Saturday, December 03, 2011

Entailment Ponds, Part II

Every schoolchild knows that Gilroy is the Garlic Capital of the World.  At least if you live in the Bay Area.  And a lot of garlic is grown in Gilroy, so much that when you drive through the vicinity in September you can smell it in the air.

In Canada, I'm told, most of the Canadian garlic comes from Ontario, specifically southern Ontario, in areas that used to grow tobacco.  I'm not sure why Canadian garlic comes from Ontario, aside from the amenable climate of the Niagara Peninsula: in this new era of free trade, you'd think it'd be cheaper in western Canada to buy the garlic from Gilroy than from southern Ontario, which is a full thousand kilometers/600 billion miles further from where I sit right now than Gilroy.  But maybe there's a case to be made with tariffs and economic nationalism and buying Canadian and so on.  And those are good reasons.  I have no qualms about buying garlic grown in Ontario, and when you're trying to buy local the difference between 2500 and 3500 km doesn't add up to much.

But then why, in the city I live in (and still in most of Canada), out here on the plains just a short 2 hour flight from Gilroy and environs, is the garlic all from China?  That is, unless its organic, in which case its local or from California.

This is especially suspicious given that in 1997 the Canadian government ruled the Chinese (and Vietnamese) were dumping garlic on the Canadian market.  Garlic in Ontario should be priced competitvely with garlic from China and yet chains across the country continue to sell Chinese garlic - or Chinese garlic rebranded as from elsewhere - over garlic from Ontario.  The story in the US is the same.  The only reason I even noticed this strange culinary-economic fact is because I picked up a pack of garlic in Calgary, expecting to see the reassuring label from Gilroy, and was stunned to discover it was from China.  If I hadn't been homesick I never would have noticed.

There is an argument to be made, a classical argument, in fact, out of Adam Smith and via the various free-trade theorists, about comparative advantage.  And its an obvious argument  when you see this table from the Wikipedia Garlic page:

Top 10 garlic producers — 11 June 2008
Country Production (tonnes) Footnote
 China 12,088,000 F
 India 645,000 F
 South Korea 325,000 F
 Egypt 258,608 F
 Russia 254,000 F
 United States 221,810
 Spain 142,400
 Argentina 140,000 F
 Myanmar 128,000 F
 Ukraine 125,000 F
World 15,686,310 A
No symbol = official figure, P = official figure, F = FAO estimate, *= unofficial/semiofficial/mirror data,
C = calculated figure, A = aggregate (may include official, semiofficial, or estimates).
Source: Food And Agricultural Organization of United Nations: Economic and Social Department: The Statistical Division

China grows 20 times more garlic than its nearest competitor, which happens to be the second largest country in the world.  It grows 50 times more garlic than the US, and probably more than 50 times more garlic than Gilroy.  China has 75% of the world's garlic production.  There is a strong comparative advantage here, an overwhelming one: Chinese farmers clearly knows how to grow garlic, so why shouldn't they be supplying the world?  They grow so much of it that even if we lost the entire US production we wouldn't notice; in fact, with an estimated supermarket waste rate of say 7-8% on garlic, we could completely remove quite a few garlic producers off the list before anyone even noticed.

There are also classic (although not economically classical) arguments against the notion of comparative advantage, which usually fall into two buckets.  The most common is the genealogical or historical argument: the road to comparative advantage is paved with tariffs, which is to say, comparative advantage has almost always been built by protecting local industries from outside competition; comparative advantage does not usually arise organically, from a combination of ancient practical wisdom and plentiful relevant local resources, but by actual intervention.  So the notion of letting comparative advantage govern our decisions about whether a given industry or vertical is competitive or not is always going to be based on the practical facts about who got there first: Whether or not our local industries have de jure comparative advantage will be obscured by the simple fact that a large share of the market confers de facto comparative advantage.  Possession of market share is 9/10ths of the comparative advantage.  While garlic originates in Asia, they've been growing garlic in Egypt for as long as there have been Egyptians and that's been millenia, and there's a lot of sand there, so theoretically the practical knowledge and plentiful resources should confer a strong and natural comparative advantage on Egypt.  And yet it doesn't: Egypt was the fourth largest producer in the world in 2008, and still managed to produce less garlic than what is probably thrown out for spoilage worldwide.

So the Chinese have the comparative advantage, this argument goes, but its probably not as a result of practical wisdom.  In fact, the Chinese have a tariff on imported garlic equivalent to that of the Canadian tariff, which might be just to protect their comparative advantage but is likely a long-standing fortress around their internal producers.  Sometimes the Internet just doesn't have the data you want, but its neither a logical fallacy nor improbable to suppose the Chinese have protected their garlic market to the advantage of their overwhelming comparative advantage.  In that case, it makes sense to protect your local garlic producers, because the Chinese aren't playing fair.  (Whaaaaaah.)

The second classic argument against the notion of comparative advantage is the national security argument, and pretty much anyone who's been paying attention in the last seventy years is familiar with that one.  Countries or regions or localities or jurisdictions can ignore the "comparative advantage" principle, so the conversation goes, when it protects their territorial integrity, or the health and welfare of their members.  The US should be able to make its own semi-conductors, for example, to fill up all those missiles protecting the coast from invasion by al Qaeda or Saddam Hussein's anthrax drones; Canada should have let the Avro Arrow go to production, similarly, so that it would have its own home-grown fighter jet that could protect it from, say, American fighter superiority.

Astute readers not overwhelmed with links will see where I'm going with this.  But my argument is not that garlic, which for all that still only amounts to about a $150 million import into the US, is some kind of vital essence we should protect from the nefarious Chinee.  Or not so much like that anyway.

But take a look through your cupboards for Chinese-made food.  If you're an upper-middle-class foodie, there's not a lot in there; maybe some backup ramen and a few cans of water chestnuts and maybe a few other things, but really not that much.  If you shop at Walmart for your food, there's a lot more.  Some of it comes from China, and some of it comes from China via third-parties like Vietnam and the Philippines.  But you're getting it from Walmart because its cheap, and Walmart is selling it you because its cheap.

And we know that China has an issue with the quality of its agricultural land.

But this isn't some purity of essence type thing.  This is actual food.  The food you eat is just the last mile of the nutrient chain that extends from the ground to your body.  Whether you choose, in the end, to eat cookies and potato chips or garlic and spring mix and extra-virgin olive oil is, obviously, up to you, but economic considerations play a huge role.

But your choices are constrained by the previous 3000 miles.  If you can get your food from local growers, you have a pretty good idea of the quality of the land, as in, "Oh you're growing garlic on that old refinery site by the river, next to the cemetery, across from the chemical plant?  Hmm.  Maybe I'll look at some other stalls for now..."  If you don't know where your food comes from, because its labelled "China" or even worse a generic "US" and you're getting it from Walmart, where the supply chain is devoted to low-cost producers, you have no idea whether your garlic - or apples, or bread, or glowing pork chops - come from the 10% of the export country's land that has striking problems with heavy metals exposure, or from the good stuff.

China's problem with heavy metals contamination in its agricultural land becomes our problem with heavy metals contamination when we eat Chinese-grown food. 

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