WASHINGTON — 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 across-the-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 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 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 self-sufficiency 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.
