Sort & Cull

Two Cheers for the Trade Deals With Japan and China

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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A Montana farmer in January 2018 signs a Farmers for Free Trade sign at the American Farm Bureau Federation annual meeting. DTN's Urban Lehner says farmers shouldn't go overboard with enthusiasm over trade deals with Japan and China. (DTN file photo by Chris Clayton)

The Trump administration's recent trade agreements with Japan and China scored some real wins for farmers and ranchers, who have been quick to express their appreciation. So am I just being churlish in saluting these deals with only two cheers rather than the usual three?

No, I don't think so. As welcome as these agreements are, there are plenty of reasons not to go overboard in our enthusiasm for them.

Japan agreed to give many U.S. ag products, led by beef, pork and wine, the same access as products from Australia, New Zealand and Canada under the 11-nation Trans-Pacific Partnership agreement, which President Donald Trump withdrew the U.S. from on his first day as president. Hurrah.

But some U.S. products -- rice, barley, butter and skim milk powder -- got a less good deal than they would have under TPP (https://www.cnbc.com/…).

And remember, Trump repeatedly blasted TPP as a bad deal and promised to negotiate a better one with Japan. Instead, the one he finally landed doesn't fully match the gains U.S. ag would have achieved if we'd stayed in the TPP. Compared to TPP, it's a two-cheer deal.

China agreed on Oct. 11 to buy what President Trump described as $40 billion to $50 billion of U.S. ag products. Hurrah again. Over what period of time the purchases would be made, however, is unclear.

As the Wall Street Journal noted, China bought $24 billion of U.S. ag products in 2017, before the trade war began, so a $40 billion purchase in a single year would be huge. "If the promised sum is spread out over some longer period of time, it is less significant." (https://www.wsj.com/…)

Moreover, the agreement with China is preliminary. There's a lot of negotiating yet to be done to nail it down, which means a lot of opportunity for the agreement to fall apart. As DTN's Todd Neeley pointed out in a China Trade Timeline in his story on the agreement, there have been many "twists and turns" in the U.S.-China trade war, with sunny-sounding announcements sometimes raising hopes that subsequent events dashed (https://www.dtnpf.com/…).

Bottom line? The deal with China, like the one with Japan, only rates two cheers.

Something else worth mentioning: Neither deal covers as broad an array of non-agricultural issues as U.S. negotiators hoped. The Japan deal omits automobiles, which is the elephant in the room in the overall trade relationship between the two countries.

The China deal does not address the many problems Trump negotiators have raised with how the structure of China's economy hurts American companies trying to do business there. Those issues will be tackled later, the Chinese indicated. The Journal said the announcement of the deal "potentially works in Beijing's favor, as it has long sought to negotiate with the U.S. in stages."

In the broad multilateral trade agreements of the past, including those that created the World Trade Organization and its predecessor, the General Agreement on Trade and Tariffs, American agriculture got short shrift. Other countries were determined to protect their farmers from foreign competition and made only grudging concessions.

This time, at least, U.S. agriculture's concerns are front and center. The administration deserves praise for that. But given that U.S. agriculture had a better deal in TPP and given the uncertainties of the arrangement with China, it's not enough to rate a third cheer.

Urban C. Lehner can be reached at urbanize@gmail.com

(CC/ES)

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11/1/2019 | 12:32 AM CDT
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judybug
10/29/2019 | 7:36 PM CDT
every day congress dose not pass trade agreement usmca cost farmer thousands of dollares