An Urban's Rural View

After NAFTA, What?

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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President Donald Trump keeps promising to put "America first," and the appeal of that slogan is obvious. Every American wants to see America's interests put first.

The problem is the slogan assumes agreement on what America's interests are. Is abandoning multilateral trade agreements that have been a boon to millions of Americans, among them exporters of agricultural products, really putting America first? The America-first mantra begs the question at the heart of an important debate.

The president says multilateral arrangements undermine America's sovereignty and lack enforceability. But any international agreement, whether with one other country (bilateral) or several countries (multilateral), is a voluntary acceptance of limits on sovereignty in exchange for perceived benefits. And there's no inherent reason why one kind of agreement is more enforceable than the other.

Most of today's multilateral arrangements -- including the World Trade Organization, the North American Free Trade Agreement and the Trans-Pacific Partnership -- exist thanks to American leadership. The American statesmen who provided that leadership were pursuing what they regarded as America's interests. The country's first interest, in their view, was a peaceful world in which prosperity is widely shared.

Last year America elected a president who believes the multilateral, rules-based world America built allows other countries to "take advantage of us." Elections have consequences. Ag interests are beginning to worry about some of those consequences.

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The TPP withdrawal came as no surprise to the farm groups, though it did disappoint them. They took heart when Trump agreed to renegotiate NAFTA rather than bail out. Now, having seen the U.S. demands and the Canadian and Mexican reaction, they're worried the renegotiation will fail and the president will follow through on his threat to withdraw.

Maybe their lobbying campaign will convince the administration not to kill NAFTA. It's at least possible it won't, though. If it doesn't the question becomes, "After NAFTA, what?"

The administration says it can get better deals by negotiating bilateral agreements country by country, using access to the big U.S. market as both carrot and stick. Maybe, but many questions come to mind -- some theoretical, some practical.

Start with the theoretical questions. Is the U.S. market as tasty a carrot or as big a stick as Trump thinks? China is now many countries' biggest trading partner and most of our trade partners are WTO members, which gives them considerable access to the U.S. market to begin with. So how much will they be willing to give to get more?

Is it possible, then, that withdrawing from the WTO is next on the president's hit list? It's no secret the Trump team has little love for the WTO. The Wall Street Journal's Jacob Schlesinger has written an in-depth look at how the administration is trying to combat China's growing influence on the WTO (http://tiny.cc/… ). But outright withdrawal would be a big, nasty surprise that could trigger trade wars. Are we really going there?

On to the practical questions: Does the U.S. government have the necessary resources to negotiate a batch of new bilateral trade deals? Does this administration, in particular, have the necessary senior people, given how slow it has been to staff up agencies like USTR and USDA? In the past negotiating even relatively small bilateral deals has taken years, so wouldn't it take even longer to negotiate a bunch of big new ones all at the same time? And while they're being negotiated, how will American ag exporters succeed in markets like Japan against competitors like Australia who are benefiting from TPP terms they've already locked in?

The outlook for successful new bilateral trade agreements is especially discouraging if you look at what the Trump team is doing rather than what they say. It has now been more than nine months since we withdrew from TPP and bilateral negotiations with Japan have not really begun. The fourth largest overseas market for American ag exporters, buying $11 billion in U.S. ag products in 2016, is at risk.

Problem is, the Japanese don't want a bilateral deal. They want the U.S. back in TPP. TPP gives them more than just increased access to the U.S. market. It serves as a counterweight to China, which they see as an economic and military threat. Japan will continue to play hard-to-get on a bilateral deal as a way of pressuring us to reconsider TPP.

Maybe the president will have more success negotiating other bilateral deals, but so far there's little reason to think so. If part of "America first" is promoting U.S. ag exports, farmers and ranchers need to hope the renegotiation goes well, so there's never a need to ask, "After NAFTA, what?"

Urban Lehner can be reached at urbanize@gmail.com

(CZ)

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