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The carrot, the stick, and U.S. farmers

Trade turmoil has the White House picking winners and losers in the U.S. farm sector

Carrot hanging on the end of angled stick

The Trump administration’s good cop/bad cop approach to U.S. trade policy was on full display Aug. 27 when President Donald J. Trump, the bad cop that day, announced a very incomplete NAFTA trade deal — fuelled by his heavy use of tariffs — that pointedly excluded Canada.

That day’s good cop was U.S. Secretary of Agriculture Sonny Perdue who explained how the first half of the White House’s allocated US$12 billion in trade “mitigation” funds will be distributed to U.S. farmers clobbered by global blowback to, yes, those same White House tariffs.

For now, that’s the White House’s double-barrelled trade policy: At one meeting tariffs are the stick to whack a stubborn negotiating partner back to the bargaining table while at a second meeting, taxpayer money is the juicy carrot to keep U.S. farmers from rejecting the administration’s market-cracking tariff policy.

So far, however, the administration’s carrot-and-stick tariff use has delivered more trouble than good for both the president and farmers.

For example, after Perdue announced the tariff payment scheme Aug. 27, silence fell over farm country as farmers and farm groups analyzed the crops affected, payment rates, income limits, and market impact. That silence soon gave way to views that ranged from lukewarm, “Well, ah, OK,” to the more heated, “You’re kidding me.”

The lukewarm groups included cotton growers who, calculates the farmdocDAILY group at the University of Illinois, “have experienced increased prices but are” rewarded “with relatively large payment rates.”

Better yet are sorghum growers who “receive a payment rate that is more than four times as large as the estimated price decline from May to August,” the period the payments are meant to mitigate.

How did these crops end up with comparatively better deals than other commodities like corn or milk? The U.S. Department of Agriculture’s two-paragraph explanation, attached to its 23-page “final rule,” offers little insight.

Farm leaders representing commodities mostly stiffed by the White House’s “mitigation” checks quickly spotted these discrepancies and publicly filed their complaints.

Oklahoman Jimmie Musick, president of the National Association of Wheat Growers, pointed out to Perdue that the US14-cents-per-bushel payment rate promised wheat growers “poorly reflects the reality that all farmers are being harmed by tariffs.” And, he added, “The long-term solution is to end the trade war.”

Kevin Skunes, a North Dakota farmer serving as National Corn Growers Association (NCGA) president, was more blunt. “Unfortunately, this plan provides virtually no relief to corn farmers,” he said, after learning that initial payments to corn growers will be a miserly US1 cent per bushel, or about $96 million for tariff losses NCGA estimates to be more than US$6 billion.

Perdue was Buddha-like toward the reviews: serenely silent.

Some of the administration’s biggest backers, however, were not quite as meditative. Many, like the Wall Street Journal, had a hard time finding one kernel of anything to praise in the president’s underlying, no-Canada-NAFTA move. “We’re glad to see Mr. Trump step back from the suicide of NAFTA withdrawal,” noted the Journal’s lead editorial Aug. 28, “but on the public evidence so far, his new deal is worse.”

And that’s the case, it noted, even if Canada jumps into the Mexican-U.S. not-yet-done deal, a move that remains uncertain.

London’s Financial Times had an equally tough, more international judgment of Trump’s incomplete NAFTA deal: “The best that can be said about” the Mexican-U.S. deal that excluded Canada “is that it is meaningless. It is emphatically not a positive development for NAFTA, or for the quality of trade policy-making in the U.S. and beyond.”

If either analysis is only partly correct, U.S. farmers have every right to howl over the administration’s “mitigation” payment schemes and, so far anyway, its very counterproductive carrot-and-stick tariff policy.

Especially now with emerging proof that it’s going to be a big harvest and a long, carrot-filled winter.

The Farm and Food File is published weekly throughout the U.S. and Canada.

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