President Donald Trump’s threats of trade wars and aversion to multilateral deals have Iowa farmers caught in the crosshairs.
His decision to potentially impose steep tariffs on $100 billion in Chinese products over unfair trade practices prompted Beijing to propose retaliation with new import taxes. To inflict maximum pain on Trump supporters in farm states, China targeted corn, soybeans, beef and sorghum, among other products.
Iowa farmers already have seen corn and soybean prices plummet amid Trump’s withdrawal from the Trans-Pacific Partnership and threatened pullout from the North American Free Trade Agreement with Canada and Mexico, which is being renegotiated.
“Here in Iowa,” stated Iowa Farm Bureau President Craig Hill, “where every third row of corn and soybeans is exported and trade with overseas markets adds about $53 per pig and $287 per beef cow, it’s easy to see how trade keeps Iowa farmers afloat during raging tides of bad weather and low market pricing.
“Agriculture accounts for one of every five jobs in the state — including the growing and innovative STEM-related fields such as computer programming, engineering, agronomy, animal science and renewable energy. In all, more than 100,000 jobs in Iowa depend on exports, much of it from farm products.”
Hill added that 49 percent of Iowa’s agriculture exports are sold to Canada and Mexico, while dropping out of TPP cost farmers “unprecedented access to the valuable and growing Asian markets, including Japan, Singapore and Vietnam.” TPP would have reduced Japanese tariffs on U.S. pork by 90 percent.
More than $150 billion worth of U.S. agricultural goods are exported annually — nearly $63 billion to TPP countries.
The Obama administration negotiated TPP with Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam to reduce tariffs and counter China’s regional ascendency.
TPP protected intellectual property rights, the environment and endangered species and promoted labor and human rights.
U.S. unions largely opposed it, citing prior trade pact enforcement problems, while pushing for an investor-state dispute settlement process to directly challenge foreign government policies. Hillary Clinton joined liberal Democrats in opposition, but the positive aspects far outweighed shortcomings.
Farm state Republican leaders recently met with Trump and suggested rejoining TPP. Trump, who had called TPP “another disaster done and pushed by special interests who want to rape our country,” told his economic advisers to revisit it.
Like his reversals on immigration and gun control, it was a temporary tease.
He tweeted Tuesday, “While Japan and South Korea would like us to go back into TPP, I don’t like the deal for the United States. Too many contingencies and no way to get out if it doesn’t work. Bilateral deals are far more efficient, profitable and better for OUR workers.”
South Korea may be an interested party, but it isn’t in TPP, and bilateral deals are much more inefficient.
Consider that when the 11 remaining TPP nations signed TPP-11 in March, it ended 98 percent of the tariffs among members and reduced others. Japan’s 38.5 percent beef tariff will be lowered to 19 percent, then 9 percent.
Some TPP members may have not wanted the U.S. back in.
Australian and New Zealand officials expressed reservations because their cattle ranchers will benefit at the expense of U.S. counterparts. Trump may have had to curry favors from Canada and Mexico amid NAFTA negotiations.
Former Mexican trade negotiator Antonio Ortiz-Mena told Foreign Policy the Trump administration “thinks they have more leverage than they do, and they are overplaying their hand. Mexico does have other options.”
Trump’s trade strategy is the proverbial “bull in the China shop.” It doesn’t differentiate friends from foes. Rather than enlisting allies also affected by China’s steel and aluminum dumping, he hit them with tariffs.
Rather than using TPP as leverage against China, he risks it becoming more powerful.
China, which recognizes the value of multilateral deals, is pursuing a Regional Comprehensive Economic Partnership with 15 other Asian nations. Obama administration economists estimated an agreement between China and Japan alone could cost $5.3 billion in U.S. exports and 5 million jobs, primarily in food production, manufacturing and fishing.
Trump has valid points about China’s unfair trade practices, including a requirement that foreign companies partner with Chinese firms.
According to the New York Times, the Communist Party is dictating appointments of Chinese managers with an eye toward technology theft and developing homegrown competitors. If Trump can’t make inroads, businesses should be wary of long-term repercussions.
To offset the collateral trade damage to agriculture, a Commodity Credit Corporation bailout of $30 billion for farmers has been suggested — unlikely with the federal budget deficit on pace to exceed $1 trillion.
Meanwhile, the plight of Iowa farmers has had statewide ramifications, including draconian cuts at state-funded institutions due, in part, to declining farm income.