The Fractured Power
How to Overcome Tribalism
The urge to teach someone a lesson seldom inspires sound policy. The lessons learned are too often one's own. So it is with President Carter's 1980 grain embargo. Soviet food supplies have been little affected. U.S. illusions about its own "food power" have been properly dispelled.
The idea of U.S. food power over the Soviet Union was an inevitable diplomatic by-product of U.S. grain sales to the Soviet Union, which had grown very large over the past decade, seemingly in proportion to large and growing Soviet needs. The President finally decided to use this putative power on January 4 of this year, when he suspended delivery of all U.S. grain sales to the U.S.S.R. in excess of the eight million tons guaranteed under the terms of a 1975 bilateral agreement. His announced purpose was to punish the Soviet Union for its military occupation of Afghanistan, begun in late December 1979. Never before had U.S. food exports to the U.S.S.R. been suspended in pursuit of a noncommercial, foreign policy objective. Now, at last, the "food weapon" had been taken from the shelf. For all who cared to watch, a definitive test of its effectiveness was at hand.
In most respects, circumstances in January 1980 seemed tailor-made for a high measure of success. Because of very dry weather early in 1979, that year's Soviet grain harvest had fallen 48 million tons (21 percent) short of production targets. To prevent a severe reduction in the size of its livestock herds, the Soviet Union had made plans, in October, to import an all-time record quantity of grain, 35 million tons in the next 12 months. By far the largest share of these anticipated grain imports (about 25 million tons, or nearly three-quarters of the total) were to be supplied by the United States, which had just completed a bountiful harvest. Meanwhile, owing to record demand, a poor harvest, and transport bottlenecks throughout much of the rest of the world's grain trading system, major suppliers other than the United States were less prepared than usual to assist in meeting Soviet import needs. If the Soviet Union would ever be vulnerable to U.S. food power, this seemed the time.
Yet, a closer look at the situation-and at history-might have suggested that, whenever food exports are manipulated in pursuit of noncommercial objectives, the odds are stacked heavily against success. This is because any effective exercise of food power requires an unbroken chain of favorable developments, in three distinct arenas, all at the same time.
First, within the political system of the nation seeking to exercise food power (in this case, the United States), foreign policy officials must be able to maintain control over the volume and over the direction of their own food exports. This is no simple task in the United States, which has no government grain marketing board, and where powerful producer and trade groups have traditionally resisted government restrictions on overseas sales.
Second, within the bounds of the international food trading system, other countries and transnational corporations must be prevented from "leaking" embargoed U.S. grain into the target nation, through transshipment or deception. Other food exporting countries must also be dissuaded from expanding or redirecting their own food exports to replace embargoed U.S. food sales to the target country.
Third, within the political and economic system of the target nation (in this case, the Soviet Union), the intended reduction in food imports must be adequate and appropriate to produce the desired effect.
Like a three-linked chain, the President's 1980 grain embargo had to hold at each of these points, if it was to hold overall. An embargo that fails at any one of the three will fail altogether.
As might have been expected, the President's embargo has failed to meet this strict requirement for success. The embargo did enjoy some initial success at Point One, when for several months it received broad-based political support within the United States. But this temporary success was possible only at a growing cost to taxpayers, and also, in part, because the embargo was simultaneously breaking down at Point Two, within the international grain trading system. There the embargo has triggered a significant expansion of Soviet grain imports from nations other than the United States. Speculating a bit, even if the embargo had somehow managed to succeed at both Points One and Two, it would probably have failed at Point Three, within the Soviet Union.
Before its domestic audience, the grain embargo was a surprising short-run political success. Widely anticipated farm state opposition to the embargo did not materialize for several months. Scarcely two weeks after the President announced that 17 million tons of U.S. grain ($2.6 billion worth of farm products in all) would not be sold to the Soviet Union in 1980, he confounded and silenced most of his critics by winning a two-to-one margin of victory in the Iowa Democratic Party caucuses. Farm lobby groups, mindful of a rising patriotic tide in support of the President, gave their tentative endorsement.
Many of these groups had assumed that President Carter would never dare to interrupt U.S. grain sales to the Soviet Union, at least not in an election year, and certainly not on the eve of the Iowa caucuses. After all, it was candidate Carter who had pledged to those same Iowa farmers, prior to the 1976 party caucuses, that under his Administration there would be "no more embargoes." Producers and exporters seemed well positioned to hold him to this promise. When President Ford, late in 1975, had tried to place a temporary curb on grain sales to Russia (initially to limit food price inflation in the United States), he immediately encountered an angry and well-organized farm state protest. Perceiving damage to his own 1976 election prospects, Ford had hastened to lift that embargo after only two months' time. U.S. grain sales to the Soviet Union were resumed-and a five-year bilateral purchase and supply agreement was reached-without Ford's gaining any of the concessions on low-cost Soviet oil exports to the United States that he had stipulated, at one point, as a necessary condition for lifting the embargo.
