While the economic pain of current tariff and trade battles are real in farm country, so too are the blatant and abusive trading practices – particularly in China, according to the Office of the U.S. Trade Representative’s (USTR) 2018 National Trade Estimate.
According to Ernie Birchmeier, manager of the Center for Commodity Farm and Industry Relations for the Michigan Farm Bureau, the annual report card of sorts highlights major trade offenses and barriers to trade, investment and services that effectively block American exports.
“For years, American agriculture (and other industries) have faced artificial trade barriers in the form of tariffs, subsidies, production controls, market restrictions and other various trade distorting mechanisms while previous administrations stood idly by and just let it happen,” Birchmeier said. “There have been rules in place, but they clearly haven’t been enforced.”
Birchmeier said that while there is little doubt current trade disputes have caused some very serious short-term, significant losses in U.S. agriculture, the Trump administration has “taken a bold step, drew a line in the sand and said … we are going to fix this.”
“It’s very easy to compare 2017 farm-gate prices to 2018 and see the economic impact of the trade dispute,” Birchmeier said. “But, what if we were allowed to compete in a truly open, free and fair trade market place? American farmers would clearly come out winners in the global market.”
While the 504-page report documents the unfair trade challenges imposed on American farmers through subsidies and unfair trade practices with worldwide competitors, including India, Thailand, Brazil, and a whole host of other ag competitors, here’s a run-down on three trading partners — China, Canada and Mexico.
China From the intellectual property theft to massive stockpiles of steel and aluminum, China’s trade relationship with the U.S. is strained in many ways. When it comes to agriculture, China is the United States’ largest export market. But America’s total trade deficit with China is significant at $375.2 billion in 2017. As the USTR notes in its report, China’s inconsistent enforcement of regulations and selective intervention creates an unpredictable market.
- China’s 2015 Food Safety Law has been disastrous for exports of dairy, infant formula, seafood, grains and oilseeds. When the international community opposed it, China agreed to an implementation delay but still moved to require an unnecessary official certification of all food products, even low-risk exports.
- Beef, to some extent, is back on the table in China after years of an outright ban based on unscientific political whims. But China still doesn’t follow international standards on beef and maintains a ban on compounds that are widely used in the industry.
- Subsides continue to distort the export market and price for many commodities in China. The government provides subsidies and support for cotton, rice, wheat and corn among others. And, China doesn’t follow the market access it promised when it entered the WTO through its tariff-rate quota system.
Canada Our northern neighbor may be the largest good export market we have but the total trade imbalance for all U.S. goods is significant coming in last year at a whopping $17.5 billion.
The NAFTA reboot, known as the United States-Mexico-Canada Agreement, or USMCA, aims to correct some of the imbalance but a look at the issues in agriculture shows just how significant the problem is for American farmers.
- Canada’s supply management system for diary, chicken, turkey and eggs severely limits the ability of U.S. producers to increase exports and means Canadian consumers pay more for these goods.
- Dairy alone has been a huge problem for U.S. producers with an unfair pricing scheme called Class-7 that is aimed at decreasing U.S. exports of dairy components to Canada while increasing Canadian exports of skim milk powder.
- U.S. grain producers also face a big challenge in Canada with a system that prevents them from receiving a premium grade for grain and instead only receiving a label for the country of origin, which unfairly tilts the market toward domestic producers.
Mexico Our southern neighbor remains the second largest export market but, like Canada, the total trade deficit – including ag and non-ag products – is large coming in at $71.1 billion last year.
In agriculture, America fights a never-ending battle against unfair pricing, court orders, labeling and subsidies that restrict our exports. Let’s hope USMCA also does some good in Mexico but for now, the problems persist.
- The international game of hot potato that Mexico and its court system have played with U.S. potato growers is just one area where unfair regulations have hurt American growers. In 2003, Mexico banned the import of potatoes beyond 16 miles from the border. But after a scientific study in 2011, Mexico relaxed the requirement and opened up to potato imports. And then the Mexican potato industry challenged that move in court in 2014.
- The Mexican government issued new decrees in 2016 aimed at opening market access but the Mexican potato industry again won court injunctions. The legal challenges are ongoing, and the USDA and USTR are still working to open market access for potatoes.
- Raw milk is another area where Mexico has blocked U.S. producers. American dairies have been unable to ship raw milk to Mexico since 2012 because the Mexican government determined the veterinary import requirements didn’t apply to the product. In 2017, the U.S. continued to hold talks with Mexico on this requirement.
- Meanwhile, and this move is not noted in the USTR’s report, Mexico gave the European Union a sweet deal on common food names related to cheese that blocked American cheese producers from selling their products in Mexico.