Washington Insider -- Thursday

Looking Back on Tariffs

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Appropriators Make Clear They Don't Back ERS, NIFA Move

The massive spending plan aimed at averting another government shutdown wades into the issue of USDA's plan to move the Economic Research Service (ERS) and National Institute for Food and Agriculture (NIFA) out of the National Capital Region.

The explanatory statement accompanying the bill notes that "conferees are concerned about the unknown costs associated with the proposed move" if NIFA and ERS to a new location. "In submitting the Fiscal Year 2020 budget justification, the Department is directed to include all cost estimates for the proposed move of the two agencies, as well as a detailed analysis of any research benefits of their relocation."

Plus, they also say it is appropriate that ERS remain under the Research, Education and Economics mission area and not be put under the Office of the Chief Economist.

"The conferees take this position as several questions remain about the merits of the proposed transfer as well as the proposed relocation of ERS outside of the National Capital Region," the statement noted. "Insufficient information and justification relating to the reorganization and relocation make moving forward on these proposals premature at this time."

The statement also warns USDA "conferees support an indefinite delay in the proposed transfer of ERS to the Office of

the Chief Economist."

Top US Farm Group Says Ag Guest Worker Visa Program Needs Reform

Reform of the H2-A guest farm worker program is necessary to better meet the needs of farmers and the workers they employ, American Farm Bureau Federation President Zippy Duvall wrote in op-ed published in the Los Angeles Times.

"American agriculture relies on hundreds of thousands of skilled workers to plant the fields, tend the crops, harvest the produce and pack it for markets both here and abroad," Duvall said, but, "We don’t have enough of these workers."

The nature of farm labor, and fact that less "than 2% of Americans grow up on farms," Duvall said, makes finding domestic workers challenging. "Farm work is episodic and often seasonal, and fruits and vegetables have a short window to be harvested, packed and shipped to market," he observed, a factor that makes the situation even more difficult.

However, work in the dairy production industry presents an opposite issue as cows "must be milked twice, sometimes three times, a day, 365 days a year," he commented. Regardless of the work or ag sector, farm work often "means long hours of hard work," Duval added.

Washington Insider: Looking Back on Tariffs

The current debates cover a great deal of ground and the Washington Post says that the President went even further last week when he “detoured into some 19th-Century policy stuff on Tariffs.”

In response, the Post published a piece by Daniel Drezner, a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University who plunged deeply into tariff history.

The Post asks Professor Drezner whether the President is correct that in 1888, the United States was “very rich,” with “no debt” and concludes that the assertion is partly true. However, it says that the United States is “much richer now” than it was in 1888 and “most certainly had debt in the late 19th century.”

Still, the U.S. economy was booming in the 1880s and “robust economic growth and high tariffs” meant that US government coffers were overflowing.”

The Post also asks about whether the Great Tariff Debate of 1888 was about how to spend all the tariff revenue?

Not exactly, Drezner says. “It would be more accurate to say that Republicans and Democrats alike wanted to find ways to slash tariff revenue rather than spend more money but disagreed on how to do that. “Democrats proposed a tariff reduction to reduce customs revenue, while Republicans offered higher tariffs to reduce imports and customs revenue.”

What the current president is hoping to do, Drezner says, is highlight a time when U.S. tariffs were high and economic growth was robust, to prove his contention that protection is good for the economy. But, Drezner thinks the parallels “fall apart” on this point.

The U.S. economy was actually pretty open in the 1880s beyond trade, history tells him. The United States was far less restrictive on immigration then than now and about as receptive to foreign investment and ideas.

More importantly, he asserts that “protection was not the cause of rapid economic growth which was due to continental expansion.” Trade was much less important to the U.S. economy back then, compared with now.

To be fair, Drezner says, there were a few other similarities between the Great Tariff Debate of 1888 and now. Republicans were the party of high tariffs and the Democrats wanted them lower. The Democrats controlled the House, the Republicans the Senate. Then, as now, the country was split right down the middle by partisan politics.

The 1888 election was primarily about tariffs; President Grover Cleveland had devoted the previous year’s State of the Union entirely to the tariff question. But, while the current president keeps insisting that foreigners are the ones paying tariffs, President Cleveland argued otherwise.

Our present tariff laws, the vicious, inequitable, and illogical source of unnecessary taxation, ought to be at once revised and amended, he said. “These laws, as their primary and plain effect, raise the price to consumers of all articles imported and subject to duty by precisely the sum paid for such duties. Thus, the amount of the duty measures the tax paid by those who purchase for use these imported articles.”

“Those who buy imports pay the duty charged thereon into the public Treasury, but the great majority of our citizens, who buy domestic articles of the same class, pay a sum at least approximately equal to this duty to the home manufacturer. This reference to the operation of our tariff laws is not made by way of instruction but in order that we may be constantly reminded of the manner in which they impose a burden upon those who consume domestic products as well as those who consume imported articles, and thus create a tax upon all our people,” he said.

The GOP controlled a unified government after the 1888 election, retaining control of the Senate and winning the House back. And, in 1890 the United States enacted the even higher McKinley tariff.

Today’s president is a big fan of McKinley, and said that his image as “a Tariff Man” was homage to McKinley. However, the Post article says that the McKinley tariff and the Great Tariff Debate of 1888 were not beneficial for the GOP over the longer term. “At a time when the public debate was about how to reduce the tariff and the fiscal surplus, [the Mckinley tariff] seemed out of line with public sentiment. In fact, the “Billion Dollar Congress” had miscalculated, and electoral retribution was swift as the Democrats made big gains in the 1890 midterm elections.”

In addition, the unpopularity of the Billion Dollar Congress swept Democrats into office in 1892 when they retained the House, captured the Senate and won the presidency. For the first time since 1858, Democrats seized unified control of government.

Certainly, the current tariffs—and those being threatened for the future — are not popular for many producers across the economy. At the same time, it is clear that more than a few officials in the current administration believe that tariffs provide powerful, effective bargaining tools. In the case of China, this debate will likely come to a head in the coming days. It is certainly one that producers should watch closely as it emerges, Washington Insider believes.

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