The only initial resistance to President Carter's embargo came not from farm groups, but from the International Longshoremen's Association (ILA), which immediately announced that it would block all further grain exports to Russia, including an undelivered 2.5-million-ton portion of the promised 8 million tons that the President had felt obliged, under the terms of the 1975 bilateral agreement, to make available. It was not until early March that the ILA could be persuaded, through private arbitration, to resume loading these committed grain cargoes on ships bound for the Soviet Union. However embarrassing this first domestic challenge to the President's action, its short-run effect was to strengthen, not weaken, the initial impact of the grain embargo on the Soviet Union.
The President's embargo policy achieved its early political success at home as a result of several factors not present when his predecessor suspended grain sales to the U.S.S.R. in 1975: the clear authority which was given to the President under the 1979 Export Administration Act, to deny validated export licenses for reasons of national security; a momentary fever of patriotism and a renewed deference to presidential leadership (which resulted from the hostage crisis in Iran, as much as from the Soviet invasion of Afghanistan); and not least of all, the lavish compensation which was immediately extended to U.S. grain producers and exporters affected by the embargo.
To hold the support of farmers and grain exporters, a variety of compensatory measures were taken. First, to protect exporting firms that had already purchased large quantities of grain earmarked for delivery to the Soviet Union, the U.S. Department of Agriculture (USDA) announced that the Commodity Credit Corporation (CCC) would step in to assume the contractual obligations of exporters for undelivered embargoed grain. This unusual improvisation, arranged in haste over a weekend following the President's televised announcement, did avert a panic sale of grain futures contracts, which would have meant catastrophic losses for export firms, and a subsequent collapse of farm prices. The CCC eventually took ownership of 4.2 million tons of wheat and 9 million tons of corn, at a short-run cost to the government of about two billion dollars, and then temporarily isolated this embargoed grain from the market, as best it could, through a technique of "rolling forward" contracted port delivery dates. Plans were made to hold some of this grain-the 4.2 million tons of wheat-in an emergency food reserve. But by midsummer, the CCC had managed to "retender" most of its embargoed grain back into market channels.
Producers were concerned, during this retendering process, that the government, having bailed out the big export firms, was now acting to depress their farm prices. But USDA had earlier taken care to provide a variety of direct benefits to producers. At an immediate cost to taxpayers of several hundreds of millions of dollars, government "loan prices" for wheat and corn were increased, to guarantee producers more for the grain which they can pawn to the government. The President raised these loan prices still higher in July. "Release" prices were also raised, to allow market prices to go a bit higher before surplus grain could come out of reserve. Compensation for grain storage on farms was increased, the heavily subsidized "farmer-owned reserve" was substantially enlarged, and interest costs on grain entering that reserve were waived.
Despite these market-tightening measures, 1980 farm prices did not keep up with fast-rising production costs, and farm support for the embargo eventually began to falter. The American Farm Bureau withdrew its support for the embargo in April, charging that the Administration had failed in its promise to protect farmers from adverse price effects. Congressional concern was aroused in June, following a USDA forecast that net farm income could decline by as much as 40 percent in 1980. Legislation to end the embargo was introduced in both Houses, under wide and growing bipartisan sponsorship. On the eve of receiving his party's nomination, Republican presidential candidate Ronald Reagan then promised, when elected, to "terminate" the embargo, which he now called a "financially painful burden on the farmer," that had also entailed, by his estimate, a one-billion-dollar net loss to U.S. taxpayers.
In truth, the Carter Administration had done its best to hold down taxpayer costs in its management of the embargo. The President's budget-cutters insisted, despite the embargo, that there be no paid "acreage diversion" program for either wheat or corn in 1980. Such a program might have cost an additional billion dollars, but it would have offered some safeguard against record plantings this year, and downward pressure on prices. These pressures emerged when an all-time record U.S. winter wheat harvest was completed under ideal conditions, before the summer heat wave struck. Without acreage diversions, expanded 1980 plantings of spring wheat and corn then tended to offset the very bad summer weather, containing prices just enough to stimulate new demands for federal help, and fueling discontent with the embargo.
By July, Administration officials were clearly on the defensive, facing down congressional critics, and denying frequent rumors that the embargo was about to be lifted. Just how to lift the embargo might itself someday become a problem. Unlike the Olympic boycott, which could die a natural death as the summer games came to an end, the grain embargo would require an awkward act of termination, awkward as long as Soviet troops remained in Afghanistan. An added difficulty will be the obligation, which the Administration has promised to honor, to permit a limited renewal of U.S. grain deliveries to Russia in any case. Beginning October 1, the Soviets are to be permitted to take up to eight million additional tons, during the fifth and final year of President Ford's 1975 U.S.-Soviet bilateral grain trade agreement. The President will be hard pressed, when these scheduled deliveries begin, to persuade his political audience that he has not suddenly reversed his grain sale policy once again.
