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Ag Left in the Trump Balance

Instead of taxes and regulations, Trump upends trade policy.

Farmers voted by landslide margins for President Trump last fall, attracted by his support for ethanol and promises of tax and regulatory reform. But his first major moves in office left farm groups wondering, “What about us?”

Trump ordered U.S. withdrawal from the 12-nation Trans-Pacific Partnership and told Mexico and Canada to prepare for renegotiation of the 23-year-old North American Free Trade Agreement. NAFTA is credited with the huge expansion of agricultural trade among the three nations that dominate the continent. TPP, covering 40% of the world economy, was forecast to open the door for more ag exports, with wider access to Japan as the big prize for U.S. agriculture.

“We’ve been talking about this for a long time,” said Trump before he signed the memorandum to drop out of TPP. The president, after all, targeted TPP and NAFTA during his campaign. White House press secretary Sean Spicer said withdrawal from TPP “ushers in a new era of U.S. trade policy in which the Trump administration will pursue bilateral trade opportunities with allies around the globe,” adding, “the beautiful thing about a bilateral trade agreement is that (countries) can renegotiate much easier” than in a multilateral pact.

Farm leaders were dismayed by the potential disruption in ag exports, which generate 20¢ of each $1 of farm income. U.S. exports to Canada and Mexico quadrupled since NAFTA took effect in 1994. Exports to China, also under fire from Trump, zoomed in the past 15 years. Together, China, Canada, and Mexico account for 44% of farm exports and, in order, are the top three markets. Mexico and Canada are the two leading sources of food and ag imports.

“President Trump seems to be going down his list of campaign promises,” says Dale Moore, public policy director for Farm Bureau. Trump will deliver on tax and regulatory reform, the unflappable Moore says, but reform will be slower coming than postelection euphoria suggested. Indeed, House Republicans, who sprinted to pass regulatory reform bills in early days of the congressional session, were dialing back expectations by the end of January for a 100-day transformation of government like Franklin Roosevelt achieved with the New Deal. Nonetheless, Moore says, “The effort is under way.”

Within hours of the Trump inauguration, the White House ordered a freeze on federal regulations “to ensure that the president’s appointees or designees have the opportunity to review any new or pending regulations.” The freeze could claw back the so-called GIPSA rule on livestock marketing that is opposed by the largest cattle, hog, and poultry groups.

New administrations always face the challenge of installing policymakers throughout the government. At USDA, there are about 400 executives, the great majority of them political appointees, who set the administrative tone and will be the frontline of regulatory reform. As a consequence of Trump’s long search for his agriculture secretary (the longest since Roosevelt in 1933), their appointments are delayed somewhat.

Mexican officials have said their nation will mirror U.S. action on tariffs. Stretching from the Yukon to the Yucatan, NAFTA was the world’s largest trading bloc when created. Trump directed his greatest complaints about NAFTA’s outcome toward Mexico.

“The loss of potential gains under TPP or TTIP (U.S.-EU free trade negotiations) could be relatively minor compared with U.S. agricultural losses if a full-blown trade war were to erupt between the United States and China or the United States and its NAFTA partners,” says former USDA chief economist Joe Glauber, now at the think tank IFPRI. Punitive tariffs on Canadian or Mexican products “would play havoc with supply chains and likely mean the loss of several billion dollars to U.S., Canadian, and Mexican producers and processors.”

Some $39.6 billion in U.S. food and ag exports were shipped to Canada and Mexico last year, up dramatically from $8.9 billion in 1993, before NAFTA removed most tariff and quota restrictions on trade. 

Farm and agribusiness groups want to maintain that large volume of trade in any reworking of NAFTA’s terms and offered their help during Trump’s first week in office “in preserving and expanding upon the gains our sector has achieved within the North American market and strengthening our competitiveness around the globe.”

This article was produced in collaboration with the Food & Environment Reporting Network, an independent, nonprofit news organization producing investigative reporting on food, agriculture, and environmental health.

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