Subsidies, Trade, Agriculture and Security

Rising global food prices have created some interesting dynamics in recent trade discussions. In the past, agricultural subsidies and import/export tariffs have been a sticking point in any negotiations. One reason for this is that many countries wish to protect their agriculture industry due to security concerns. If world agricultural product prices are low, many industrialized countries cannot compete on the world market. Their producers are threatened with failure. So, the governments of those highly developed economies typically subsidize their farmers in some fashion so that they can remain in business and thus keep agriculture viable.

With high food prices, the subsidies are not as necessary to maintain viability for famers in advanced economies. They can compete with low-cost producers such as Brazil. This provides the opportunity for those governments to offer a cut in farm subsidies in exchange for things like reduced import tariffs for manufactured goods in countries that have erected barriers to protect their industry for reasons similar to industrialized countries protecting agriculture.

Ultimately, the most efficient way to allocate the world's resources is with a completely open, free market. This of course would necessitate that the world's governments all feel safe enough from their neighbors to believe that dropping protective barriers is prudent. Those barriers are like an economic stockade or fort. Just as a country seeks to protect itself militarily, it must protect itself economically.

In the last 30 years, the U.S. has exposed itself economically, yet has maintained its world preeminence in some respects, by its military power. Countries fear to take economic retaliation on the U.S. because of the potential for an overwhelming military response. Our dependence on foreign oil has weakened our position. We now are at extreme risk due to our high dependence on foreign sources of petroleum. Have we stretched our military capacity to the point that the military threat is less likely to offset that economic threat?

We must achieve energy self-sufficiency. We also must remain vigilant to maintain our food security. The greatest strength of our country is our economic system. It is also our greatest point of vulnerability. If we are hostage to foreign sources of energy -- or, through exposing our agricultural sector to extreme market vulnerability by eliminating a system of price subsidies -- we offer ourselves to the mercy of our enemies.