bad signs for america

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    In the past weeks, there were two serious economic signs signaling momentous change, if not outright decline.

    The first concerns China's invasion of Canadian oil fields, heretofore a U.S. energy fiefdom. The second came in the form of an all-but-hidden report from the Department of Agriculture that America, the breadbasket of the world, is now a net importer of food.



    OIL
    If the half-dozen planned projects worth $2 billion go through, Canada, our No. 1 energy supplier, could end up sending as much as one-third of its total oil exports to China. One project would give the Chinese a 49 percent interest in a 720-mile-long pipeline running from Alberta to British Columbia. The Chinese are also eyeing an expansion of a second Canadian pipeline system, and they're discussing gaining an interest in companies with oil leases.

    Much of this interest centers on extracting oil from oil sands. In the U.S., prospects for an oil sands development during the energy crisis of the early 1970s never got off the ground. It was discussed along with coal gasification as a possible alternative to what the industry at the time insisted were declining reserves. But when prices were deregulated and rose, along with profitability, all the talk about coal gas and oil sands died down. For the big international oil companies, oil sands historically have been dicey because of the high development cost, and hence reduced profitability. However, as Kang Wu of the East-West Center in Honolulu told The New York Times last week, "For China, it is foremost about securing supply and secondly about profits." And that is one reason China is willing to go so far abroad.

    China's energy consumption is up some 40 percent in the past year, making it the second-biggest energy consumer in the world, ahead of Japan. Its booming economy depends on fossil fuels, especially oil imports.

    By 2020 China is expected to be importing two-thirds of its oil, some 80 percent of it from the Middle East. It currently imports oil from Oman and Yemen, and China has explored deals with Saudi Arabia. Its imports of natural gas come from the Middle East as well as from Australia, and there is a possibility of China importing Caspian Sea gas through an extensive pipeline that would run all the way from Shanghai across the country into the rich Caspian finds of Central Asia.

    As China's energy needs grow, emphasis shifts to protecting supply lines running through South Asia, some of them close to the always contentious straits between Taiwan and China. For the U.S. military, protecting energy supply lines always has been a prime consideration of national security. And these economic shifts in Asia can only mean a further strain on U.S. military operations in that part of the world.

    More immediately, a diversion of Canadian petroleum resources to China is about the worst thing that could happen to the U.S. Since the '70s energy crisis, we have been seeking to diversify supplies, trying to shed our dependence on the Middle East, and as a result the U.S. now relies increasingly on Canada and Mexico. We have always viewed Canadian energy resources as a backup—to be used when we are in need. To say they are taken for granted is an understatement. We view them as our own. Free trade makes that condition even more explicit. If Canada actually begins to commit resources to the Chinese, that will lead to more direct U.S. manipulation of Canadian politics and economics; right-wing Republicans will use the China-Canada deals as one more argument for stepped-up drilling in Alaska, the eastern front of the Rockies, and on the outer continental shelf, all of them areas where remaining U.S. petroleum stocks are located.



    FOOD
    Agriculture, long our largest and most important industry, has heavily influenced American foreign policy. As the push west ended by the turn of the 20th century, we began to struggle to find markets for an increasing food surplus. The isolationists of the 1930s and today's conservative Republicans sought to expand farm exports to friend and enemy alike. We sold quantities of grain to the Soviet Union. Before the first Persian Gulf war, Bob Dole had visited Iraq in part to enhance Midwest grain exports to Saddam Hussein. Before that, at the height of the Cold War, Hubert Humphrey, as both senator from Minnesota and then as LBJ's vice president, concocted the Food for Peace program, which masked U.S. military intervention under the banner of cheap foodstuffs to developing countries that we worried were too nationalistic in their policies.

    But the surplus has suddenly disappeared. For the first time in decades, the U.S. will not turn an agricultural trade surplus, the Economic Research Service reported on November 22. The Agriculture Department couldn't say why. It could not explain how Bush managed to run down a $13.6 billion agricultural trade surplus in 2001 to zero in 2005. "Ironically, the very thing farmers have been told for years would be their savior—a cheaper dollar—is worsening the ag trade balance," the Peoria, Illinois, Journal Star's Alan Guebert wrote in early December. "Despite the dollar's now falling to new lows against most of the world's major currencies, the U.S.'s 2005 ag exports will be $6.3 billion less than in 2004."

    All signs are that the trade balance will get worse. Brazil now exports more soy products than we do. To boost Brazil's strength in soybeans, the Chinese have entered into a trade deal for farm products. They will open their borders to Brazilian beef, soy, and minerals, while China agrees to invest $5 billion to $7 billion in Brazilian roads, ports, and railways. Brazilian agriculture is becoming such a hot item that the Chicago Board of Trade is setting up a Brazilian soybean futures contract so that the financial institutions that have driven American farmers out of business can speculate on Brazil and get in on the action. Russia is growing more grain than expected, as is the Black Sea region.

    Matters will get worse if the World Trade Organization forces us to reduce our trade barriers further. If the quota on Australian beef is abandoned, the market will be flooded with imports. A recent ban on Canadian beef due to mad-cow fears has reduced imports from the north. Once that is lifted, beef imports by the U.S. will increase.

    Homeland Security officials argue that the food supply is not protected from germ and biological contamination. And if there are more imports, that danger will increase, especially because the food industry and Agriculture Department have lobbied hard to turn over inspection to private hands or abandon it altogether. The result, as the Canadian mad-cow experience demonstrates, is to turn the open U.S. border crossings into sluices for serious food-borne disease.

 
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