September 25, 2006

Subsidizing Quality

by PG

In the bewailing and bemoaning of the failure of the Doha trade talks, a consistent assumption is that the only reason for the United States and Europe to maintain subsidies (by the former) and tariffs (by the latter) on farm products is naked protectionism, a motive based on special interest politics and ignorance of economics. Some have argued that the WTO should be cognizant of differences in environmental and labor standards that make products from countries with different standards non-interchangeable at an ethical level; if the U.S. pays a living wage to tomato pickers and bans the use of certain pesticides, while Indonesia does not, the U.S. should be able to pay subsidies to American farmers to make their prices competitive with Indonesians'.

But there's a potential second argument in favor of subsidies, though not tariffs: keeping high quality food affordable. Tariffs mean that all prices will be higher, because the cheaper foreign fruits are taxed to be comparably priced with the more expensive domestic food. With subsidies, on the other hand, the U.S. can make the produce of local farmers possible for middle class people to purchase. According to foodies, plants that are bred to endure long-distance transportation are less tasty than ones bred purely for flavor. In its insistence that Chilean blueberries separated from the consumer by several days and several thousand miles are the exact same as the ones grown just outside the city limits, trade law strikes me as taking the kind of broad market perspective usually reserved for defendants in antitrust lawsuits.

September 25, 2006 07:50 PM | TrackBack

A trade law that permits higher-quality locally-grown fruit to be sold at a higher price reflecting the higher quality is not insisting that imported fruit is the "exact same as the ones grown just outside the city limits." It seems to be much the opposite, in that it allows the market to signal differences between them.

The price of tastier food may indeed be a burden on low-income purchasers, but that's not a question of trade law. Those local blueberries cost what they do because of their own factor inputs (seeds, land, fertilizer), and they wouldn't be any cheaper if foreign blueberries did not exist. Certainly, you can subsidize them to make them cheaper, as you can with anything, and the only question is where to get the money to do so.

Posted by: Tom T. at September 27, 2006 08:18 AM
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