Tuesday, May 25, 2010

Unintended Consequences #5

I've followed the following story in several places, but I'm writing with the Wall Street Journal editorial "The Madness of Cotton" in front of me.

Students in both the Compassion and Sustainability classes have heard an earful from us about U.S. agricultural subsidies. They depress prices for farmers in developing countries, are transfers largely to wealthy Americans, and have a variety of unintended, bad environmental consequences from overproduction. Did you know that so much cotton has been grown in the Arizona desert that we used to say that Arizona's economy was dependent on the 5 C's: Copper, Citrus, Climate, Cattle, and ....Cotton? [WSJ figures regarding the total U.S. subsidy amount: $2.3 billion in 2009, with the top 10% receiving 70% of the benefits]. Of course, Congress repeatedly re-authorizes the program.

Recently, Brazil successfully protested to the WTO about our cotton subsidies, and the WTO found in favor of Brazil. The allowed Brazil to propose a list of retaliatory tariffs against the U.S.. According to the WSJ, the hits to American manufacturing would have included cars, medical equipment (way to go Brazil---make health care more expensive for your own people), pharmaceuticals, electronics, textiles, wheat, software, and intellectual property. It seems as thought the sensible thing to do would be for Congress to say, "That's a shame, I guess we'll just have to lower those cotton subsidies." Instead, the Obama administration has proposed that the United States government pay $147.3 million dollars to Brazilian cotton farmers in return for the Brazilians waiving their right to retaliate against American manufacturers.

$147.3 million paid by our government to Brazilian farmers to divert the damage done by our own cotton subsidies to our medical device and software industries....just another day in the life of Unitended Consequences.

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