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On the cusp of change on trade

Free Market Reflections with Steve Dittmer

One thing Canadian cattlemen can be certain of, they are not alone in their concern regarding trade, its importance to agriculture, or how it will be handled by the new Trump administration.

At the U.S. cattle industry convention in February, anywhere from 250 to 400 cattlemen attended separate committee sessions on international marketing and export growth, as well as government policy sessions that dealt with beef exports.

I realize exports for American cattlemen are imports for you and the rest of the world, but outside of a few fringe groups, U.S. cattlemen realize trade is a two-way street. To export, we need to allow imports.

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And with the U.S. beef industry in an expansion phase, expanded trade will be absolutely essential to offset that added beef coming onto the market, along with more pork and more poultry, to keep cattle and beef markets up.

Some analysis of testimony by key cabinet appointees and feedback on Trump’s new agriculture secretary provide some clues. At this writing, agriculture secretary nominee Sonny Perdue has not testified before the Senate committee because his nomination was the last one made and his Senate confirmation will be last.

Trump’s aggressive statements before his inauguration and his actions during his first weeks have given us some indication about how his mind works. It took him little time to approve construction of both the Dakota Access and Keystone XL pipelines, but he inserted language on the latter regarding the use of U.S. steel. He’s also made some noise regarding what percentage of auto parts should be sourced from within NAFTA countries, not necessarily American parts, echoing the negotiations that went on with Japan during some of the final TPP negotiations.

His solution may not always start from scratch, although he has expressed a preference for bilateral trade deals. But he is used to putting deals together a lot faster than the five- to 10-year crawls of recent multilateral trade negotiations. A taste of that, plus pressure from cabinet officials, industries, unions and Congress, might make adding some tweaks from “Trump Overhauls” to NAFTA and TPP look more appealing to him.

Just because Trump has officially pulled the U.S. out of TPP, doesn’t mean this agreement is dead. The other countries involved consider the deal much less appealing without the U.S. being involved, but it will not be dead until the remaining partners decide not to ratify it. If the TPP survives in some form perhaps the U.S. at a future date would seek to reopen negotiations in order to add some Trump chapters.

Next up on agriculture’s list of trade actions is NAFTA. During his confirmation testimony Trump’s commerce secretary, Wilbur Ross, indicated changes to NAFTA would be the first thing he would like to work on. His view is that borders should be open to countries that “play by the rules” but scofflaws “should be punished — severely.”

This dovetails with Trump’s nomination of Robert Lighthizer as U.S. trade representative, the office that is normally in charge of negotiating agreements. Lighthizer’s comments so far, taken together with his past government service, indicates the U.S. Trade Representative under Trump may be more concerned with enforcement than negotiating new deals. Lighthizer was not known for building consensus in previous trade postings.

It is hard to tell to what degree Trump’s tariff pronouncements are serious or simply a negotiating technique designed to soften up the other side before sitting down to the table. Ross acknowledged as much during his confirmation hearing.

“When you start out with the adverse party understanding that he or she is going to have to make concessions, that’s a pretty good background to begin negotiations,” he said. (Washington Post, 01/1/2017).

That gives us a pretty good idea of his and Trump’s negotiating style.

Ross explained that he views tariffs as both a negotiating tool and a punishment for lawbreakers, rather than permanent protection. In the main, he claims he is pro-trade.

Frankly, I think misinformation and poor definitions cloud many trade discussions. Trade is buying something you want.

The term globalization, for example, depends on your viewpoint. You may see it as a grouping of countries under one centralized authority such as the European Union. Others use the term to refer to the advanced speed of communication and the ease of shipping goods and services worldwide, compared to centuries past. Still others use it as a codename for competition, as in the modern world brings global competition to one’s door much faster and easier. Labelling it globalization doesn’t make it go away, nor does it really provide cover for pretending it doesn’t exist, or passing trade rules to keep it away.

Trump’s nominee for agriculture secretary, Sonny Perdue, not only understands how important trade is to agriculture, he was actively engaged in it. The companies he controls of late are exporting businesses. As governor of Georgia, he pushed for economic growth and trade through the port of Savannah.

Georgia cattlemen familiar with Perdue also do not believe he would support the GIPSA rule I talked about a couple of issues ago. The rule is presently in abeyance under Trump’s short-term prohibition of any new government regulations. But Perdue is believed to support the concept of paying premiums for quality as opposed to livestock producers getting paid the same, regardless of quality.

About the author

Contributor

Steve Dittmer is the CEO of Agribusiness Freedom Foundation, a non-profit group promoting free market principles throughout the food chain. He can be reached at [email protected]

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