Milling & Baking News - January 14, 2020 - 30

Washington

Holiday 'gift-giving' includes vote on
U.S.M.C.A., trade deal with China
BY ROBBIN S. JOHNSON

Speaker of the House Nancy Pelosi
gave President Donald Trump a nice
holiday gift and a lump of coal for
his stocking. The coal, of course, was
a vote on two impeachment counts,
on which she is trying to negotiate
the rules for the Senate trial as well.
The gift was agreement to schedule a
House vote on the United States-Mexico-Canada Agreement (U.S.M.C.A.).
Her actions may have been motivated
by the desire to give something to the
progressive wing of her party (the impeachment) and to the 40-odd new
Democrats largely from swing districts (the U.S.M.C.A.) that gave her
the Speakership in the first place.
The Chinese joined in on the holiday
gift-giving, striking a phase one deal to
put a pause on their trade war with the
United States, hopefully to be signed in
mid-January. The Chinese have agreed
to purchase more U.S. farm products
and other American exports, although
exactly how much is unclear. In the giftgiving, they got something in return: a
halt to tariffs on $156 billion in Chinese
goods that had been targeted for Dec.
15, 2019, and reductions in some of the
existing U.S. duties they face.
Which of these various gifts will
prove most meaningful?
Meaning for 2020
Senate Majority Leader Mitch McConnell believes the outcome of the
impeachment process in the Senate is
largely a foregone conclusion, although
Ms. Pelosi and Minority Leader Chuck
Schumer are trying to cast some doubts.
The whole process both exemplifies and
further solidifies the partisan political
divide in Washington. Its potential effects on the 2020 presidential campaign
are harder to discern and may not be
clear until the voters have spoken.
The implications of U.S.M.C.A. passage also are somewhat hard to read.
Proponents of America's longstanding
pursuit of a multilateral trading system built on laws rather than leverage
are unimpressed. As Robert Zoellick,
a former trade negotiator and World
Bank leader, said, "If your metric is
whether we're expanding trade, opening markets and setting higher standards, then these (trade threats) have
been a total waste of time."
Proponents of the more muscular,
leverage-oriented, "America first" approach of President Trump take a very
30 / January 14, 2020

Milling & Baking News

different view. While acknowledging
that the China deal is only a first step,
former administration trade negotiator Stephen Vaughn sees a more coherent strategy at work: "The U.S. is
actively making its own trade policy
right now, and that's going very well."
The administration itself offered a
very upbeat - and forward-looking -
assessment. Speaking of the U.S.M.C.A.,
White House National Economic Council director Lawrence Kudlow said, "We

always thought this was a template of a
trade agreement. And it's going to be a
very pro-growth template."
What's a pro-growth template?
Mr. Kudlow's characterization deserves some further thought. Up to
now, President Trump's approach to
trade has seemed very negative. He
imposed steel and aluminum duties
on allies, including Canada, Mexico
and the European Union. He confronted the Chinese with a broad swath
of unilateral tariffs, then raised them
when talks broke down in May 2019.
He withdrew the United States from
the Trans-Pacific Partnership (T.P.P.)
agreement negotiated under President
Barack Obama. And he has emasculated the World Trade Organization's
dispute settlement system by blocking the appointment of new judges as
terms expire. These hardly seem the
actions of a pro-growth trade policy.
On the other hand, there are several
elements that might make up such a
policy. One is a clear tilt toward a mercantilist view of trade: that increased
exports and better bilateral trade balances are the goal. Trade economists
will tell you that this stands trade policy - and fiscal policy - on its head.
But the theoretical welfare gains from
freer trade have long been suffering
erosion in their political support, especially among domestic manufacturers
and organized labor.
The U.S.M.C.A. has won back some
labor support by building in protections

for workers in less-developed countries,
encouraging higher wages in competing
industries abroad and strengthening enforcement of labor and environmental
standards. Future trade agreements, especially with less-developed countries,
may require similar provisions to earn
congressional approval.
The U.S.M.C.A. also incorporates a
number of the T.P.P.'s provisions dealing with digital services, particularly
protections of the intellectual property
embedded in such products and services. It also includes a chapter on currency manipulation, something that
also may be part of the phase one China deal. This has long been a sensitive
political issue with some countries,
like China and Japan, that crops up as
an excuse to oppose trade agreements.
Finally, the U.S.M.C.A. includes
protections for U.S. businesses that
could be hurt by non-market economic activities - like governmental
subsidies of favored industries - in
countries like China that might then
pass through countries party to the
agreement with the United States. This
issue, as well as intellectual property
protections, remain large, unresolved
problems in U.S.-China trade.
In a sense, the pro-growth trade policy template Mr. Kudlow describes may
be putting the Trump administration's
interpretation on a Washington shibboleth: support for "free and fair trade."
What President Trump seems to mean
by "fair" is not so much multilaterally
even-handed as it means tilted toward
U.S.-based interests. Since the W.T.O.
has failed to produce any progress under the moribund Doha Round, a shift
from a multilateral to a bilateral approach may yield some results.
This is not a model that optimizes
the efficient use of global resources and
skills, nor is it one that puts consumer
interests first. Rather, pro-growth trade
policy in this context means putting
U.S. industry, farmers and workers
first. This is not a strategy that avoids
resistance; to the contrary, it provokes
it, at least among those with enough
economic strength to resist. Its main
virtue may be that it accurately reflects
the majority domestic political view toward trade policy today. MBN

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

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - January 14, 2020

Table of Contents for the Digital Edition of Milling & Baking News - January 14, 2020