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Plan to Compensate Farmers for Trade War Retaliation Largely Panned

Thursday, July 26, 2018
Sandler, Travis & Rosenberg Trade Report

The Trump administration announced July 24 plans for up to $12 billion in assistance for U.S. farmers whose exports have been affected by restrictions imposed by foreign countries in retaliation for the administration’s increased tariffs on imported goods. However, reaction to the announcement was largely negative.

(Click here for ST&R’s web page providing comprehensive information on all U.S. tariffs imposed under Section 301 and Section 232 as well as the retaliatory tariffs trading partners are levying on U.S. goods.)

The Department of Agriculture said the aid is designed to help agricultural producers that have “taken a disproportionate hit” from the “estimated $11 billion impact” of the “unjustified” retaliatory measures, which have been imposed by major trading partners including China, the European Union, Japan, Canada, and Mexico. According to a USDA press release, these measures include high tariffs that increase costs and force commodities to find new markets as well as unusually strict or cumbersome entry procedures that can affect the quality and marketability of perishable crops. Affected commodities include soybeans, sorghum, milk, pork, fruits, nuts, and specialty crops.

The press release characterized the planned assistance, which will not require congressional approval, as “a short-term relief strategy to protect agricultural producers while the administration works on free, fair, and reciprocal trade deals to open more markets in the long run.” Components of the plan include using the Market Facilitation Program to provide payments to producers of soybeans, sorghum, corn, wheat, cotton, dairy, and hogs; the Food Purchase and Distribution Program to purchase unexpected surplus of affected commodities such as fruits, nuts, rice, legumes, beef, pork, and milk for distribution to food banks and other nutrition programs; and the Trade Promotion Program to help develop new export markets for farm products.

The announcement garnered some support but primarily opposition, often sharp and from the president’s own party. Sen. Bob Corker, R-Tenn., decried the administration for implementing “a terrible policy that sends farmers to the poorhouse, and then you put them on welfare, and we borrow the money from other countries.” Sen. Rand Paul, R-Ky., agreed, saying “if tariffs punish farmers, the answer is not welfare for farmers – the answer is remove the tariffs.” Sen. Ron Johnson, R-Wis., emphasized simply that farmers “want trade, not aid.”

In remarks to agriculture groups following the announcement President Trump defended his approach, asserting that “farmers will be the biggest beneficiary” of the market openings he believes the tariffs will achieve. However, many of those same groups warned that it is the current trade tensions themselves that, if continued for any appreciable length of time, risk losing valuable markets. Instead, they said, the administration should focus its efforts on negotiating new trade agreements and other solutions that will boost U.S. agricultural exports.

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