Larger federal subsidies for farm prices, and deeper federal involvement in the farm sector, are legacies of the embargo that will linger on even if it is eventually lifted. Domestic grain producers view the embargo as more than just a temporary loss of export opportunities. They doubt that the Soviet Union will ever again, any time soon, make plans to buy so much U.S. grain, even if given official permission to do so. They expect to be compensated by the taxpayer not just this year, but also into the future, for continuing damage they claim to have sustained.
In fact, U.S. grain producers tend to exaggerate the damage done to their export opportunities by the embargo. Direct sales to the Soviet Union may have been constrained in 1980, but a surge in exports to other customers has largely offset this loss. The volume, the value, and also the market share of U.S. exports of wheat and corn all grew in 1980, and the U.S. agricultural trade surplus continued to widen, despite the embargo. In the first seven months of fiscal 1980, U.S. agricultural exports were 34 percent, by value, above the level of a year earlier. By volume, wheat exports were up by 26 percent, corn by 37 percent. A sharp drop in net farm income in 1980 had been forecast long before the embargo, and can be blamed more on fuel costs and interest rates than on the loss of the Soviet market. Farmers have sought to use the embargo as added justification for gaining federal assistance that many would have sought in any case.
If the 1980 embargo had in fact sharply constrained U.S. grain export opportunities, farm state resistance would have come sooner, and would have been much sharper. To understand why U.S. grain exports have continued to grow, despite the embargo, we must turn to the behavior of other actors in the world grain trading system.
The international grain trading system was the second point at which the President's embargo had to succeed, and it is the point at which the embargo has proved itself most prone to failure. Within the world market, a unilateral food power exercise must survive several kinds of difficulties. First, an effective unilateral embargo must not leak. U.S. grain must not be transshipped to the U.S.S.R. (reexported through third countries, or through multinational trading firms). At the same time, competing suppliers must not redirect or otherwise expand their own grain sales to the Soviet Union. All the while, the diplomatic cost to the United States of preventing or limiting trade shifts or leakage must not outweigh the benefit.
Transshipment of U.S. grain was the first and most obvious threat to the embargo within the international arena. Nearly 100 million tons of U.S. grain entered world commerce in the past year, bound initially for destinations other than the U.S.S.R. Some portion of this total, once it left U.S. shores, was bound to find its way, by an indirect route, to the Soviet Union.
One broad avenue of transshipment was through Eastern Europe. Warsaw Pact countries were planning, prior to the U.S. embargo, to import about 16 million tons of grain in 1980, mostly from the United States. In the months following the embargo, that import total grew to more than 18 million tons, despite this year's vastly improved East European harvest prospects. Roughly two-thirds of these total imports were feed grains, precisely what the Soviets desired the most. The only sure way to prevent the leakage of embargoed U.S. grain through Eastern Europe would have been to do what President Ford was forced to do in 1975: enlarge the scope of the embargo to include one or more Warsaw Pact countries. Ford had decided to include Poland in the 1975 embargo. To repeat such a step this year would have entailed an added diplomatic cost, as it would have broken the spirit of a bilateral grain sale agreement which was reached with Poland, a large and important U.S. grain customer, following the unpleasant 1975 embargo experience. Expanded sales of U.S. grain to Eastern Europe were thus permitted to continue, inviting leakage and irritating competing suppliers in Canada and Western Europe, who had been asked to exercise export restraint. "You'd have to be pretty naïve to believe that increased exports to that area would not find their way to Russia," complained the president of the Saskatchewan Wheat Pool, as Canadian support for the embargo began to weaken last spring.
Another sort of transshipment has also threatened the embargo. The five largest private grain trading firms (which handle 85 percent of U.S. grain exports) are genuinely multinational in structure and in character. Even those firms which are headquartered in the United States do much of their business through overseas affiliates. Cargill, for example, uses a Geneva-based affiliate, Tradax, to make many of its sales. Secretive and competitive as they are, these multinational firms have a well deserved reputation for discretion and ingenuity when it comes to servicing the needs of their largest and wealthiest customers, most notably the Soviet Union, which can readily pay for its grain imports this year by selling gold at 1980 prices. To deter export firms from making secret sales of U.S. grain to the U.S.S.R., a so-called sting operation was talked about last February, within USDA. The Agriculture Department, which has long seen its mission as the promotion of U.S. food exports, seemed an unlikely enforcement agency for the embargo. All the same, export firms claim to have abided by the terms of the embargo, even to the point of joining an "informal agreement" with USDA to restrict overseas sales of non-U.S. grain to the Soviet Union, an agreement which lapsed in June. It is the nature of secret sales that they can often remain a secret, so trade publications could only guess, early in the year, that five million tons of U.S. grain would sooner or later leak through to the Soviet Union in 1980, transshipped via East and West European channels. These first leakage estimates were probably high. As it turned out, the Soviets did not have to use large transshipments of U.S. grain to evade the embargo.
