Yves here. Michael Hudson explains how the US sought to promote grain dependence as a means of maintaining its economic dominance. Although most of us know that wars are often fought over resources, we don’t often think about the modern era of control of agricultural commodities that serve similar purposes.
By Michael Hudson, a research professor of Economics at the University of Missouri, Kansas City, and a research fellow at the Levy Economics Institute of Bard College. His latest book is The Destiny of Civilization.
A new monthly column for the German newspaper Berliner Wochenende.
Since World War II, US trade strategists have based their international policy on the control of two key commodities: oil and grain. Economically, they were the mainstays of the US balance of payments, the leading categories of net exports (and arms), especially as the US economy was withdrawn.
And politically, these are the basic needs of every economy. US diplomacy sought to make other countries dependent on American grain. In the 1950s, in particular, opposition to the US and Mao’s Communist revolution in China sought to impose a grain embargo on that country. But Canada broke the embargo — building goodwill for decades.
US trade strategists seek to promote grain reliance on American farmers by opposing foreign efforts to achieve grain sufficiency. Most famously, the World Bank from the beginning refused to lend agricultural money to Southern/Third World countries for grain production. Borrowing is limited to promoting tropical crops that do not compete with US farm production. The result is that countries like Chile, the world’s largest supplier of natural guano fertilizer, waste their copper exports by buying US grain they could easily get themselves.
As soon as the seven-member Common Market/EEC was established in 1958, the Common Agricultural Policy became a major area of conflict between the EEC and the United States. This is one of the reasons why US diplomats promote the European Free Trade Area (EFTA) as a competitor. They had expanded America’s harsh agricultural protectionism into trade agreements. President Roosevelt’s Agricultural Adjustment Act, price bases (“equal price”), agricultural extension services and other government subsidies made farm production more profitable than any other country.
It is therefore not surprising that the European CAP sought to achieve similar benefits in its agricultural sector, and subsequent contributions to the trade balance of France, Germany and other member countries. For the EEC, the CAP was a major economic success of the 1960s and 1970s. Europe became a major exporter of grain. There was nothing US diplomacy could do to preserve its previous market dominance in this area.
This success made agriculture an important aspect of French-German negotiations and the EEC expanded into today’s European Community. Obviously, these two leading agricultural producers want to maintain their top position.
It is natural that the new EU member states would like their agricultural subsidies to achieve the same gains in farm production and mutual support. This has been an ongoing political battle within the EU. And it has reached the top with the war in Ukraine, it wants to reach the European market. Its soil is reputed to be the richest and most productive in the world, producing grains, sunflower seeds and other agricultural products.
But again, US diplomatic interests are at odds with those of the EU. American companies have bought a lot of Ukrainian agricultural land, and they want to reach European markets, starting with Poland. Its president Andrej Duda explained the problem in an interview with Lithuanian National Radio and Television:
I would like to pay more attention to industrial agriculture, which is not owned by Ukrainians, is run by large companies from Western Europe, from the USA. If we look today at the owners of many places, they are not Ukrainian companies. This is a paradoxical situation, and it is not surprising that farmers are defending themselves, because they have invested in their farms in Poland. […] and cheap agricultural products from Ukraine hurt them a lot.
The threat to Poland and other European farm producers of low-priced Ukrainian grain has been intensified by two major developments. Ukraine’s access to the Black Sea is blocked, leaving rail transport to the west as the main way to sell its grain. And American firm BlackRock has worked with Ukrainian President Zelensky to organize US and European investment in Ukraine’s industrial-scale agriculture to help provide the country with foreign currency for its NATO-backed war against Russia.
National lobbying interests of Ukrainians have joined the pressure of US officials for duty-free access to the EU grain market. Polish farmers recently sought to block the import of Ukrainian grain to reduce the prices at which they can sell their own grain. Despite the price support for this and other EU farmers, the threat of competition for Ukrainian farms supported by the US is a major obstacle to Ukraine’s membership in the EU.
Thus, it revives the US-European conflict of agricultural interests that has been going on for more than half a century. The extension of the EU’s economic bases for the competitiveness of Ukrainian farms would be, in the field of agricultural trade, equivalent to the destruction of the Nord Stream gas pipeline to damage European prosperity.
US agricultural interests in opposing the EEC’s CAP after 1958 now oppose US investment with today’s EU farm producers.
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