Foreign Policy

Trump's commerce wars have worsened poor agricultural insurance policies

The past few years have been turbulent for American farmers and ranchers. Thanks to advanced technology and generous subsidies, their products have become so numerous that the United States typically exports about 20 percent of its agricultural output abroad. In order to continue to grow, US farmers and ranchers need better access to overseas markets. However, US agricultural and trade policies run counter to the liberalized and more open markets that US farmers would benefit from. These obstacles are not due to President Donald Trump. He raised it higher, but only within a system that was already deeply flawed.

One of Trump's first actions as President was to keep an election promise to withdraw the United States from the Trans-Pacific Partnership (TPP), a promising free trade agreement with Pacific Rim states that was signed in early 2016. No one would have benefited more from the TPP than from US farmers and ranchers, who would have seen significantly improved access to the notoriously closed agricultural markets of Asian countries like Japan. Following the same refrain, Trump then threatened to withdraw the United States from the North American Free Trade Agreement (NAFTA) with Canada and Mexico from the Clinton era before embarking on minor changes to the 25-year-old pact.

When it comes to U.S. producers, the damage done by Trump's actions on these deals pales alongside the damage done by his tariffs and trade wars. In early 2018, Trump cited highly dubious national security concerns to impose tariffs on steel and aluminum imports from virtually every country in the world, including long-time allies. The United States' trading partners are likely to have retaliated with their own tariffs, including on a number of US agricultural products.

Trump's aggressive trade war with China made the situation of US farmers worse. In about 18 months, Washington and Beijing imposed a series of escalating trade restrictions, including Chinese retaliatory tariffs on more than 1,000 categories of U.S. agricultural products such as pork, soybeans, dairy products, and nuts. Both sides signed an easing in January 2020, but it's only a temporary reparation for a conflict that continues to fester and is likely to re-emerge in the near future. As part of the so-called phase 1 agreement, Beijing agreed to buy US agricultural products worth around 40 billion US dollars over a period of two years. As of September, however, China's agricultural purchases were barely half as high as necessary to meet the agreed target for 2020. In the meantime, high tariffs remain in place on both sides.

With American agriculture in the midst of Trump's trade wars, the sector has predictably suffered. Farm bankruptcies are increasing as farmers lose market access overseas. To mitigate the aftermath of its trade wars and tackle the financial burden of COVID-19, the Trump administration has shoveled tens of billions of dollars into farmers, ranchers and companies in the sector – an important constituency for Trump's re-election prospects. In 2020 alone, the Trump administration will have paid the agricultural sector an estimated $ 45 billion. This has increased net agricultural income, which has risen sharply since 2016, thanks largely to Trump's subsidies. However, the bulk of these payments went to wealthy farms and well-connected businesses, while the poorest farmers and ranchers received little relief. It is estimated that this year an astonishing 40 percent of the sector's income will come from government subsidies.

Shortly before the election, many are amazed at Trump's political calculations. The Office of Special Counsel recently accused Secretary of Agriculture Sonny Perdue of violating federal law by using his official position to promote Trump, and promised a crowd in North Carolina in August that the subsidies would last for "another four years … continue … if America pulls out and votes for it man, Donald J. Trump. "

The Trump administration's aggressive push into protectionism was costly to farmers, but the misguided agricultural policy was apparently a result of the trade war. Every five years, Congress distributes billions of dollars in subsidies to US agriculture in a variety of different programs, in a largely bipartisan manner. Like the Trump administration bailouts, these guidelines are not all expensive. They also greatly benefit wealthy farms and businesses without providing an adequate safety net for family farms. This inequality extends beyond US borders: Domestic subsidies harm farmers in developing countries who cannot compete with heavily subsidized agriculture from the world's richest country.

Despite the huge setback to American farmers from Trump's tariffs and trade wars, a reversal is possible. That the US public piqued foreign trade is a popular political narrative, but it is unfounded. In fact, more Americans support trade than ever before in the past quarter century. Washington policymakers can capitalize on this enthusiasm to expand market access for American farmers and ranchers by resolving Trump's tariff wars and rejoining the TPP to improve access to key Asian markets. Finally, and perhaps most critically, the United States should use its biggest bargaining chip – the curtailment of domestic subsidies – to kickstart multilateral negotiations at the World Trade Organization, where agricultural subsidies and tariffs have long been a major obstacle.

Trump deserves a lot to blame for his misguided trade and agricultural policies. Many of the excesses in the US system, sold to the public as a safety net for family businesses but largely used as a welfare system for the largest producers, have a long bipartisan history. The next administration can and should do better.

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