To quote the late, inordinately great Ronald Reagan, “Government is not the solution to our problem – government is the problem.”
“Trade Wars” actually aren‘t about trade — they are about government trade policy.
If peoples are trading freely, there isn‘t a “War” – there‘s commerce. The “Wars” only happen when governments get involved, placing tariffs, regulations and subsidies in the way of the flow.
It becomes a regulatory arms race. A government imposes another subsidy or tax. So several others in response impose new subsidies and taxes of their own. Lather, rinse, repeat.
The global government mess may be worst in food.
(O)ur Farm Bill — which warps our market — has warped the world‘s as well. Franklin Delano Roosevelt helped beget an eight-decade-long international regulatory arms race.
Other produce-producing nations saw our lattice-work panoply of tariffs and subsidies – and felt compelled to match them. And then exceed them….
So what we now have is a global lattice-work panoply of tariffs and subsidies. A thicket that grows ever thicker – as each next government tries to outdo the last.
Some of the global government money is beyond parody.
Take tiny Thailand. A nation with a tiny 2013 Gross Domestic Product (GDP) of $387.25 billion – whose government plowed $1.3 billion into subsidizing its sugar. Just sugar.
Which leads to yet another battle in these incredibly stupid and unnecessary Trade Wars.
Brazil, the world’s largest sugar exporter, has brought questions about incentives for Thai and Indian sugarcane producers to the Agricultural Committee of the World Trade Organization (WTO).
Brazil is also the world’s largest sugar subsidizer – at $2.5 billion per year. We shouldn’t misplace the irony.
Where is Thailand getting all of this sugar subsidy coin? Likely from the incredible excesses of the rice subsidies with which they screwed up that global market.
In 2011…the Thai government implemented the “rice pledging scheme” to give Thai farmers the opportunity to pledge and then to provide an unlimited supply of their rice to the government at a higher price than they would obtain by selling at market rate….
The price that the government offered to farmers who pledged rice was higher than the market price by almost 50%.
The critics claimed that for the scheme to succeed, the government would need to provide subsidies amounting to approximately 300 billion Baht (about US $9.375 billion) for pledging rice within two years.
Get that? About $4.7 billion per year in government money. Just for rice. From tiny Thailand.
In mid‐June 2013, the Thai government admitted that its rice subsidy program had lost 136 billion Baht (about US$ 4.4 billion) in payments.… The Prime Minister announced the amount paid to farmers for pledging rice would be cut by 20%….
I would think 100% – but 20% is a start. Except:
(T)he PM reversed this decision when the announcement brought protesting farmers to the streets of Bangkok.
Losing free government money upsets the free government money recipients – we certainly see that here in the United States.
The government then announced that it would sell up to 1.5 million tons of rice a month through tenders and sales to other governments.
So the rolling disaster continued. Until:
The Thai coup d‘état of the 22nd of May acted to suspend democratic politics within Thailand, and rice farmers lost much of the ground, which they had gained over recent years.
A coup with an upside – something to which post-Muslim Brotherhood Egyptians can attest.
The subsidies are gone – but the egregious damage to the rice market remains.
According to a USDA report (ERS Rice outlook), “despite a smaller 2014/15 crop, prices of rice in Thailand remain under pressure from large stocks of government-held rice accumulated from late 2011, until early 2014, under its Paddy Pledging Scheme“.
It takes time to clear out the government rubble – and then the recovery can occur. Which is why the sooner we all end the government interference – the better.
Unfortunately, Thailand hasn’t learned. They are just shifting the entirety of the bad thinking and policy to sugar.
We need to translate Reagan’s axiom to Thai. And Portuguese. And Hindi. And….