Free Trade Talks Could Lead to Big Savings at the Supermarket!!
February 10, 2006The current round of free trade talks, initiated in Doha, Qatar in 2001, is officially stuck. Trade ministers met in Hong Kong last December to see if they could come to an agreement to lower tariffs on finished goods, food and services traded around the world. In order for the talks to progress, wealthy countries most notably the members of the European Union and developing countries must reach some kind of compromise over agricultural trade. Developing countries want an end to farm subsidies and high tariffs on products like sugar, in return for their lowering of tariff barriers to trade in finished goods. The United States sits astraddle this issue as both a major exporter of agricultural products, but also with its own farm subsidies and trade barriers on certain products, most notably sugar.
If the negotiators of this round could reach agreement--not an easy thing by any means--then consumers around the globe would benefit. Here in the US, prices at grocery stores might fall from a reduction in the border taxes applied to imports of products like sugar, beef, and dairy products. This would be wonderful news, because the U.S. heavily taxes imports of these products. While tariffs on finished manufactured goods such as flashlights and stereos average about 4%, diary tariffs are set at 43%! So, a consumer would pay $1.80 in taxes on a $3.30 purchase of imported cheese--that is a pretty steep sales tax, by any stretch of the imagination. To make matters worse, consumers don't even know they paid this hidden tax. Meanwhile, many other food items, such as sugar, are subject to even higher border taxes and trade restrictions that drive up the cost of all kinds of things, most notably candy and other sweets.
While US consumers would certainly get a break from the liberalization in food trade, farmers in poorer nations would probably benefit even more. Experts recently calculated that over 90% of the benefits of the current trade proposal between rich and poor countries would go to poor countries. Almost the entirety of this benefit is attributable to removing the barriers that wealthy countries maintain on food imports. In essence, rich nations are slamming the door on poor nations with their high border taxes on food. If those taxes were lowered, farmers in poor countries would be able to sell more products, and the standard of living in some of the poorest countries could be raised. So, open trade in agriculture is a win-win situation for US consumers and foreign farmers, and, it should be noted, for a majority of U.S. farmers, as well, who comprise our largest single export sector.
The U.S. unwillingness
to consider removing high tariffs on sugar and dairy is a classic example
of our small special interests are working against the interests of consumers
and poor people here in America and around the world.