For advocates of free trade, President Trump’s policies have taken a marked turn for the worse in 2018. Perhaps it was inevitable that the president would give in to his worst protectionist impulses. But with tensions now rising between Washington and Beijing, and with American farmers and ranchers increasingly caught in the crossfire, the administration’s attempts to buy the domestic agriculture industry’s acquiescence are especially odious.
The administration’s protectionist turn started in late January, when the president levied discretionary tariffs on solar panels and washing machines. Understanding that agriculture is America’s biggest export to China and a key constituency of the president’s political base, Beijing responded with tariffs on American sorghum.
Since then, the United States has announced tariffs on imported steel and aluminum and is in the process of levying tariffs and other import and investment restrictions on China due to its industrial espionage and trade secret theft. In return, Beijing has plans to target for retaliation more American agriculture products, including soybeans, our largest export to China. Suffice it to say, these are scary times for those farmers who rely on foreign markets.
The administration now looks to assuage those fears with another ill-advised scheme. House lawmakers last week rolled out the first draft of the 2018 Farm Bill, which is scheduled for renewal later this year. While the president’s previous budget proposals included sensible reforms to outdated farm subsidy programs, the administration is shifting quickly to bolster domestic agriculture subsidies as political cover for its tit-for-tat game of protectionism.
But the federal government’s agricultural safety net is already far too generous. It is full of misguided subsidies that pad the bottom lines of large mega-farms while failing to provide for those truly in need. Meanwhile, certain domestic subsidy programs like the federal crop insurance program bust the federal budget and provide incentives to damage the environment. Those subsidies also hamper trade negotiators’ ability to open foreign markets to American products, including agricultural products. Adding more subsidies to this troublesome mix is a recipe for disaster.
Most American farmers and ranchers want market access, not more government subsidies. A better approach for policymakers to bolster the farm economy is straightforward. First, the president should back down on his plans to levy tariffs on Chinese imports. Not only would this de-escalate trade tension, it would soothe market fears of a full-blown trade war. Since the new year, in fact, the Dow Jones Industrial Average is down, despite low inflation, historically low interest rates, positive employment figures, and otherwise sensible tax and regulatory policy coming from Washington.
Next, in order to open notoriously closed Asian agriculture markets, the United States should re-engage on the Trans-Pacific Partnership, or TPP. After jettisoning U.S. involvement in the promising 12-nation trade pact as one of his first initial acts in office, the president floated the idea of rejoining the agreement last week in a meeting with senators from states dependent on agricultural exports. There are a number of reasons to rejoin the TPP, including expanded market access abroad and bolstering America’s ability to influence China’s trade practices. Beijing was the biggest winner of the president’s hasty decision to withdraw the United States from the TPP.
Though the remaining members of TPP would welcome the United States rejoining the agreement, there are a number of potential hang-ups. The remaining members of TPP already have moved forward without the United States. It is an open question the extent to which the other members would be willing to negotiate further changes to the agreement. After witnessing the United States’ irresponsible negotiating positions in the NAFTA renegotiation, a healthy skepticism of the administration’s trade tactics is warranted.
Likewise, rejoining TPP has domestic political problems. If Democrats retake the House of Representatives, why would House Speaker Nancy Pelosi, D-Calif., ratify the same trade agreement for Trump that she was unwilling to support under former President Barack Obama? Still, it’s not too late for the president to try to push forward with plans to rejoin the TPP and reaching a bipartisan deal would be a legacy-building accomplishment.
For too long, American agriculture has been overly dependent on domestic subsidies. Rather than double down on that failed regime, the smarter course would be to pare back those subsidies and diligently work to expand market access abroad. American farmers and ranchers want the chance to sell their products, not have to wait for a government handout.
Image credit: oticki