Let’s put ourselves into the shoes of, say, . The EU and the , with their massive agricultural subsidization programs, pay to their domestic farmers a price much higher than the market price, resulting in massive agricultural surpluses. These surpluses are then “dumped” on . Dumping is often seen as a near declaration of war, and the receiving party always goes to great lengths to avoid it.
Now, I can easily see the agricultural position here: cheap foreign competition. And the corporate State interest too: dumping destroys the local (agricultural) tax base, and hence lowers the State’s current and future income.
What I truly can’t se, is why the hell do people disagree with dumping? Hey, the way I see it they should be saying “If the Americans are willing to pay 90% of the price of our food imports, than All Hail the Americans! We get almost free food, and all our human and capital resources immobilized in agricultural production can now be used elsewhere. We only stand to gain! They only stand to loose!”
Why the hell are people so dumb than? Or is there something I’m missing?
Because they are illiterate, impoverished farmers with no capital for any industry but agriculture? Because people wish to avoid intervention in general, and foreign intervention specifically?
I think it presents a problem in counrties like India and Bangladesh, given the high proportion of the population that are employed in agriculture, and adjustment would be slow given how high regulation would hamper readjustment of capital structure and labour such that these people could be re-employed.
Politicians in these countries are largely not willing to make any moves that could hurt such a large and powerful lobby, even temporarily.
And since they’re poor they should forfeit free food? Or they can’t mop up floor of some plant? You know, if there ever had been such a notion as “aversion to dumping” I really don’t think that would ever had gone through the Industrial revolution.
Britain was under the influence of Richard Cobden and the classical liberals. India and South Asia have had 50 years of Socialists and nationalist facists. Go figure.
Because Americans will dump for like a season and then stop. So the industry is destroyed and has to be rebuilt again next year when they need it. The market cant react fast enough and people starve. Starving is bad.
You have to understand “dumping” is the most commonly used justification for introducing and/or increasing tariffs. For example the EU used it two years ago to increase tariffs on certain Chinese textile goods. To stay in the agricultural field most Asian countries have astronomical tariffs on imported rice precisely to avoid “dumping” by large exporters like the US or Thailand.
But when “dumping” is “dumping” and not merely same quality goods sold at an inferior price because of a more efficient manufacturing/growing system, lower wages, lower taxes etc? Nobody can really tell. This is usually left to panels of experts (“technocrats”) working in mysterious ways.
*time T1 a massively chap amount of food enters Ruritania. Local food growers are left without a market and are forced to relocate to the city and find productive jobs there.
time T2, the import stops, food priced spike and some of the farmers who fled come back.
time T3 a new flood of food incurs and some farmer go back to the city, while some speculators understand that the flood will cease in time T4, and hoard some of the food.
*When cheap imports actually cease in time T4, speculator unload food, while a few farmers who have resisted the temporary losses in time T3 produce the rest. Prices are ironed out between cheap imports, a few farmer who make a loss half of the year, and a profit the other half, and speculators. Prices year-long are lower than they would have been with no import at all, while industrial production is higher.
Sure, it might be “free” until your boss decides it’s no longer economically viable to keep you. You’ll then have to find an alternative profession to adapt your skills, more difficult if you’ve been in agriculture you’re whole life, and especially when you live in countries that grant low economic freedoms to entrepreneurs, as are typically found in the so called 3rd world.
It takes time to grow new food. You have to anticipate the food shortage a year in advance in order to be able to meet it. Also, you have to have enough money to live for that entire year it takes to grow the food before you can sell it.
The US never makes it clear when its going to stop the flow of aid/dumping.You make it sound like its a rollercoaster. It might not have a regular pattern. It may be only when there’s an (unpredictable) drought. The US may only help depending on politics and its other expenditures. etc etc.
Basically what you’re saying is that dumping can’t cause a famine because markets are self adjusting. But you must admit that there are transition costs associated with changing professions, particularly between farms and cities. My point is that the cost of transition is a famine (which is better than the alternative of all-out starvation).
Reductio ad absurdum: What if aliens came and gave us matter-producers that could manufacture anything we wanted? And so we closed down all our factories, forgot about education, and became completely reliant on matter producers. Then, what if the aliens took them away all at once? Sure, the market will adjust and we’ll go back to our old jobs etc etc, but we will see a huge dip in standard of living until we can get the machine back on track.
Well, you know me, I’m all for free markets. The problem here seems to be the capricious and unreliable factor that is government interference in the marketplace. Examples of private dumping are few and far between, and people always seem to work out a way around private dumping. I don’t deny that market actors can’t cause market instability, but I think that the incentive structure of markets makes this far less likely…
I agree with your point. It is true that there are costs associated with the unpredictability of the US Agricultural policy. Still tackling the unpredictable is the job of the entrepreneur, and where there is unpredictability, there are profits.
So, all I’m saying is that there will be costs of transition, especially in the first years of dumping. Yet I submit that profits, in the form of cheaper agricultural products and increased labor force available elsewhere, would be much higher than said losses. So, the receiver is gaining, on the balance, from dumping. They who truly lose are the American taxpayers.
Right if Americans could be counted on to dump with reasonable frequency the industry could situate itself to take advantage of the dumping. I totally agree. Its just its possible for the Americans to make the adjustment process a living hell via unpredictability etc.
I’m also sure that agriculture is heavily regulated in india
Doesn’t your argument imply that it would be bad if the people of some ‘poor’ country suddenly (although temporarily) found themselves with a bountiful harvest?
The US shouldn’t be subsidizing food production in the first place. The US shouldn’t be dumping food paid for by government subsidies on other countries. This isn’t a free market thing. Food is also perishable so the food the farmers grew could be worthless by the time the US stops “dumping.”
This is agricultural terrorism, or economic warfare plain and simple.
In so far that farmers and businessmen have accounted for such changes in their business calculations they may not be so affected by such occurences. Who knows, perhaps if agriculture was completely liberalised, once the initial damage is done, we would see eventually the emergence of sophisticated insurance, spreadbetting and futures markets with regard to US agricultural policy, in much the same way that farmers already account for the weather.
It would of course still be a needlessly damaging policy for both Americans and developing world citizens.
Jack put it well. If every now and then it just started raining wheat and vegetables, with rather unpredictable periodicality, would you advocate burning all this food on the ground that it is “heavenly financial warfare”?
From the point of view it is certainly a stupid policy, and considering the world intoto, it is a bad policy in net terms. But for the receiving side it is a free gift. Why people refuse it any more that they’d need to refuse free goods? I don’t hear anyone complaining about massive and unexpected inhertitances.
