Nick DeLong

Finally. It looks like Congress will actually be moving to approve the three pending FTAs after it returns from the summer recess according to a recent report by Politico.

Apparently the Trade Adjustment Assistance program (TAA) will be voted on separately from the FTAs.

Months of bipartisan discussions “have provided a path forward in the Senate after we return for passage of the bipartisan compromise on the Trade Adjustment Assistance program, followed by passage of the three FTAs,” Reid said in a statement.

For quite some time, CEI has been critical of Congress and the White House’s failure to support the long standing FTAs without the inclusion of TAA. While it’s good to see that TAA won’t be tied directly to any one FTA, it’s disappointing to note that the approval of TAA has essentially become a pre-condition to their endorsement. As CEI has mentioned several times before, free trade agreements should be voted up or down based upon their own merits.

Post image for High Food Prices: Another Reason To Get Rid Of Farm Handouts

Yesterday’s Wall Street Journal article highlights another reason why farm subsidies need to be put to rest.

Land prices are way up and so are bank deposits, as high corn and soybean prices mean local farmers are making the most money in their lives. At Sloan Implement, which sells John Deere tractors, “This could be our best year ever,” says chief executive Tom Sloan.

CEI has blogged about the archaic subsidy program before. With the budget crisis looming, Congress had a reason to cut the tax squandering program. It looks like the current economic outlook for the farming industry simply adds fuel to the fire.

What’s the reason for agriculture’s new found fortune?

The global grain markets shifted in 2006 when Washington began to require that the oil industry mix billions of gallons of corn-derived ethanol with gasoline annually. Around the same time, rising numbers of middle-class consumers in emerging economies such as China began seeking more grain-fed meat and milk, boosting demand for soybeans, pork and, most recently, corn from the U.S.

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Post image for Flirting with Austerity: Congress Considers Ending Agriculture Direct Payment Subsidies

Finally. After several years of persistence, it looks like the movement to reform the agriculture direct payments system is finally gaining some momentum. It seems that nothing short of a potential budget crisis was enough of an incentive for Congress to seriously reconsider which federal programs are truly supported by the taxpayer. Seizing upon Congress’ brief lapse into austerity, last week Rep. Jeff Flake (R-Ariz.) introduced the “Reducing the Deficit through Eliminating Agriculture Direct Payment Subsidies Act of 2011” or “REAPS.”

The direct payments program has been recognized as a vehicle for government waste for some time. Direct payments are subsidies given to landowners whose property has been historically used to grow crops such as wheat, corn, and rice. However, landowners are under no obligation to actually produce crops in order to receive the subsidy. In 2006, The Washington Post ran an article which claimed that the program pays $1.3 billion to people who don’t farm at all. These sentences in particular highlight the federal government’s squandering of taxpayer money:

Some of them collect hundreds of thousands of dollars without planting a seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in Houston, has received $191,000 over the past decade. For Houston surgeon Jimmy Frank Howell, the total was $490,709.

Adding insult to injury, the article was written before the 2008 Farm Bill was passed. That bill actually increased the number of subsidies to farmers by nearly $300 billion.

With a preliminary estimate of nearly $28 billion in savings, REAP is definitely a step in the right direction. The bill still has a long way to go, but it’s good to see that Congress is finally attempting to rein in the agriculture handouts. Here’s hoping that Congress not only flirts with austerity but takes some real steps to cut wasteful programs.

Yesterday, Senate Republicans successfully blocked a Finance Committee meeting to consider free trade agreements (FTA) with Korea, Colombia, and Panama.

The reason? President Obama and many Democrats have coupled their support for the trade agreements with the inclusion of funding for the employment Trade Adjustment Assistance (TAA). Most Republicans are in support of the trade agreements, but disapprove the inclusion of TAA. As Sen. Orrin Hatch (R-Utah) explained, “If the president and his Democratic allies want to pass TAA, go ahead and pass TAA. Have at it. Let it stand on its own accord like we always have in the past. But don’t attach it to these agreements.”

The Colombia free trade agreement was signed in 2006 and the Panama and South Korea agreements were signed in 2007, however, they must pass Congress before they can take effect.

Under a special set of rules known as “fast track” trade promotion authority, free trade agreements can be negotiated by the president, but must be sent to Capitol Hill for approval. Congress, meanwhile, must approve or disapprove of an agreement in its entirety. The agreement cannot be amended.

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In his article “Suffering of Many Continues to Serve the Greed of Others,” Thomas Gibson argues we should convince our politicians to change the “destructive trade laws” that have caused business to locate overseas and as a result have “ravaged communities and families all over our country.” In support of his claim, Thomas list several specific examples where small communities lost a significant number of jobs relative to their total population and notes that more than 42,000 factories have been closed since the U.S. entered into the North American Free Trade Agreement (NAFTA). Furthermore, he cites the authors of Outsourcing America, Ron Hira and Anil Hara, stating that “Outsourcing signals that even hardworking, well-educated and highly skilled American workers may no longer be able to achieve success.”

I beg to differ. While small groups of individuals in specific, labor-intensive sectors across the nation may lose their jobs, the evidence suggests that United States’ trade policies have been had a net positive effect on the nation as a whole. In 2005 dollars, real GDP grew from $8,523.4 billion in 1993 to $13,248.2 billion in 2010. According to the Office of the United States Trade Representative (USTR), total U.S. employment actually increased from 110.8 million to 137.6 million people during the period (1993-2007) following the enactment of NAFTA. Finally, and perhaps most importantly, the new jobs that were created during the early years of the NAFTA agreement weren’t low-paying. In fact, most of the new job creation came in the form of high-wages in high-paying professions. Contrary to Thomas’ claim, it doesn’t look like the “well-educated” and “highly skilled” American citizen is in trouble.

Since the time of Adam Smith, the evidence of the benefits of free trade has been irrefutable. When countries trade, the wealthier nation is exposed to more competition and thus its citizens get the added benefit of a larger variety of products at a lower price. The poorer nation, on the other hand, benefits from the creation of a new industry that once didn’t exist within its borders and its citizens can begin buying essential goods with their new found increase of wealth. Trade is not a zero sum game. Let’s not ask our politicians to end our free trade policies. If we do, a few small groups of people will benefit at the expense of the many.