islander <nos...@xxxxxxxxxxx> wrote:
In the sometimes bizarre world of right wing finance, we are seeing
increasing desperation in the search for good news. Last week, for
example, the Commerce Department reported a drop in the trade deficit
reported in the Investor's Business Daily as follows:

"Rousing gains for U.S. exports helped narrow the August trade deficit
by 2.4% to $57.6 billion from $59 billion in July, the Commerce
Department said Thursday. Wall Street expected little change.

"U.S. exports grew 0.4% to $138.34 billion, while imports fell 0.4% to
$195.92 billion."

While they noted that this might be partly due to the shaky greenback,
they continued:

"Still, the deficit's decline means that trade is adding to overall U.S.
growth, offsetting a slowing domestic economy."

Meanwhile, we note that the Department of Agriculture reports record
levels of foreign sales of farm products. A good thing, right?

Let's take cotton, for example. The following was reported in the Wall
Street Journal.

"In 2005 cotton subsidies totaled $3.3 billion, up from $30 million in
1995, according to the Environmental Working Group, which tracks U.S.
subsidies. This industrial policy primarily benefits large corporate
farms and their wealthy owners. Of the $19.1 billion that EWG says was
paid out over that decade, the top 10% of cotton-subsidy recipients got
more than 80%, or almost $15.5 billion. The bottom 80% of recipients had
to make do with $1.4 billion. This is a brazen wealth transfer to fat
cats from the tax-paying middle class.

"Because the subsidies eliminate risk and reward production, they also
create a glut on world markets. The main culprit is the loan rate.
Growers borrow from the government at 52 cents per pound of cotton and
pay back their loans at the lower world price. So they produce without
regard to market conditions. As production increases, prices are further
depressed, but no sweat for the grower. He's capturing the spread on his
loan plus his counter-cyclical payments. No wonder the U.S. exports 70%
to 80% of the cotton it grows, and world prices always run well below
the government's high "target" price of 72 cents."

So, what is going on here? The Republican advocates of free market
economy are subsidizing the large cotton growers who then export 41% of
their production at prices that depress the world market. If you go to
the whole report by the Environmental Working Group, one can begin to
learn what the WSJ left out. The result of this subsidy and
corresponding export of cotton (in addition to looking good on the trade
balance bottom line) are:

"In 2003, the top 46 recipients of cotton subsidies, mostly farm
corporations, each received over a millions dollars, while 80 percent of
cotton producers received less than $3,000...more than 60 percent of
farmers collect no subsidies at all.

"This skewed payment distribution is harming our rural communities.
Generous payments to large farms, argue some, contribute to a hike in
land prices and facilitate buy-outs of small farms...Small farmers can't
expand or remain competitive and young farmers can't get into the
business. All of this is pushing family farmers off the land."

But, the damage is not just to small US farmers:

"The corresponding dip in world prices has a significant impact on
cotton-dependent developing countries.

"According to U.N. figures, in 2002 the average cost for a U.S. farmer
to produce a pound of cotton was 86 cents. However, their cotton was
exported at 37 cents-43 percent the cost of production. The 57 percent
difference was paid by U.S. taxpayers and the impact was felt by cotton
farmers unable to compete with artificially deflated prices. Oxfam
estimates that cotton was produced at a net loss to the United States
that year, with the amount of subsidies-$3.9 billion-exceeding the value
of cotton produced by around 20 percent. Despite the fact that the
United States is a high-cost producer on the global stage, low-cost
producers such as Brazil and West Africa are unable to compete with the
high level of subsidies that push prices to record lows.

"Subsidies in relatively wealthy countries," writes John Baffes, a
senior agricultural economist at the World Bank, "depress global prices
and cut into the livelihoods of millions."

Care to guess where most cotton is grown? Texas grows nearly 30% of all
US production. Nearly half of US production is in the Southeastern US.
86% is grown in red states.

The next time that you hear Republicans complain about farm subsidies,
remind them of the hypocrisy of the Bush administration: Their free
market ideology seems to only be imposed on the little guy. Large
corporations and the wealthy get federal help to screw everyone else in
the world!

Oh yes, one more thing. That reduction in the trade deficit? A
reduction of all of $1.4B. Could that have something to do with cotton
subsidies of $3.3B?

We Americans love competition. That's why Reagan fired the those
traffic controllers. That's why Bush revoked Clinton-era rules that
required the government to favor unionized firms with federal
contracts.
http://blogbyjakeatunr.blogspot.com/2007/07/senate-bush-and-judiciary-gouge-unions.html

The problem is that we only love competition when it applies to
someone else. God forbid that it should effect us personally. That's
why we subsidize cotton at a higher rate than any other country in the
world.
http://www.odi.org.uk/Publications/briefing/bp_july04_cotton.pdf

And, incidentally, that's also why we invaded Iraq. Bush wanted to
make sure that most of Iraq's oil stayed in the ground. If we were to
ever let Iraq to fully develop it's oil resources and go into full
production the same thing would happen to our oil companies that
happens to Africa's cotton producers when we subsidize our cotton.
http://www.oxfam.org.uk/resources/policy/trade/downloads/bp30_cotton.pdf
http://www.globalpolicy.org/security/issues/iraq/history/1976blairoil.htm
http://www.iht.com/articles/ap/2007/07/19/business/EU-FIN-ECO-WTO-US-Cotton.php

.

Relevant Pages

  • Re: Balance of payments...
    ... "Because the subsidies eliminate risk and reward production, they also create a glut on world markets. ... Growers borrow from the government at 52 cents per pound of cotton and pay back their loans at the lower world price. ... As production increases, prices are further depressed, but no sweat for the grower. ...
    (soc.retirement)
  • Re: Balance of payments...
    ... Let's take cotton, for example. ... "Because the subsidies eliminate risk and reward production, ... As production increases, prices are further ...
    (soc.retirement)
  • Re: Balance of payments...
    ... Let's take cotton, for example. ... "In 2005 cotton subsidies totaled $3.3 billion, up from $30 million in 1995, according to the Environmental Working Group, which tracks U.S. subsidies. ... "Because the subsidies eliminate risk and reward production, they also create a glut on world markets. ... As production increases, prices are further depressed, but no sweat for the grower. ...
    (soc.retirement)
  • Re: Balance of payments...
    ... "Because the subsidies eliminate risk and reward production, they also create a glut on world markets. ... Growers borrow from the government at 52 cents per pound of cotton and pay back their loans at the lower world price. ... As production increases, prices are further depressed, but no sweat for the grower. ...
    (soc.retirement)
  • Re: Balance of payments...
    ... Let's take cotton, for example. ... "Because the subsidies eliminate risk and reward production, ... As production increases, prices are further depressed, ...
    (soc.retirement)
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