Apparently, the term blowback was coined in a CIA report on its efforts to overthrow the Mossadegh government in Iran. In that report, and since, the term has come to refer to the unintended consequences of government policy. More recently it has been applied to describe the effect of decisions by the U.S. government to have its intelligence agencies support the mujahedeen fighting the Soviet Union in Afghanistan. Several years later, of course, some of these "freedom fighters" masterminded the attacks of 9/11.
What does this have to do with international trade? Although the now-moribund Doha Round negotiations revealed profound disagreements among the world’s major trading powers, it seems that there is one item on which consensus exists: the root of the current impasse is found in agriculture.
So it may be worth recalling why GATT disciplines on agriculture were so weak in the first place. The conventional wisdom, of course, traces the original GATT treatment of agriculture to U.S. policy. The literature here is vast, and the story is complex; for these purposes I’ll summarize the arguments developed by Judith Goldstein in her excellent 1989 piece in International Organization.
The agricultural sector in the U.S. began to decline following the end of World War I, and by the 1920s, agricultural prices began to fall precipitously. Thereafter, the government embarked on a series of programs designed, in effect, to create and maintain artificially high domestic prices. The stock market crash and Great Depression undermined these plans. However, the experience led to a widespread belief among relevant elites that government intervention in this sector was appropriate and necessary. In addition, the experience of the 1920s largely discredited export-oriented recovery plans. Moreover, the accepted economic wisdom in the 1930s was that foreign markets would not be able to absorb U.S. surpluses on a sustained basis.
As a result, policymakers in the 1930s focused on the domestic market. The Democratic Congress that was elected with Roosevelt passed a number of laws designed to create long-term interventions to increase farm income. These laws, inter alia, authorized the government to raise market prices through acreage reduction; authorized payments for farmers who switched from the production of surplus crops; authorized creation of marketing agreements among producers; and authorized price subsidization through direct payments and nonrecourse loans. Significantly, by the time Congress enacted these laws there was general consensus that tariffs were ineffective, at least with respect to agricultural goods. And finally, much of the relevant legislation was passed before and independently of trade liberalization legislation, such as the RTAA. Even post-RTAA agricultural legislation looked to domestic, rather than international markets, to solve agriculture’s economic problems.
Of course, if the government was going to support artificially high prices at home, it had to worry about increased imports undermining its efforts, and the amended Agricultural Adjustment Act mandated import quotas. Several years later, article 22 of the AAA was amended to require the executive branch to restrict agricultural imports notwithstanding any "trade agreement or other international agreement heretofore or hereafter entered into by the United States." This amended language led to the U.S. request for a GATT waiver, which was granted in 1955. Readers of this blog will be familiar with efforts to create disciplines on agricultural policies in intervening years.
I do not wish to suggest that it is possible to draw a direct line from the U.S. experience in the 1920s and legislative reaction in the 1930s to the current impasse over agriculture. The story is much more complex, and would need to account for practices in Europe, Japan, and elsewhere; strategic arguments about the need for self-sufficiency in agriculture; economic arguments about the volatility of agricultural prices; political economy arguments about the ability of entrenched agricultural interests to disproportionately impact policy; and more recent debates over the multifunctionality of agriculture. Moreover, trade politics is fluid rather than deterministic. Nevertheless, it may not be terribly farfetched to see at least the roots of current difficulties as deriving in significant part from a series of decisions made by well-meaning U.S. policymakers in an era when none of them could have imagined either today’s globalized economy or the WTO.
