Milling & Baking News - March 28, 2017 - 32

Washington X

Trying to read Trump's tea leaves
BY ROBBIN JOHNSON

President Donald J. Trump was critical
about U.S. trade policies and agreements during the campaign, but it
may not be a totally straight line from
those comments to what he does. On
the protectionist side, he quickly withdrew from the Trans-Pacific Partnership (T.P.P.). He also has promised
to renegotiate the North American
Free Trade Agreement (NAFTA), has
threatened China with unilateral import duties and has promised to "Buy
American" in any infrastructure program. His plans to tighten immigration rules also fit into this camp.
On the other hand, he has shown
support for negotiating bilateral trade
agreements and has offered assurances to Britain and Canada on keeping markets open. In his address to
Congress, he spoke about developing a
"merit-based" immigration system. He
has promised tax reforms designed to
make American businesses more globally competitive, including possibly an
incentive to repatriate foreign earnings
currently held abroad. None of this fits
easily into an "isolationist" box.
Trump's protectionism
One of President Trump's first executive actions was to withdraw the United States from the T.P.P. agreement. To
some, this was deeply troubling. To
others, it seemed more symbolic. After
Bernie Sanders' campaign criticisms
and Hilary Clinton's withdrawal of
support, it was far from clear that there
was sufficient congressional support to
ratify the deal. Whether its prospects
were bright or dim, however, T.P.P.'s
demise signaled a sharp turn in U.S.
foreign economic policy.
Candidate Trump also repeatedly
threatened to impose duties on Chinese imports unilaterally. This could
be done under existing laws acrossthe-board under a finding of China as
a "currency manipulator." Or it could
be done piecemeal through antidumping or countervailing duty actions,
as was done on steel and tires under
President Obama (or on Japanese autos under President Ronald Reagan).
A sharp turn in this direction, however, is not inevitable. China seems if
anything to be managing its currency
upwards to restrain capital outflows.
The appointment of Governor Terry
Branstad to be U.S. ambassador to China may help de-escalate tensions, as he
has good ties with the current Chinese
leadership and certainly understands
32 / March 28, 2017 XMilling & Baking News

how much U.S. agricultural shipments
to China would be vulnerable to retaliation, if a trade war broke out.
Candidate Trump also labeled NAFTA a "terrible deal" and promised to
renegotiate it. Yet he recently promised Canada's Prime Minister Trudeau
that he valued the trade relationship
with that country. Many of the stresses
NAFTA has experienced in its 20-year
history have been with Mexico, including agricultural trade issues around
sugar, high-fructose corn syrup, and
fresh fruits and vegetables. Several
of these sectoral issues may need a

ALEKSEYKH/STOCK.ADOBE.COM

fresh look, but the enormous growth
of two-way trade under NAFTA generally and for agricultural goods specifically would make re-opening the
agreement a daunting task. The need
to work out energy and immigration
issues with Mexico may add more ballast to sustaining the NAFTA ship.
More generally, the administration's
trade policy advisers lack a uniform
view, and many Republican leaders
in the House and Senate would resist
draconian trade actions. So, while the
protectionist threat has heightened, it
is not at all clear that such an outcome
is yet written in stone.
The ambivalent side
While President Trump has been
critical of plurilateral trade agreements,
he has shown interest and support for
bilateral negotiations. This may in part
stem from a view that bilateral trade
should be more balanced, a view most
economists shun. Or it may be seen
as a better way to grapple with difficult issues. Many agricultural trade
issues around matters like sanitary/
phytosanitary standards, genetically
engineered crops and market access
for sensitive commodities may be more
manageable bilaterally. How U.S. Trade
Representative nominee Robert Lighthizer and Agriculture Secretary nominee Sonny Perdue may work together

will be important, both in minimizing
retaliatory risks and resolving stubborn
agricultural issues in key markets.
Tax reform also may be a mixed bag
for the farm community. Eliminating
the estate tax would be a great boon in
passing farms between generations. On
the other hand, a tax holiday for repatriated earnings or a "border-adjusted"
tax would strengthen the dollar, making agricultural exports less competitive. And tax or trade measures that
lead toward World Trade Organization
dispute settlement procedures are likely to put some agricultural commodities in the retaliatory crosshairs.
What to do?
In the face of these uncertainties,
what should the agricultural community do? Certainly one thing is to
speak out for the benefits of trade, as
some already are doing. With large exportable surpluses, agriculture needs
to make this case; it is necessary but
far from sufficient.
The agricultural community has
long and effectively argued that selfsufficiency is a high-cost, self-defeating
road to food security. In the process, it
has come to recognize that real food
security through trade requires not just
open markets but also assurances that
importers have equal access to supplies
with domestic users (i.e., no export
controls or taxes) and that poor buyers
receive sufficient financial assistance to
keep them from being squeezed out in
times of scarce supplies.
It needs to become equally clear that
protectionism is a high-cost, self-defeating road to good jobs and financial
security for working- and middle-class
families. Those workers, industries and
communities that have borne the burdens of adjusting to trade, technology
and immigration changes deserve better financial security. This may include:
real access to alternative career opportunities, maintenance of fundamental
health and pension benefits, and public
support for rebuilding or replacing lost
business and community resources.
Protectionism is unlikely to be defeated by economic arguments alone.
It will take progressive actions in support of those being left behind. MBN

Robbin S. Johnson, a fellow
with the Hubert H. Humphrey
Institute of Public Affairs,
is a contributing editor at
Sosland Publishing Co.
bakingbusiness.com / world-grain.com

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Milling & Baking News - March 28, 2017

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