Far more damage was done to Carter's embargo in 1980 by expanded and redirected exports of non-U.S. grain to the U.S.S.R. The United States does supply more than half of all grain entering world markets every year, including nearly three-quarters of the world's feed grain exports, corn primarily, which is what the Soviet livestock industry needs the most. The other grain-exporting nations, such as Canada, Australia, France, Argentina, South Africa and Thailand, have for some time been supplying a declining share of total grain exports, and they supply much less altogether than the United States alone. These nations did not have the short-run capacity, merely by expanding production, to replace fully the 17 million tons of U.S. grain which the President had hoped to deny to the Soviet Union in 1980. They could, however, enlarge their exports temporarily, by drawing down surplus stocks. They could also redirect their grain exports, away from traditional customers, and toward the Soviet Union. By offering premium prices, the Soviet Union has made it worth their while to do both.
To dissuade other suppliers from expanding or redirecting their grain exports to the U.S.S.R., the United States hastily organized a conference of grain-exporting nations in Washington, during the week following the President's January embargo announcement. At that conference, Canada, Australia and the European Community (EC) made a public pledge to hold their 1980 grain sales to the Soviet Union down to "normal" levels. Unfortunately for the United States, grain exports to the U.S.S.R. from these three sources have varied so much in the past that considerable growth can occur in any one year, and can be defended as "normal." Even so, the growth in exports which did occur was so great as to constitute a clear hedge on earlier promises, and a major setback for the embargo. Measured against average volume over the previous seven years, 1980 grain exports to the Soviet Union from these three suppliers, during the trade year which ended in June, more than doubled, increasing by about five million tons.
The Australian government has most conspicuously exceeded its past levels of grain sales to the U.S.S.R., selling more this year than in the previous four years combined. Having yielded to intense pressure from its own grain producers and exporting organizations, Australian officials now plan to continue these expanded grain sales to the U.S.S.R., at the newly established "normal" level of nearly four million tons a year. Depending upon how this year's weather has affected crops in Canada, Australia could use these expanded sales to the Soviet Union to move into a position as the second-largest wheat exporting nation in the world, after the United States.
Canada's grain production and export organizations, long troubled by transport, labor and logistical problems, have been openly resentful of this year's embargo restrictions upon larger sales to the Soviet Union. By observing some export restraint, they claim to have sustained income losses of up to 57 cents a bushel. All the same, Canada allowed its sales to the Soviets to increase by about 50 percent in 1980, and has hinted at a further increase in the coming year.
The EC, which began the year with seven to eight million tons of exportable wheat and cereals on hand, has also faced a strong temptation to hedge on its promise to support the embargo. Finding overseas buyers for surplus grain has long been a headache for the Community, one that frequently requires the application of expensive export subsidies. Expanded sales to Russia by French grain cooperatives began within a month of the President's embargo announcement.
Real damage was done by these expanded exports from nations which had endorsed the embargo. Still, the greatest damage was done by one nation which had not-Argentina. Argentina is the world's second-largest feed grain exporter, after the United States, and in recent years has been a regular supplier of modest quantities of wheat, corn and grain sorghum to the Soviet Union. The 1980 Argentine corn and sorghum harvest, which began in March, was a major disappointment, the poorest in four years, due to drought conditions earlier in the season. But this poor harvest did not prevent Argentina from expanding its grain exports to the Soviet Union, openly profiteering at the expense of the U.S. embargo. By redirecting its normal pattern of trade-reducing customary exports to Italy, Spain, Japan, Chile and Peru-Argentina was able to offer nearly all of its exportable corn and grain sorghum surplus this year, about 4.5 million tons, to the Soviet Union. The incentive to do so was an attractive price, as much as 25 percent above the American selling price, paid willingly by eager Soviet purchasing agents.
The United States made several futile attempts to dissuade Argentina from redirecting its 1980 grain exports toward the Soviet Union. Argentine officials were invited to the Washington exporters' conference in January, but they refused at that meeting to promise any restraint, complaining that they could not be expected to join an embargo initiative which had been taken unilaterally by the United States, without prior consultation. Argentina held firmly to this position, despite the pleadings of a special U.S. emissary, General Andrew Goodpaster, sent to speak with President Videla in Buenos Aires. During these talks, leaders in the Argentine junta are said to have asked when the United States would stop denouncing human rights violations in their country and resume military sales, which had been cut off by Congress over that issue.
