Rabat – The US Department of Commerce (DOC) sided with US phosphate giant Mosaic in its decision on Moroccan import duties on Tuesday, February 9. The DOC has had the case under consideration since June 2020, when US phosphate giant Mosaic filed a petition at the US International Trade Commission (ITC.)
The case
Mosaic claimed that popular Moroccan, as well as Russian, phosphate-based fertilizers received subsidies in their country of origin. It argued that these subsidies made more expensive US phosphate fertilizers uncompetitive, with local farmers opting for cheaper foreign phosphate-based products instead.
On Wednesday the DOC issued a decision that agreed with this assertion. The ruling specifically targeted Mosaic’s largest competitor, Morocco’s OCP Group, with new duties. The decision outdoes preliminary findings released on November 24, 2020. At the time, the DOC had estimated that Moroccan phosphate producer OCP Group received subsidies to the tune of 16.88%.
In its final decision, the DOC increased the number to 19,97%, effectively ruling that Moroccan phosphate-based fertilizers should be given a one-fifth price increase, a major blow for local farmers. Two Russian fertilizers were deemed to be subsidized by 20.94% and 72.5% in November, but the DOC revised this down to 9.19% and 47.05%.
Morocco’s OCP Group received no such downward revision.
The DOC has determined that the 19.97% in “subsidies” that it says Morocco’s OCP Group receives is based primarily on the absence of cost to ensure mining rights. While OCP Group does indeed spend less on these rights, it is due to the company’s direct contributions to the Moroccan state through dividends, taxes, and development projects.
But these additional factors are not taken into account by the US department. They are standards that US companies do not have to abide by, as their primary goal is only to ensure profits for shareholders.
Pending ITC decision
The decision by the DOC could effectively make Moroccan fertilizers sold in the US more expensive, a decision that would increase costs for local farmers. By claiming that Moroccan phosphate products are subsidized, Mosaic — now the DOC ruling– argues for import duties that would increase the cost of foreign fertilizers and make US phosphates produced by Mosaic more competitive.
The fact that farmers in the US will be the victim of rising fertilizer costs in order to protect a US corporation was not lost on Mosaic itself. Its press release on the issues stated that the decision has “brought us one step closer to ensuring American farmers can depend on high-quality, competitive American fertilizer.”
For local farmers, however, this statement means little more than stating that they will be asked to pay more to make fertilizers competitive for a US phosphate corporation.
But there is still some hope for US farmers as the DOC decision is not yet final. Moroccan and Russian fertilizers will not see duties imposed until the International Trade Commission issues its ruling in mid-March.
Free trade vs. protectionism
The irony of the case is that the heavily subsidized US agricultural sector depends on cheap fertilizers, produced in countries where phosphate can be extracted cheaply and efficiently. The free market principles that have dictated the availability of Moroccan phosphate products to US farmers in need of affordable fertilizers is now under threat.
Under the guise of “fair” competition, the DOC has sided with Mosaic in deciding that farmers ought to pay more for this crucial product for their daily production. In order to protect less efficient and more costly domestic phosphate production by Mosaic, farmers will be forced to purchase their products by making its competitors more expensive.
In a classic case of trade protectionism that contradicts the US’ matra of efficient and free markets, Mosaic appears to be ensuring itself a domestic monopoly at the cost of local farmers and their families.
The proposed duties have been described as a “farm tax” by local farmers who joined together in the “No On Farm Tax” movement. The group has described Mosaic’ monopolistic behavior as “trade madness.” They have urged the Biden Administration to “allow markets to actually work,” instead of opting for the “past administration’s protectionism.”
‘Massive spike in prices’
The “No On Farm Tax” movement” predicts there will be a “massive spike” in US fertilizer prices, at a time when farmers and their families are already struggling amid an economic slump. It accuses Mosaic of trying to create a protectionist monopoly after having two difficult years in which rain negatively impacted US farming.
Farmers and industry experts had been awaiting the DOC’s decision with bated breath as its consequences could be dire. Excluding Morocco, the world’s largest phosphate producing country, from the supposedly “free market” in the US endangers local competitiveness and saddles already struggling farmers with mounting costs.
Those costs are likely to impact the cost of food for consumers in the US because of Mosaic’s “stranglehold” on the US phosphate market, as the anti-farm tax group describes it.
The reason for the DOC decision is being questioned as a matter of undue influence by Mosaic’s intense lobbying efforts. In 2020 alone, the Mosaic group spent over a quarter of a million dollars in lobbying on just one super-PAC, called “Americans for Prosperity Action.”
This dark money political action committee funds right-wing politicians, including the senators of Mosaic’s home state Florida. Florida state senator Marco Rubio in January received an “A+” rating from the super PAC, indicating that he had actively reciprocated on the campaign donations he had received from the Mosaic-funded PAC.
Who pays the price?
It appears that Mosaic will in effect be granted a protectionist domestic monopoly for the hundreds of thousands of dollars it has spent on lobbying. If the ITC will similarly accede to the US phosphate giant’s demands, American farmers face a difficult future as their essential fertilizers will see significant price increases.
Excluding the world’s largest phosphate producing country that holds over two-thirds of the world’s phosphate reserves undermines free markets. More still, it hurts American farmers –all in order to please and boost the morale of an inefficient local phosphate producer.
The US is ill-served by its move towards lobbying-driven protectionism in order to protect a local giant corporation that admits it cannot compete under free market conditions.
The World Bank has estimated that fertilizer prices are set to rise in 2021 even without protectionist machinations. In response to such a trend, US farmers can ill-afford to become the victims of a lobbyist-driven monopoly that serves only the profits of the Mosaic corporation.
Threats to free markets and the plight of local farmers deserve to be the main reasoning when the ITC issues its ruling in March. In a David and Goliath struggle for affordable food products, US farmers will likely be rooting for the continued supply of affordable high-quality fertilizers from Morocco, the country that enjoys the longest unbroken trade agreement with the US.
