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Minnesota Views: Phosphate tariff would be another blow to farmers

Kent Kaiser

    This year was supposed to be a moderately good year for farmers, but then COVID-19 hit, and a derecho hit Iowa, and now the agriculture industry is expecting to experience a downturn of over 20%, according to the Food and Agriculture Policy Research Institute at the University of Missouri.

    What farmers don’t need right now is more government meddling to increase uncertainty and to harm their economic outlook even more.

    Yet, at the request of the giant Mosaic Company, the U.S. Department of Commerce is pursuing an investigation into imports of phosphate from Morocco and Russia and could ultimately decide to slap tariffs of 30-70% on those countries’ phosphate exports to the United States. The estimated economic impact of these tariffs would amount to roughly $480-$640 million in additional unexpected fertilizer taxes on U.S. farmers, according to Bob Young, former Chief Economist for the American Farm Bureau Federation.

    The geographic breadth of the impact would also be enormous. One of the most common inorganic fertilizers is diammonium phosphate, used on over 60% of American crop land. For just Minnesota corn growers, the tariffs would cost an additional $46 million or more.

    The issue is so important that eight Republican U.S. Senators wrote to urge the Department of Commerce and U.S. International Trade Commission (ITC) to deny Mosaic’s request.

    Why is Mosaic Company doing this, when it already owns a majority of the phosphate production for fertilizers in the U.S.? The answer is that imposing tariffs on phosphate imports from Morocco and Russia would increase the prevailing cost of phosphates in the U.S. and allow the Mosaic Company, with its $19 billion-plus assets, to charge even more for its phosphate fertilizers than it already does.

    Morocco holds by far the largest phosphate rock reserves in the world and has been a strategic U.S. ally since 1777, when Morocco was the first nation to recognize the independence of the United States, and a treaty on trade was forged shortly thereafter—the longest unbroken partnership in U.S. history. Morocco is a strategic military partner and a country with which the United States should seek to build stronger relationships for the benefit of all Americans, especially those who work in and benefit from the agriculture industry.

    Moreover, trade policy should be more than invoking the “Russia” bogeyman to scare people into bad policy decisions. A healthy trading relationship with Russia that involves importing phosphates to hold down the cost of fertilizers and, therefore, American groceries, is a good thing.

    A tariff on Moroccan and Russian phosphate would be a strategic mistake in addition to amounting to a tax on American farmers and consumers.

    We have seen in recent years how trade wars, tariffs, anti-dumping safeguards, and other measures instituted by the federal government have backfired only to hurt the very farmers the government was purportedly trying to help. In the case of phosphate imports, the current investigation and potential tariff on imports stands not only to hurt farmers but to harm relations with a longstanding world ally and to help a corporate behemoth to shore up its market majority in our country.

    ITC poised to release a preliminary determination on September 21. President Trump should instruct the Department of Commerce to stand down. This investigation should be stopped in order to avert further disruption in the agriculture industry—farmers are facing a tough enough row to hoe.

    Kent Kaiser, Ph.D., is executive director of the St. Paul-based Trade Alliance to Promote Prosperity. TAPP is a coalition of American companies, workers, trade associations, opinion leaders, lawmakers and policymakers committed to building America’s economy by creating jobs through strategic trade partnerships that will drive growth for decades to come. TAPP operates as a force of reason, supporting a common-sense direction for international trade, founded by the guiding principles of protecting American innovation, promoting free trade, supporting global supply chains, strengthening the economies of America’s trade partners, and supporting secure, good paying jobs here at home.