Soon thereafter, the Soviet Union sent its own emissary to Buenos Aires, Viktor Pershin, Director of the Soviet grain purchasing agency, Exportkhleb. Immediate sales for 1980 were arranged, and negotiations were subsequently completed on an agreement whereby Argentina would supply the Soviet Union, over the next five years, with at least 20 million tons of corn and grain sorghum, and with 2.5 million tons of soybeans. These vastly expanded grain and feed sales are to become the centerpiece of what is suddenly a booming Soviet-Argentine commercial relationship. The Soviet Vice Minister for Foreign Trade visited Argentina in April, and predicted a tripling of total trade volume between the two countries, to include increased cooperation in the nuclear energy field.
If the embargo continues, it could soon be further weakened by sales from several other Southern Hemisphere food exporters, including South Africa (corn), Thailand (corn, rice and tapioca), and Brazil (corn and soybeans). Brazil has an exportable surplus of corn for the first time in two years, and its 1980 soybean harvest was half again as large as last year's crop. It would be something of an irony if Brazilian soybeans were to further weaken the U.S. food embargo. Brazil only recently became a major soybean exporter, largely as a result of an earlier U.S. food embargo, the momentary soybean embargo of 1973 (designed to check food price inflation in the United States). This embargo "shocked" the Japanese into making much larger investments in the now flourishing Brazilian soybean industry.
It is of interest that even India has provided Russia with grain this year. India was able to export to the Soviet Union about two million tons of its "surplus" wheat, partially in repayment for an earlier Soviet wheat loan, and partially in barter for Soviet oil.
These shifts which have occurred in grain trading patterns since the embargo are not all bad for U.S. exporters, and are not all bad for the world's food system as a whole. Markets abandoned by competitors, in their haste to sell to the U.S.S.R., have in part been filled by the United States. Hence the surprising volume of U.S. exports this year, despite the embargo. While losing a big part of the large but unpredictable Soviet market, U.S. exporters may be gaining some smaller but more steady customers. Of course, these new customers must first be persuaded that the United States is a reliable supplier, and that they are not to be the next target of a U.S. food-power exercise. Also, because the embargo has produced some diversification of Soviet grain imports, the market disruptions so often associated with those imports may now be reduced; Soviet purchasing agents buying grain from a larger number of suppliers, and in smaller quantities, will find it more difficult to surprise the market than in the past. As one final benefit, the hasty buy-up of embargoed grain did stimulate the United States to establish a much needed four-million-ton food reserve, to meet emergency needs in poor countries. Unfortunately, the embargo has also made far less likely the participation of the Soviet Union in a truly multilateral food reserve system. Prior to the embargo, Soviet officials had been playing a far more positive role than ever before in the on-and-off negotiations to establish such a system.
Assessing the situation now, it is better to continue searching for redeeming side effects than to redouble diplomatic efforts to plug leaks in the embargo. Those leaks, together with shifts in trade, have practically eliminated the value of the embargo as an instrument of denial. By USDA estimates, the Soviet Union was able to import, from all sources, a total of 31 million tons of grain during the trade year that ended in June-more than in any previous year in its history, and only 2.5 million tons less than it had planned to import prior to the embargo announcement.1 If this embargo must continue, then its many leaks should probably be allowed to continue as well. The diplomatic cost to the United States of seeking to make the embargo more effective would surely outweigh the benefits.
Added to these diplomatic costs is another concern, a concern that this embargo, even if made effective in the world market, might not yield its intended effect at the third point in the food power process. Even if the 1980 grain embargo had somehow managed to hold within the United States, and within the world's grain trading system, it might yet have failed to produce the desired result within the target nation, the Soviet Union.
What would constitute success for the embargo within the Soviet Union? Accepting the President's language, the embargo had a highly limited but clearly stated purpose. The announced objective was not to force the Soviet Union to remove any or all of its occupying troops from Afghanistan. The objective was not to deter a further act of Soviet aggression. If it had been, it would have made greater sense to continue grain exports on a conditional basis. Nor was the announced purpose of the embargo to force the Soviet Union to spend more on agriculture, and therefore less on arms, though this might have been an unannounced purpose. The purpose of the grain embargo, as stated by the President, was simply to punish the Soviet Union for its invasion of Afghanistan. The President used the diplomatic double negative, explaining that the Soviets should not be permitted to commit such an act "with impunity." Accepting this announced objective at face value, the embargo would have been a success if it had managed to inflict a significant dose of pain upon the Soviet Union, by damaging the Soviet livestock industry.
Because of the seasonal import needs of the Soviet livestock industry, it is best to provide a three-part estimate-short, middle and long run-of the damage that might have been done by a well-disciplined U.S. grain embargo.
