Wednesday, November 24, 2004

Where's Our Agriculture Going?


November 24, 2004
Food Imports Close to Matching Level of Exports, Report Says

ASHINGTON, Nov. 23 - Next year, for the first time in nearly five decades, the United States could import as much food as it exports, the Department of Agriculture said. Until now, the United States exported more food than it imported. One out of every three acres in the United States is planted for export and agriculture has been one of the few economic sectors that produced a predictable trade surplus.

But in a revised quarterly report issued this week, the Agriculture Department predicted that in 2005 the imports of farm products would equal exports, which are estimated at $56 billion. Foreign competition and record crop production in the United States, which pushed down world prices for grains, oilseeds and cottons, were blamed for the drop in export sales from the record of $62.3 billion set in this fiscal year, which ended on Sept. 30.

With the United States trade deficit deepening, reaching 5 percent of the gross domestic product in its fullest expression, this forecast was unwelcome news.

Earlier this year, the Agriculture Department had predicted a $2.5 billion surplus in agriculture for 2005.

This turnaround has occurred in less than a decade. Throughout the 1990's agricultural products were racking up increasingly large trade surpluses; the record, of $27.2 billion, was earned in 1996.

Indeed, political support for the $16 billion in federal farm subsidies every year is based in part on the importance of agriculture exports.

But as the United States concentrated on farm exports, American consumers have been buying more imported goods. This year the rise in imports was especially marked for processed foods, essential oils used in food and beverage processing, snack foods, red meat, wine, beer and fresh vegetables, according to the Agriculture Department.

Canada remains the United States biggest market for agricultural products, buying $9.7 billion. The next four projected big buyers are Mexico, at $8 billion; Japan, at $7.7 billion; the European Union, at $6.5 billion; and China, at $4.6 billion.

Several Congressional aides said this forecast could have an effect on the debate over the financing of farm programs in the next Congress.

New regional and international trade agreements have been held up by agricultural and farm policies.

Copyright 2004 The New York Times Company

Krugman on Our Economy

Krugman: Economic Crisis a Question of When, Not If
By Pedro Nicolaci da Costa

Monday 22 November 2004

New York - The economic policies of President Bush have set the country on a dangerous course that will likely end in crisis, Princeton economics professor Paul Krugman told Reuters in an interview.

Krugman, who may be best known for his opinion column in The New York Times, said he was concerned that Bush's electoral victory over Sen. John Kerry earlier this month would only reinforce the administration's unwillingness to listen to dissenting opinions.

That, in turn, could spell serious trouble for the U.S. economy, which under Bush's first term was plagued by soaring deficits, waning investor confidence and anemic job creation.

"This is a group of people who don't believe that any of the rules really apply, said Krugman. "They are utterly irresponsible."

Krugman is currently taking some time off from journalism to write and promote the second installment of his latest project - economics textbooks aimed at making the science more accessible to college students.

In the meantime, however, he worries the Bush administration's fiscal policies are going to push the world's largest economy into a rut.

The most immediate worry for Krugman is that Bush will simultaneously push through more tax cuts and try to privatize social security, ignoring a chorus of economic thinkers who caution against such measures.

"If you go back and you look at the sources of the blow-up of Argentine debt during the 1990s, one little-appreciated thing is that social security privatization was a important source of that expansion of debt," said Krugman.

In 2001, Argentina finally defaulted on an estimated $100 billion in debt, the largest such event in modern economic history.

Banana Republic?

"So if you ask the question do we look like Argentina, the answer is a whole lot more than anyone is quite willing to admit at this point. We've become a banana republic."

Crisis might take many forms, he said, but one key concern is the prospect that Asian central banks may lose their appetite for U.S. government debt, which has so far allowed the United States to finance its twin deficits.

A deeper plunge in the already battered U.S. dollar is another possible route to crisis, the professor said.

The absence of any mention of currencies in a communique from the Group of 20 rich and emerging market countries this past weekend only reinforced investors' perception that the United States, while saying it promotes a strong dollar, is willing to let its currency slide further.

"The break can come either from the Reserve Bank of China deciding it has enough dollars, thank you, or from private investors saying 'I'm going to take a speculative bet on a dollar plunge,' which then ends up being a self-fulfilling prophecy," Krugman opined. "Both scenarios are pretty unnerving."

In the longer-term, Bush's version of social security reform, which Krugman says would relegate pensions for the elderly to the whims of volatile financial markets, could have wide-ranging implications for future generations.

The only bright spot in having Bush in power for another four years, said Krugman, is that further economic mismanagement might trigger some sort of popular outcry.

"I do believe at some point there is going to be a popular tidal wave against what has happened," concluded Krugman. "In the meantime, you keep banging on the drum, you keep telling the truth.

"And then eventually we have the great demonstrations, which I think are important to let the government know that many Americans are not happy with what is happening," he said.


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