Charles M. Harper Chairman and chief executive officer of ConAgra, a food processor based in Nebraska THE US market has been buffeted by import competition from all over the globe and growing competition in the export market. American businesses have responded to this challenge by taking major steps to become more competitive in world markets by slashing costs, modernizing, and introducing flexibile financing and component sourcing. Even so, serious obstacles remain to be overcome. The US tax system is not constructed for maximum export competitiveness, when compared with many of our competitors. Europe, for example, derives a large portion of its tax revenues from a value-added tax that is not applied to exported goods. The taxes that US businesses pay are a part of production costs and inflate the price of exported goods, making US products less competitive.
The value of the dollar has declined in Europe and Japan, but is still too high in most east Asian countries, Canada, Australia, and elsewhere. Thus, our products are still having a difficult time competing with goods from these countries. Finally, the US has recently reduced the incentive for its citizens to invest in business by the elimination of the capital-gains deduction and by limitations placed on IRAs and business savings plans; our competitors encourage high savings rates with incentives to save. Thus, the costs of financing expansion by US businesses remains high relative to much of our competition. US agriculture represents a special situation in world trade. Five years ago, US agricultural trade generated a $22 billion trade surplus. Today, the surplus has virtually disappeared.
Although American agriculture is very efficient, the US has lost market share, in large part because of high export subsidies of foreign governments, principally the European Community. US agricultural policy has also kept US grain prices uncompetitive in world markets and encouraged expansion of production abroad by keeping prices artificially high through support programs. The 1985 farm bill has helped make US farm products more competitive by lowering price support levels, but still providing income support with the target-price mechanism. It will take time for this program to work; competitive US prices will both stimulate demand and slow the rapid production increases abroad, but not overnight.
We are seeing progress in the form of lower acreages in Australia and Argentina and the difficulty the European Community is having in financing burgeoning farm supports. But Congress must resist those who would reverse the farm bill by adopting high support prices and making larger acreage reductions before the legislation has had a chance to work. This would mean the loss of markets and agricultural jobs to competitors.