Trump’s trade policies haven’t hurt Iowa, but there’s a missed opportunity

Source: By Erin Murphy, Sioux City Journal • Posted: Thursday, August 17, 2017

Agriculture in Iowa may not be hampered by shifts in international trade policy under President Donald Trump.

But at least one trade decision made by the Trump administration likely created a missed economic opportunity for Iowa farmers and ag businesses, state ag leaders and experts say.

Iowa farmers continue to work their way through a prolonged downturn in the ag economy. Farm incomes have declined three consecutive years and are headed for a fourth, corn and soybean prices remain in a slump and much of the state is mired in drought conditions this summer.

International trade is not the culprit for Iowa’s sluggish farm economy. Still, trade may have helped boost farm incomes, but not for a decision made early in Trump’s presidency.

Trump, on his fourth day in office, fulfilled a campaign pledge when he withdrew the U.S. from the Trans-Pacific Partnership, a 12-nation trade deal that was multiple years in the making. The trade deal was favored in the U.S. by agriculture groups but panned by labor organizations.

Iowa ag leaders and experts say that had the U.S. joined the Trans-Pacific Partnership as planned, the state would have reaped the benefits in the form of increased exports of corn, soybeans, pork and other commodities.

“TPP was extremely good for Iowa because it opened up new markets,” said Dermot Hayes, an agriculture professor at Iowa State University. “TPP was a lost opportunity.”

Iowa exported more than $12 billion in goods in 2016, which was down 8.4 percent from the year before, according to federal statistics.

The state’s top exports were corn ($1.2 billion), tractors ($633 million) and pork ($454 million).

Iowa’s top trading partners were Canada ($3.4 billion), Mexico ($2.3 billion) and Japan ($1.1 billion).

‘What could have been’

The Trans-Pacific Partnership was negotiated among 12 countries primarily in North America and Asia. Some of the larger countries involved included the U.S., Canada, Mexico, China, Japan and Australia. The member nations comprised 40 percent of the world’s economy.

Had the U.S. entered the Trans-Pacific Partnership, some of those figures probably would have received a boost this year, experts said.

“It was just a great product that could have had a lot of fruit for the entire Pacific Rim region and the U.S.,” said Craig Hill, president of the Iowa Farm Bureau. “It’s what could have been.”

Agriculture would have been in line for a $10 billion increase in agricultural output over 15 years, according 2016 estimates from the U.S. International Trade Commission.

Despite the U.S. withdrawing from the Trans-Pacific Partnership, the 11 other nations have continued to try to renegotiate the deal under a new framework without the U.S. involved. And other countries also have been filling the void with several smaller trade agreements.

Hayes and Hill said that instead of being a leader in a multilateral trade agreement, the U.S. is on the outside looking in.

“It’s a club that people belong in, and they trade within that club with preferential access. If you’re outside that club, you pay the high (taxes),” Hayes said. “These free trade agreements are going ahead without us, and we are outside the club. … We’re now at a disadvantage.”

Hill said the U.S. missed an opportunity to be a leader in an international trade deal that likely would have grown from the original 12 members, and other nations, including China, are stepping up to fill that leadership void.

“We lost the opportunity to set the standard for the Pacific Rim, and as a result, China has created their own regional trade negotiation. … They’re pushing hard on that. They want to control the rules of the game. … So our absence has left a void,” Hill said. “TPP would have allowed the U.S., in this negotiation, to set standards and protocols that would have used science and technology to make decisions, instead of political decisions. … It’s unfortunate.”

Trade trouble brewing?

Still looming over Iowa agriculture is the nation’s trade relationship with China. The state’s fourth-biggest trading partner ($491 million in 2016) has had a tenuous relationship with the U.S. This week, the Chinese government warned against the U.S. starting a trade war after the Trump administration indicated it may investigate whether China is stealing U.S. technology.

Former Iowa Gov. Terry Branstad is now the U.S. ambassador to China.

For the time being, the U.S.-China trade relationship has improved in recent months; China recently ended an embargo on U.S. beef.

But, Hill warned, things could turn sour quickly if a U.S.-China trade war is sparked.

“If China retaliated in a trade war, the first thing they would do is hit at ag products. They would stop, curtail the purchase of soybeans quickly because ambassador Branstad is from Iowa,” Hill said. “They would hit and they would hurt, and it would be ag first, probably soybeans first. They can get soybeans from other parts of the world. They can get a lot of ag products from other parts of the world. So they would probably retaliate harshly on ag first.”

Hill said he is encouraged the U.S. has not started a trade war with China, despite the sometimes charged comments made by Trump. During the 2016 campaign, he accused China of manipulating its currency, and recently, he has called on China to be more active in addressing military activity in North Korea.

Heated politics

International trade was an oft-discussed topic during the 2016 campaign, and Hill said he thinks the rhetoric — especially regarding the TPP — became unnecessarily heated.

Trump pledged to remove the U.S. from the TPP, but his opponent, Hillary Clinton, also said she opposed the TPP, as did her primary challenger Bernie Sanders.

“Trade was demonized through the election process. Unfortunately, a lot of things were said that turned people against trade,” Hill said. “Trade actually should have had more oxygen blown on it and not be suffocated as it was through that election process.”

With the Trans-Pacific Partnership out of reach, Iowa ag officials are turning their attention toward renegotiation of the North American Free Trade Agreement, which begins Wednesday. NAFTA is a trade agreement between the U.S., Canada and Mexico.

Trump threatened during the campaign to pull the U.S. out of NAFTA, but since taking office, he has said he would renegotiate the deal.

“Iowa’s agriculture businesses and farmers take pride in producing products that are exported to nearly every country in the world,” Brenna Smith, a spokeswoman for Iowa Gov. Kim Reynolds, said in an email. “While we were disappointed in the withdraw from the Trans-Pacific Partnership, we have turned the focus to modernizing NAFTA as our top two markets for ag products include Canada and Mexico.”