Opinion: U.S. Can’t Export Its Way Out of Farm Crisis

The Trump administration has encouraged USDA to deal with oversupply of agricultural products by promoting foreign trade, not limiting production. That doesn’t seem to be a very good fit with the administration’s current fight with China over trade.

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It’s obvious at this point that President Trump’s tough talk on trade has shaken up the political establishment. Trump’s threats to enact tariffs on steel, aluminum, solar panels and washing machines have staggered into a full-blown trade war, particularly with China, one of the United States’ largest trading partners.

Most Republicans are speaking out against the president, many of them for the first time. Senate Majority Leader Mitch McConnell (R-Ky.) and Speaker of the House Paul Ryan (R-Wisc.) are publicly opposed to the tariffs. The president’s chief economic adviser and Wall Street darling, former Goldman Sachs President Gary Cohn, resigned over Trump’s trade moves a few weeks ago.

Joining the chorus of outrage over the president’s trade policies are many within the agriculture sector. What began as a series of serious concerns related to possible changes to NAFTA has grown into full panic-mode among many in farm country. Chinese tariffs on soybeans, pork, nuts, fruit and many other items could have serious ramifications on U. S. agricultural markets.

The Farm Bureau, the checkoff-funded commodity groups (such as the National Cattlemen’s Beef Association), farm input suppliers, multinational grain traders and corporate meatpackers have long embraced free trade agreements and export-oriented agriculture policy as bedrock principles. Their man in Washington, Secretary of Agriculture Sonny Perdue, has even re-organized USDA elevating export promotion to undersecretary status while demoting the office of Rural Development.

Secretary Perdue is a true believer in export-oriented agriculture. In “video town hall” with members of FFA last year, Secretary Perdue explained,

The challenge is sometimes when it gets so profitable, we overproduce, and that’s kind of where we are today. We’ve got a worldwide supply of grain that’s more than we can consume here in the United States. My role as USDA secretary is to go around the world and sell those products that our great productive people in agriculture in the U.S. have grown. We want to do that, whether it’s cattle, whether it’s grains, or other types of other products.

That’s right. USDA’s leader sees his main priority as selling agriculture products overseas. Not reforming the farm bill to help address the root cause of overproduction. Not addressing the health and safety of the U. S. food supply. Not assuring that low-income families have access to healthy and affordable food. Not building rural telecommunications infrastructure, water systems and roads and bridges. Not addressing historically low dairy prices and family farmers leaving the industry. The Trump administration’s own budget proposal, which slashes domestic rural spending, tells us what we need to know about their priorities.

What is clear is that tariffs imposed by other nations could have serious implications for agricultural markets. USDA’s Economic Research Service estimates that 20% of the value of U.S. agricultural production is destined for the export market. The importance of exports, though, varies widely between particular geographies and particular agriculture commodities.

In general, I find the concept of focusing on exports problematic, particularly as a silver-bullet solution to depressed farm income. Exports are important, but they’re only 20% of the market. That leaves 80% of purchasing power among U. S. consumer. Additionally, nearly 100% of farmers are selling the things they produce in a domestic market. Farmers don’t export; agribusiness companies do the exporting.

Export-oriented agriculture does not have the best track record in delivering better incomes for farmers. When I was in college during Clinton’s first term, the passage of NAFTA had the pro-export agriculture lobby salivating. Mexico’s appetite for corn, the thinking went, would lead to a boom once Mexico reduced trade barriers. That’s exactly what happened. U. S. corn exports exploded. Yet, even with the export boom for corn producers, by the turn of the millennium corn prices paid to U. S. farmers were at historic lows compared to farmers’ cost-of-production. Mexican corn producers were leaving their farms because of a flood of U. S. corn exports, and U.S. farmers were in deep trouble and had to be bailed out by large “emergency payments” from Congress.

I’m not suggesting that there is a direct correlation between export-dependence and low farm incomes. On the other hand, it clearly doesn’t make sense to link expanded foreign trade with improved economic security for U.S. farmers.

Ben Lilliston of the Institute for Agriculture and Trade Policy (IATP) told me agriculture is very vulnerable to trade wars.

“The area [in which] other countries are going to retaliate is very much in agriculture. And we’re vulnerable there. China, they’re such a large customer for soybeans, if they shut the door they can crash our soybean market. There’s consequences to a trade war that can be quite alarming.”

USDA estimates that China purchased $14.2 billion of U. S. produced soybeans in 2017.

A key issue, according to Lilliston, “is that people are going to get hurt.” While it might not be a crazy idea to invoke tariffs to protect important industries like agriculture, Lilliston said, “the problem is that there doesn’t seem to be real plan, a coherent strategy, that brings the elements together for a comprehensive solution. What’s the larger program we can point to the administration is using to revive the manufacturing sector here?”

I’ve heard the same concerns from dairy farmers, crop producers and ranchers (some of them voted for Trump, others did not) while covering rural issues since Trump took office. What does Trump’s “America first” program for rural America look like?

When it comes to domestic issues for farmers, it’s clear that Trump’s USDA is focused on an export-oriented agriculture. And focusing on export promotion only amplifies the issues of tariffs, international relations and trade barriers between countries.

It is possible, in the midst of all of this uncertainty, to find a path forward for supporting U.S. family farmers while also limiting the detrimental impacts of exports on farmers in other countries. Groups like IATP, the National Family Farm Coalition, National Farmers Union, R-CALF and the Rural Coalition have called for a replacement of NAFTA that accomplishes just that. Their trade proposals are based around restoring local and national sovereignty of farm and food policy, stopping corporate giveaways through free trade agreements, preventing dumping of cheap commodities on other nations and supporting farmworker rights and better wages.

That’s a worthwhile trade agenda for making rural America great again, at least when it comes to farmers and farming communities.  But given their 16-month track record of chaos, the biggest barrier to implementing coherent trade policies that leads to some security for farmers might be the president and his Administration.

Bryce Oates is from Missouri, lives in Washington, and covers public-land policy and other topics for the the Daily Yonder.

Speak Your Piece is a periodic opinion column representing diverse rural voices and points of view. The opinion expressed in Speak Your Piece are those of the author and not necessarily those of the Daily Yonder. If you’d like to Speak Your Piece, contact Tim Marema, editor of the Daily Yonder at tim  [at] dailyyonder.com.

 

Topics: Ag and Trade
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