Ignorance or Hypocrisy?

Last week the US House of Representatives passed the Currency Reform for Fair Trade Act, a bill that would allow the Commerce Department to impose tariffs on imports from countries it believes manipulate their currencies. The point of the legislation is mainly to enable the US to punish China, which is widely believed to be keeping the value of the Yuan low artificially in order to enhance the competitiveness of Chinese exports. The result is that the US has a very large trade deficit with China – $227 billion in 2009, which many people think inhibits manufacturing and employment in the US.

ABC News quoted House Speaker Nancy Pelosi expressing precisely this concern –

“For so many years, we have watched the China-U.S. trade deficit grow and grow and grow,” Speaker Nancy Pelosi said. “Today, we are finally doing something about it by recognizing that China’s manipulation of the currency represents a subsidy for Chinese exports coming to the United States and elsewhere.”

The same article also reported remarks by Democratic Majority Leader Steny Hoyer –

“I believe in free markets and open competition. I believe that American companies and workers can win under those conditions. But the rules have to be fair—and for years now, it has been clear that China’s currency policy unfairly tilts the field in its direction,” Majority Leader Steny Hoyer said in statement. “By deliberately keeping the value of its Yuan low, China is able to sell products here at an artificially low price. As a result, domestic manufacturers—whose prices would be much more competitive if China allowed the market to set the value of its currency—go out of business. And American workers lose their jobs.”

Ah yes… free markets, open competition, the noble pursuit of justice for the American worker. It’s inspiring!

However it is a shame that Pelosi and Hoyer and the 346 other Democratic and Republican representatives who voted for the legislation and who express indignation over the damage they imagine Chinese subsidies do to the US economy apparently don’t feel the same concern about the $15.4 billion in subsidies that they themselves paid to American farmers last year ($245 billion since 1995), nor the impact that that has on foreign agricultural producers, many of whom live in developing countries in extraordinary poverty.

A case in point is Haiti, where, according to a report published this week by Oxfam, 90% of the rural population lived on $2/day before the earthquake in January and two-thirds on less than $1/day. They note that after Haiti lowered their own trade barriers in the mid-nineties under pressure from the international community, they went from being self-sufficient in rice production to having to import 80% of what they need because Haiti’s own farmers are no longer able to compete with cheap imported rice.

Haiti’s poverty is undoubtedly a complex problem and I don’t claim to have an in depth knowledge of the subject. But the fact is that rice farmers in Haiti, one of the poorest countries in the world, are forced to compete with American farmers whose production is subsidized by the US government, to the tune of $434 million in 2009. How Pelosi and Hoyer reconcile that with their disdain for Chinese subsidies is perplexing to say the least.

The Oxfam report points out that subsidies have helped the US gain a 16% share of the $11 billion global market for rice and that Haiti is the third largest export market for US rice production. They also make the interesting observation that US rice subsidies significantly exceed the $353 million of aid the US gave to Haiti in 2009 and is about 20 times greater than the aid given specifically to improve agriculture. It’s also interesting that US rice subsidies supported 611 US farmers in 2009, while Haiti has some 1 million farming families.

Incidentally, former President Bill Clinton has recently declared the US policy towards Haiti, and particularly his own role in putting it into effect, a serious mistake. A video report on his comments was presented this week by Pacifica Radio’s Democracy Now! show. Whatever else you think about Bill Clinton, I think he deserves credit for his willingness to accept responsibility for his own role in instituting a policy that has been very harmful to Haiti.

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