In the very short run (during the six months before grain from the 1980 Soviet harvest began to become available for feed use, in late July), if denied access to imported feed supplies, the Soviet Union might have been required to conduct what is known as a "distress slaughter" of livestock. Such an action increases the quantity of meat available for consumption in the very short run, but makes vastly more difficult any sustained increase in meat production in the long run. The Soviets last conducted such a distress slaughter following a weather-related crop disaster in 1975. Even with the benefit of record grain imports at that time, it then required about three years to rebuild livestock numbers back up to pre-1975 levels. In the meantime, per capita meat production stopped growing. The punitive design of the 1980 U.S. grain embargo was to trigger another such disruptive cutback in Soviet livestock numbers.
The embargo has failed in this short-run objective. The Soviet Union was able to feed 126 million tons of grain to livestock during the year which ended in June, which is one million tons more than last year, and only two million tons below the quantity that had been forecast before the embargo. This two-million-ton difference translates into a three percent short-term feeding cut-back attributable to the embargo, since it was compressed into the six month January-June period. From a Soviet perspective, this three percent embargo-related feeding cutback does not begin to approach setbacks of the recent past, such as the 20 percent feeding cutback from the trend of that period which followed the 1975 Soviet harvest failure. For that matter, it is also much less dramatic than a feeding cutback experienced not too long ago by the U.S. livestock industry. Because of a very bad corn crop and high feed grain prices in 1974, U.S. livestock producers reduced grain feeding by almost 30 percent.
To explain the short-run survival of Soviet livestock herds, we must look beyond leaks in the embargo. Equally important, this past spring, was the decision of the Soviet Union to draw a very large quantity of grain-estimated at 17 million tons-out of its own food reserves. This decision was not without precedent. Soviet stocks had been drawn down by about 16 million tons following the poor harvest of 1977. Although the total size of Soviet grain reserves is a well-guarded state secret, outsiders could scarcely doubt the availability of these extra supplies on this occasion. Assisted by a heavy volume of imports, the Soviets had been able to build their stocks by adding an estimated 19 million tons following their very successful 1978 grain harvest (which came in at a record 237 million tons). Even if the 1980 embargo had not leaked, the Soviets might have been able to meet much of their short-run need, by removing even larger quantities of grain from their own reserves.
Saved by its own grain reserves in the short run, the Soviet livestock industry has now been saved by good weather in the middle run. The 1980 Soviet grain harvest looks to be a well-timed success. That harvest has been estimated at 210 million tons, 15 million tons above the average over the past five years, and more than 30 million tons above the 1979 harvest. Had this year's harvest failed, the Soviet livestock industry, having struggled to survive the spring and summer by drawing down reserves, would almost certainly have been forced into substantial herd reductions. It might then have appeared that the President's embargo was working.
In fact, with bad weather and a poor harvest in 1980, Soviet livestock herds would have been sharply reduced even without a U.S. grain embargo. In the middle run, Soviet weather fluctuations are of much greater significance than the deprivation that could result from any imagined U.S. embargo. Year-to-year variations in Soviet grain production can be as great as 84 million tons (as in 1976, relative to 1975). This huge potential variation in production is always the dominant middle-run concern for Soviet livestock managers, much more than the 17-million-ton difference that might have been made by a well-disciplined embargo.
In the longer run, over more than the next year or two, a well-disciplined grain embargo could do very serious and lasting damage to the Soviet livestock industry. Drawing down stocks can save the Soviets in the short run. Unusually good weather can even get them through the middle run. But in the long run, very bad weather will sooner or later strike when stocks are low. Under these circumstances, without a very large volume of grain imports, the Soviet Union would not be able to continue to expand its livestock herds at the desired rate. If a tight U.S. grain embargo could be maintained over the long run, the Soviet Union might be forced to abandon its present plans for a dramatic increase in the meat component of the Soviet diet.
Not that this long-run prospect should inspire efforts to keep the embargo in place. The longer any U.S. embargo continues, the more likely it becomes that new sources of supply will emerge. Argentina is the obvious candidate to take over, permanently, a sizable share of the Soviet market. If Argentine farmers begin to use high-yielding varieties of grain, and if they bring more land under cultivation, their annual harvest could very well double in the coming years, from 25 million tons up to 50 million tons.
The long-term promise of an embargo would also be clouded by a second and more speculative judgment. If a U.S. grain embargo were to accomplish its announced long-run purpose, if it were to force Soviet leaders to abandon their present hopes for a rapid increase in per capita meat consumption in the U.S.S.R., then it might be doing those leaders a curious favor. What better excuse than a foreign policy crisis-a grain embargo-to rethink the grandiose agricultural objectives of the Brezhnev era? For the past dozen years, the Soviet leadership has deceived itself in pursuing a costly plan to upgrade rapidly the Soviet diet. Neither Soviet agriculture nor the rest of the Soviet economy can yet provide an adequate base to support diets rich in meat. Even with the unprecedented grain imports of the past decade, plans for a rapid increase in meat production were not being fulfilled.
