Letter to the Editor: Tariffs, turf, temptation

To the Editor:

The current U.S. government recently placed tariffs on some Chinese imports into this country. China is the largest market for our agricultural raw materials, with a tax upon entry. The Chinese have retaliated by placing an additional 25-percent tariff on selected imports from the U.S. Just recently, the Trump administration announced the prospect of government subsidies to be paid for farmers injured by Chinese tariffs. Congress has a jaundiced eye toward more unnecessary deficit spending, so these promises are speculation.

To continue to be competitive with Russian, Australian and South American wheat farmers in the Chinese market, eastern Washington farmers will be made to accept a 25-30 percent price reduction for their current crops still in the field, which has already begun in the marketplace here. Jobs, income, homes, acreage, implement sales to the industry (and the long term viability of the wheat, perhaps potatoes, hay and barley) are at stake. Sometimes slow in implementing these moves, tariffs are always slower to roll back when political winds shift. This U.S. government began a trade conflict; it now seems tempted to pay for it with subsidies from unknown purses.

From the field, wheat is transported, packaged, marketed and delivered to foreign shores. From the field to the market borders, distribution costs increase the farm price to pay handling, consolidation and profits along the way, resulting in a “landed” price that competes with other sources. Chinese taxes are added to this basis; tariffs are taxes on the market. Wheat prices are inflated by China’s current tariff, 18 percent, and a current 10-percent Value Added Tax. Therefore, before recent trade friction, the Chinese buyer paid roughly eight percent over ‘landed price.’ Distribution costs are determined by forces which offer limited, if any, options to adjust prices to compete. So, it’s up to the farmer’s market to offset the inflation, or fail to compete beyond the landing. In the 1980s, mountains of rotting wheat grains lined fields along Interstate 90 for the loss of a market in Russia that eastern Washington farmers suffered due to political friction. The Reagan administration let market forces alone govern the farmer.

This fall, U.S. wheat will be taxed an additional 25 percent on top of existing “landed” prices at Chinese ports of entry. The increase will not be a burden on the Chinese importers, distributors/wholesalers or consumers, because competing wheat exporting nations will not be subject to this retaliation. Buyers will just shift their sources, rebuffing U.S. wheat or barley, maybe potatoes and hay, for other less costly supply.

Mr. Farmer, with whom do you want to compete? Other nations based on the “landed prices” of their product versus your own? Can you survive a 25-percent cut in income to move your product? Will your bank and implement suppliers extend you more credit? Will your crop insurance be available in addition to subsidies, or instead of?

Our Congressional representative Cathy McMorris Rodgers needs to hear from you on this existential issue.

Paul Osborne

Chief Economist (retired) at Puget Sound Power & Light Co. and part-time Odessa resident.