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September 2001

Terrorist act could hurt U.S. agriculture, support programs

WEST LAFAYETTE, Ind. – Terrorist attacks in New York and at the Pentagon could affect United States agriculture should the economy slow further or if Congress shifts money from commodity support programs to national security, say Purdue University agricultural economists.

Philip Paarlberg, a specialist in international agriculture trade, said the financial fallout to American farmers from the Sept. 11 attacks could be substantial.

"One of the issues is that the global economy is weak. Some people feel it is in a recession," Paarlberg said. "Does this make that worse? Probably so. To what extent is a little bit premature to determine. New York was a major international finance and commerce center. These facilities are now offline for the foreseeable future.

"The other issue is redirection of U.S. federal spending. Beefed up security, air strikes or whatever military action they choose to take, is going to cost money. The federal budget now is tight, unlike a few years ago, and so they would have to find this money someplace."

Some of that money could come from farm programs, said Otto Doering, a farm policy specialist.

Doering said work on the 2002 farm bill likely will be postponed, as Congress turns its attention to protecting U.S. citizens from future terrorist acts. Until Tuesday's tragic events unfolded, leaders in the U.S. House and Senate were locked in a political battle over farm bill provisions and spending. Not now, Doering said.

"This has changed the whole set of priorities about what is important and what is not important, and the ag bill is at the bottom of the list right now," Doering said.

The House crafted a 10-year, $75 billion farm bill heavy on subsidies. House leaders hoped to begin debate on the bill this week. The Senate has not yet drafted a bill, but leaders have said they intend to tie many support payments to conservation practices.

Both houses of Congress would have to agree on a final bill before the president could sign it into law. The deadline for passing farm legislation in order to lock in the $75 billion set aside for commodities programs is April 15, 2002.

"I think events take pressure off the Senate leadership to pass a bill they don't like," Doering said. "What they can say now is, 'We have a national emergency, and farmers are taken care of for this year. We've got until 2002 to pass a bill, and we may have less money to spend after April 15.'"

As Washington considers how to retaliate against terrorist groups and the nations harboring them, lawmakers should think carefully before imposing trade embargoes, Paarlberg said.

"The success of embargoes – and we've had a number of them over the years – depends on getting the cooperation of all suppliers," Paarlberg said. "In the case of the 1980 embargo of the Soviet Union, Argentina chose not to join with the U.S. and the other countries. And so, consequently, the Soviets were able to replace embargoed grain with Argentine grain and other products to get around the embargo."

The longest U.S. embargo – placed on Cuba more than 40 years ago when Fidel Castro rose to power – has not stopped Cuba from importing goods from other sources, including wheat from Canada, Paarlberg said.

"Other embargoes, like the ones against South Africa and Iraq, had a broader coalition of participants who were more interested in actually stopping the flow of grain, reducing smuggling and third-party suppliers," he said.

Should it be determined that Tuesday's terrorist acts originated in the Middle East, a unilateral U.S. trade embargo of nations in that region might go virtually unnoticed.

American agricultural exports to Middle East nations are small compared to major U.S. trading partners, Paarlberg said. For example, the United States exported nearly 30 million metric tons of wheat worldwide in 1999, of which only about 2 million metric tons was shipped to the Middle East.

Exports of course grains – corn, barley, oats, rye, sorghum and millet – are greater to Japan than the entire Middle East, Paarlberg said.

"We export 17 to 18 million metric tons of course grains to Japan and about 3 to 4 million metric tons to the Middle East," Paarlberg said.

Sources: Philip Paarlberg, (765) 494-4251; paarlberg@agecon.purdue.edu

Otto Doering, (765) 494-4226; doering@agecon.purdue.edu

Writer: Steve Leer, (765) 494-8415; sleer@aes.purdue.edu

Ag Communications: (765) 494-2722; Beth Forbes, bforbes@aes.purdue.edu; http://www.agriculture.purdue.edu/AgComm/public/agnews/

Purdue News Service: (765) 494-2096; purduenews@purdue.edu


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