Despite the current turmoil in global agricultural trade, the Trump administration’s effort to hammer out better trade deals with China, Mexico, Canada and other key importers of U.S. ag products will help increase export demand over the long term and improve farmers’ access to markets. That’s the message two high-ranking federal officials delivered during recent visits to Iowa.
Gregg Doud, chief ag negotiator for the U.S. Trade Representative, said he understands and appreciates that farmers are very apprehensive about the future of trade with these and other prime markets. “But we want to get this right for the long term,” he said at the World Pork Expo in Des Moines.
Doud, who grew up on a Kansas farm and is involved in the operation, told farmers to prepare for retaliatory tariffs on U.S. ag products like pork and soybeans, which could mean billions of dollars in lost revenue. He said the problems U.S. trade officials are working on are complex, deep-rooted and will take time to fix.
Why use the tariff strategy?
President Donald Trump has announced plans to slap tariffs on high-tech Chinese imports. The strategy is to punish and stop China’s unfair trade practices, such as the forced transfer of intellectual property, cyber theft of technology and ignoring World Trade Organization rules pertaining to agriculture.
Many of the key issues with China are tied to intellectual property and the future of high tech. That’s why the administration is targeting specific high-tech sectors with tariffs. “Much of this is multifaceted and complicated, and doesn’t have anything to do with agriculture. But unfortunately, agriculture gets dragged into it,” Doud said.
It’s also important for the U.S. to try to end China’s trade distorting ag policy practices. Those include China heavily subsidizing its farmers, building huge commodity stockpiles that depress world prices and using non-scientific barriers to block imports. China fails to approve biotech crop traits in a timely manner, and recently imposed stricter foreign material restrictions on U.S. soybean shipments than beans from Brazil.
“I understand the nervousness and sensitivity about putting tariffs on Chinese products coming into the U.S.,” he said. “But you need to understand we have to look at this from five or 10 years down the road. If we don’t get more discipline in what’s going on in Chinese agriculture and trade, the problems will only get worse.”
No need to rush on NAFTA
Trump administration trade officials are also trying to renegotiate the North American Free Trade Agreement with Canada and Mexico. Some members of Congress are pushing to get NAFTA finalized so it can be voted on before the end of 2018.
“The president has said he will take however long is needed to get the right agreement,” Doud said. “There is no need to panic and rush this; we are trying to get it worked out.”
One way to counteract negative financial impacts of tariffs is to go on the offensive. The U.S. Trade Representative is actively working on new agreements with countries in southeast Asia and Africa to increase demand for U.S. ag products. “First and foremost is Japan,” Doud said. “It’s a huge market. I’m concerned we could be left behind as Europe, Canada and Australia already have new agreements completed with Japan. We’re also starting to work on agreements with Vietnam and the Philippines. Another key opportunity will be the United Kingdom, once the Brexit process is completed.”
Dealing with regulatory issues
Also at World Pork Expo, Greg Ibach, USDA undersecretary for marketing and regulatory programs, said access to global markets is top of mind at USDA, as it is for pig farmers. One goal is to level the playing field. USDA isn’t opposed to meeting a nation’s standards for gaining access to its markets, as long as those rules are in line with international standards and are applied consistently and fairly. “This is something we can all support and move forward on,” he said.
Some countries have tariffs and phytosanitary regulations that pose complications in the global marketplace and affect access for U.S. pork imports. “At USDA we are working with our administration’s trade team,” Ibach said. “What the president is asking of all of us now, including farmers, is to stick with him. Once we resolve the various trade issues, we’ll open up markets and agriculture will do well.”
Meanwhile, many farmers are nervous about the potential of losing market share due to the tariff situation. Current and future tariffs could negatively impact $20 billion of the $140 billion in annual U.S. ag exports, Doud said. Soybeans would take the biggest hit. The U.S. shipped $12.4 billion worth of soybeans to China alone last year.
Trump has asked U.S. Ag Secretary Sonny Perdue to “help those people who will be harmed” if his plan doesn’t work as intended. There will likely be some bumps in the road along the way. Perdue said in mid-June USDA’s Commodity Credit Corporation, the agency that has broad authority to support farm prices and incomes, is among “the tools available,” but he provided no details.