The Soviet Academy, some time ago, established a "scientific" meat consumption norm of 82 kilograms per capita, or about three-quarters of the U.S. level. Even before the embargo, the Soviets were making little or no progress toward this presumed goal. After reaching a high of 57 kilograms in 1975, per capita meat consumption had stopped growing. In 1978, the planned rate of growth in per capita meat consumption for the upcoming 1981-85 plan period had been set at only 1.5 percent, which was well below the unfulfilled goal of the present plan period. Soviet meat production in 1979, before the embargo, had actually fallen below the quantity produced in 1978. Soviet leaders were forced to revise their 1980 meat production goals further downward. At the time Carter announced the embargo, Brezhnev's meat production program was already going nowhere.
Is it good policy for the United States to seek to inflict a small bit of added pain upon an already failing Soviet meat production program? Does the United States wish to be seen as responsible for a major Soviet food policy failure, a failure that would have become increasingly obvious even without an embargo? If the U.S. embargo had continued without leaks, it might have provided a unique opportunity for Soviet leaders, most logically Brezhnev's successors, to abandon their costly meat consumption program without having to admit to their own people the failures of state farming. These failures could have been obscured, if necessary, behind calls for sacrifice and retrenchment, to blunt the hostile designs of enemies of socialism abroad. Soon after the embargo was announced, the Soviet press rallied the people to resist-as they had during the siege of Leningrad in World War II-this new attempt on the part of a foreign enemy to "create famine" in the Soviet Union.
Nor would a tight embargo force the Soviets, necessarily, to spend more on agriculture and less on arms. The effect might be the opposite. Soviet leaders have not been using their grain imports as a "low cost alternative" to larger investments in their own agricultural sector. Those imports, over the past decade, have been just one part of an extremely lavish and increasingly expensive agricultural program. Agricultural investments have been steadily expanded, under Brezhnev, from 20 percent up to 27 percent of total annual capital investment. The Soviet government has been throwing an estimated $50 billion every year into investments in agriculture, a staggering amount, roughly five times as much as the United States. The Soviet farm price subsidy program, though it offers little as a production incentive, has been running out of control. Outlays were increased by 15 percent in 1978 alone, and these subsidies are now the most expensive of their kind anywhere in the world.
It is difficult to imagine the Soviet Union spending much more on agriculture than it is already. In response to a well-disciplined U.S. grain embargo, Brezhnev or his successors might instead be prompted to reassess the costs of pursuing an unrealistic meat consumption objective. Should that objective then be set aside, or the timetable for its attainment stretched out, less money might be spent on Soviet agriculture, and given Soviet fears of Sino-American encirclement, more might be spent on arms.
It is said that the Soviet consumer would not tolerate his government abandoning the well-publicized meat consumption objectives of the Brezhnev era. True, perhaps, in an atmosphere of détente. With a return to confrontation, under conditions of a continuing grain embargo, austerity might well be accepted as a patriotic duty. Care should be taken not to offer to the Soviet leadership this avenue of escape from its own food policy failures.
With such little chance of success, and with clear costs attached to failure, why did the President select a grain embargo as part of his response to the Soviet invasion of Afghanistan? By doing so, he went against his own better judgment, and against his own campaign promise, that U.S. food exports should not be used as a "weapon."
Perhaps the embargo decision was taken as a gamble on the weather. If this year's Soviet grain harvest had failed badly (the odds were at least one in five), the President's embargo would have seemed, to those with little information, a principal cause of the resulting damage. A claim could have been made that punishment had been inflicted. At the same time, on the chance that bad weather might hurt the U.S. grain harvest this year, a restriction on large sales to Russia might have seemed a prudent step to help steady food prices at home. But the odds, last January, were very long against winning both ends of this gamble. If hot and dry summer weather had done any less damage to this year's U.S. corn crop, the President might actually have found himself losing this gamble both ways.
In fact, the haste with which the President's decision was taken suggests a more immediate and less calculated set of concerns. However slim its chance of success, the grain embargo must have appeared, last January, as more attractive than the alternative. The alternative was to continue with plans, which had been made the previous October, to sell in 1980 an all-time record 25 million tons of U.S. grain to the Soviet Union. For reasons unrelated to domestic food prices, these sales would have proved at least as embarrassing to the President, this year, as his ineffectual embargo. Without an embargo of some kind, the President would have found himself presiding over the largest "Russian grain deal" on record, much larger than Richard Nixon's still remembered sale to the Russians in 1972, the so-called Great Grain Robbery. To important allies abroad, this would have been an inappropriate token of the Administration's new policy toward the Soviet Union, so soon after Afghanistan. Likewise, to his political audience at home, these sales would have raised large doubts, at the time, about the President's capacity to make hard decisions. Politically, the only thing worse than announcing a grain embargo two weeks before the Iowa caucuses would have been not to announce such an embargo. The President's entire foreign policy would have appeared hostage, in a moment of crisis, to a few Iowa corn growers.
