Paulson: Farm bill bad for trade

Treasury Secretary Henry Paulson told the House today that the farm bill it's debating would damage relations with U.S. trading partners. John Dimsdale reports.


Reported by John Dimsdale

Kai Ryssdal: Up the coast in Washington, D.C., today Treasury Secretary Henry Paulson weighed in on the debate. He wrote House Republicans to say the bill as it's currently written would damage relations with trading partners. U.S. farm subsidies are generally unpopular overseas. They're seen as giving American farm exports an unfair competitive advantage. Our Washington Bureau Chief John Dimsdale takes it from there.

JOHN DIMSDALE: Developing countries have long complained that U.S. taxpayer subsidies to farmers result in a flood of cheap American food exports. Laura Rusu with the international development and relief agency Oxfam, says the price supports in the congressional farm bill are unwelcome overseas.

LAURA RUSU: These subsidies encourage overproduction which leads to lower prices on world markets. That's why we see struggling farmers in West Africa, for example, living on a dollar a day, who aren't able to sell their cotton because of the programs and the rules that we have created here in Washington.

The U.S. is not the only industrialized country to offer government support for domestic food production. Most countries in the European Union do the same.

CLYDE PRESTOWITZ: We have the same complaint about the Europeans that the Brazilians and others have about us.

But Clyde Prestowitz at the Economic Strategy Institute says American farm subsidies are more harmful to poor countries because they're designed to encourage farmers to produce more.

PRESTOWITZ: European subsidies are in many respects less trade distorting than ours because they're less tied to the amount of production. Our incentives are to produce more and export more; their incentives are much more to trim the hedgerows and keep the landscape green.

International companies that do business in the U.S. have another complaint with the farm bill. To pay for an increase in the food stamp program, the bill's sponsors have added taxes on U.S. profits made by foreign corporations. Todd Malan at the Organization for International Investment says the tax violates several international trade treaties.

MALAN: This is a protectionist tax measure that only hits foreign companies that are bringing jobs into the United States.

The foreign corporate tax provision has eroded Republican support for the farm bill and prompted a veto threat from the White House.

In Washington, I'm John Dimsdale for Marketplace.