This is a victory for free-trade and a major loss for the corn lobby. The fact is that this 30-year taxpayer subsidization of the corn industry had the effect of securing a higher price for farmers during that period than would have otherwise existed. The adverse effect for the farmers now is that a much lower price than would otherwise have existed will be brought about; this must happen. Inefficient producers will be driven out of the market by this fall in price.
Now let’s examine the removal of this protective tariff on imported ethanol from Brazil. Brazil may be the world’s most efficient producer of ethanol; they use sugarcane instead of corn. Since we couldn’t produce ethanol as cheaply as Brazil, we erected a “protective tariff wall” that would tax the import offsetting the difference in price. Without this tariff, U.S. consumers would have chosen Brazilian ethanol over the more expensive domestic product.
“In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.” “The proposition is so very manifest,…that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the interested sophistry of merchants and manufacturers confounded the common sense of mankind.”
It’s better for us to buy ethanol from Brazil than attempt to make it here. Adam Smith continues:
“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy. The tailor does not attempt to make his own shoes, but buys them of the shoe maker. The shoemaker does not attempt to make his own clothes, but employs a tailor. The farmer attempts to make neither the one nor the other, but employs those different artificers. All of them find it for their interest to employ their whole industry in a way in which they have some advantage over their neighbors, and to purchase with a part of its produce, or what is the same thing, with the price of a part of it, whatever else they have occasion for. What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”