More than this, if the President had not announced his grain embargo on January 4, we can guess that within a week the International Longshoremen's Association would have proceeded on its own to block grain shipments to Russia, as it has on several occasions in the past. Should the President then acquiesce in such an action, following meekly behind renegade labor leaders, thereby getting all of the pain but none of the credit for an embargo policy? Or should he send his lawyers to plead the U.S.S.R.'s case in court, and be seen begging the ILA to allow U.S. grain to reach the Soviet transgressors? When viewed against these alternatives, and when supplemented with more substantial measures to improve the security of U.S. interests in Southwest Asia, the grain embargo was not so much a serious mistake as an unhappy necessity.
A similar logic of political necessity may eventually require a lifting of the embargo. Producers and exporters hope to be able to force a policy reversal, with or without a change of Presidents in January. But such an end to the embargo would not restore the status quo ante. Nor should it. No future President should wish to find himself uncomfortably positioned, as was President Carter earlier this year, with his most visible trade and security policies toward the Soviet Union moving in opposite directions. Nor should any future President wish to expose his domestic food and farm policies, as much as in the past, to the disruptive consequences of large and largely unregulated grain sales to the U.S.S.R.
Perhaps an error was made in 1972, when then Secretary of Agriculture Earl Butz promised Leonid Brezhnev that the Soviet Union would be "absolutely safe" in building up its livestock herds with grain from the United States. Given the dominance of strategic concerns between rival superpowers, given the volatility of the U.S. political system, and given the obsessive secrecy of the Soviet system, no such assurance could or should have been given. The recent intensification of superpower rivalry is only one part of the grain sale problem. Even in the early honeymoon of détente, large and unpredictable U. S. grain sales to the Soviet Union proved more trouble than they were worth, at times, for both parties. The United States suffered from exposing its food and farm economy to the disruptions caused by "hit and run" Soviet purchasing tactics. It could never be known far enough in advance just how much U.S. grain the U.S.S.R. would buy. The Soviets suffered, in turn, whenever U.S. fears of an untimely sale led to surprise export interruptions, as in 1974 and 1975.
The 1975 bilateral agreement took some of this fear out of the market, but the agreement remains an imperfect means to control commercial disruption. Under its terms, the United States promised to make eight million tons of grain available to the Soviets every year. Larger sales would require official approval, year by year. But constant pressure from U.S. producers and exporters led to much larger offers, every year, of sales double or triple this minimum amount. The Soviets, meanwhile, refused ever to give assurance in advance that they would buy more than the rather low six-million-ton minimum purchase requirement specified in the agreement. Even with the grain agreement, U.S. farmers, traders and policy officials went into every season with few clues of what to expect from the Soviet market.
The continuing invasion of Afghanistan has now overshadowed these commercial difficulties. Still, one possible occasion for ending the embargo might be a renegotiation looking to an extension of the bilateral grain agreement, which is due to expire October 1, 1981. As a part of this renegotiation, the minimum Soviet purchase requirement ought to be raised. Alternatively, the Soviets might at least be required, on a year-by-year basis, to match any temporary increase in U.S. offers to sell with an increase in their own commitments to buy. More likely, of course, the Soviet Union will shun a renegotiation of the grain agreement, as long as the embargo remains in place, to avoid any appearance of dealing with the United States from a position of weakness. If their hope is to resume importing large quantities of U.S. grain, they might simply take their chances on a new President, or on political pressures in the United States for a timely policy reversal without a new agreement.
Then again, a different kind of Soviet action may eventually ease the grain embargo dilemma. If the Soviets, in response to the 1980 embargo, should decide to slow the growth of their own grain imports, or to persevere in a further diversification of those imports, then the troublesome question of mammoth U.S. sales to the Soviet Union, in future years, might not arise. If U.S. grain exports can then continue to grow, free from their previous degree of dependence upon these mammoth sales, something useful will have been salvaged from the embargo experience by both superpowers.
1 In April, amid publicity over embargo leakage, USDA suddenly raised its estimate of Soviet pre-embargo July-June grain import intentions, from 34 million tons, up to a previously unheard of level of 37.5 million tons. By doing so, it was able to claim a somewhat larger "denial" effect for the President's embargo. This upward revision was accompanied by an admission of "numerous uncertainties" when judging Soviet import intentions. The earlier, and less suspect, 34-million-ton estimate is used here.