Re: Credit Crunch

Folks,
Here is my argument against export subsidies I outlined in a letter to an
editor who did not care to print it. Two articles were side by side: one
decrying unionization efforts at a warehouse, another celebrating a corp
welfare program.
****
Editor
Wenatchee World
Wenatchee, WA 98801

RE: GSM 102/3

Dear Editor,

Again we read in the Wenatchee World (4/11, page 14) praises being sung for
the Federal GSM 102/3 program to "promote exports" of ag products. In this
day of looking for places to cut welfare, it seems to me that a story covering
such a blatant example of "corporate welfare" would at least make mention of
the negative impact of such programs.

Initiated as a program to help poor countries get access to US food and
nutritional fiber, it is now in fact a way to subsidize at taxpayers' expense
poor credit decisions on the part of US exporters, and by extension, poor
government economic policies overseas.

Anyone willing to wade through the 200 pages of rules and regulations can see
GSM 102/3 really has only 3 requirements:
1. The exporter assures the customer, bank, country and commodity are eligible
for coverage.
2. The exporter gain a letter-of-credit-backed order from the customer.
3. The exporter apply for payment guarantee by the US taxpayers as outlined in
part 1490.30 of the scheme.

The key problem, although it is not mentioned in the article, is no USA bank
would accept any of the letters of credit issued by these buyers' banks. So
if bankers would not touch these deals, why ought we taxpayers? Especially
since the growers can yield the same net by other means.

For example, Russia is not covered in #3. In that instance, growers are
allowed to sell a grade of apple not otherwise allowed for export. The
Russians pay a premium price that reflects risk. Certainly, Brazil can pay a
premium price for the risks associated with doing business there....and in any
event the USA taxpayers ought not pay the premium for the risk of doing
business. That risk belongs to individual companies.

And as an aside, this government intervention in the marketplace creates a
distorted demand for fruit, which in turn causes more trees to be planted,
with the attendant ecological impact. Land devoted to unnecessary orchards is
land not devoted to warehouses and other economically diverse activities.

The same thinking that designs export subsidies also promotes unionised
warehouses; you will never have one without the other, and to take one invites
the other. With both of course, you give up freedom, plus there is the cost
paying those who now tell you how to run your business.

Sincerely,
John Spiers

Bookmark this post --- Email this post