Keep Congress Out of Your Refrigerator

This is a Commentary On Foreign Aid and Development

Commentary-

Keep Congress Out of Your Refrigerator

By Sara Fitzgerald
June 8, 2003

Apparently, it's not enough for Congress to stick its nose in your wallet. Now, it wants to stick its nose into your refrigerator and pantry. That would be the result if the Milk Import Tariff Equity Act, backed by several members, becomes law. The measure would implement a tariff on ingredients not commercially produced in the United States. And many of those ingredients can be found in products sitting in your refrigerator and pantry right now, such as hot dogs, frozen pizza, baby formula and potato chips.

Even as the United States negotiates free-trade pacts with Australia, Chile and a host of other nations, this measure would impose tariffs on milk protein concentrates (MPCs), casein and caseinates. Casein is the main protein found in milk. Caseinates are salts of casein. MPCs are milk that has been concentrated to remove most of the water and some of the lactose and other solids. These products differ from nonfat dried milk, which is simply dried skim milk with its basic components.

So why would Congress consider a tariff on products that meet all U.S. food safety standards but are not produced domestically? Ostensibly, to protect dairy farmers -- already battered by low wholesale prices -- from further competition. But this makes little sense. According to a 2001 General Accounting Office (GAO) report, these products don't displace milk in the marketplace, and in 1981 the U.S. International Trade Commission found casein imports do not affect the price of milk. It's simply not the same product as milk -- dry or otherwise.

Despite past findings, Sen. Charles Grassley, Iowa Republican, has asked the U.S. International Trade Commission to conduct an investigation into U.S. market conditions for milk proteins. "Dairy farmers believe that imports are contributing to pressure on milk prices," notes a press release issued by Mr. Grassley. "Asking the International Trade Commission to investigate is an important first step to resolving the issue." Dairy farmers have been quick to blame everyone for low milk prices. Recently, the National Milk Producers Federation "told a congressional hearing that one of the major problems with the dairy sector is the U.S. Department of Agriculture's management of several important dairy programs."

Farmers have failed to recognize that overproduction and lower consumption might have a hand in this dilemma. A tariff wouldn't contribute to sales of domestically produced milk; it simply would make these other products cost more. Congress could "help" dairy farmers just as much by raising tariffs on sewing machines and jet skis -- although we wouldn't want to give the members any ideas.

This tariff also would raise the ire of some of our closest trading partners, particularly Australia, which has tried to answer our calls for freer trade by removing many of its barriers only to be "rewarded" with increased tariffs on products such as lamb and steel that it exports. It would hamper negotiations toward a free-trade agreement with Australia and quite possibly invite a trade dispute in the World Trade Organization.

Restraints on free trade, such as tariffs, do nothing to help American consumers and extremely little to help American industries. And in this case, it's even worse. Like cork or rubber or bananas, these products have no American competitors. No one anywhere in America loses a job because these products are imported. Why would we add tariffs that do nothing but drive up prices?

And the damage to your grocery bill could be widespread. Food producers as diverse as General Mills, Kraft, Hershey and Sargento Foods have lined up against the tariff. Virtually all of us -- save a few starving bachelors -- have at least some products made by these firms in our refrigerators.

If Congress wants to help dairy farmers, there are ways to do that. Cut the subsidies that contribute to oversupply and artificially low prices for milk. Allow the shakeout that needs to occur to go forward. Create a leaner, more efficient, more profitable industry the American way -- through competition. But don't pretend to help dairy farmers by driving up the price of a product that has nothing to do with them.

Sara Fitzgerald is a trade policy analyst in the Center for International Trade and Economics at The Heritage Foundation.

Reprinted with permission by The Washington Times

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