Wading Through

Sugar industry does the tough work of ensuring favorable trade

Published online: Mar 30, 2019 Feature Luther Markwart, Executive Vice President, ASGA
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This article appears in the April 2019 issue of Sugar Producer

Management by crisis—this is the standard way Washington works, and it is a complicated and messy process to navigate. It seems that every major issue is embroiled in a partisan brawl. We witnessed that last year in the passage of the 2018 Farm Bill, and now we will see it in the negotiation and passage of trade agreements in 2019. Perhaps the biggest and most immediate challenge to American agriculture is the short-term damage incurred as a result of negotiating strategies to leverage better long-term trade agreements. The disruption and damage of well-established agricultural markets and reliable supply chains is both disheartening and economically punishing to farmers who are the ultimate pawns on the negotiating chessboard and whose income and equity is being put at risk. When and where does this all end? Let’s take a look.

Trade agreements negotiated in the past were often for geopolitical purposes. Strong economic ties with allies (for military sites), neighbors (migration concerns) or essential commodities (oil) were critical, even if we run trade deficits with them. The reason for NAFTA and CAFTA trade agreements was to provide good jobs in those countries for political and economic stability to avoid mass migration to our southern border, knowing full well it would take jobs from the Rust Belt and Midwest regions. Certainly, it is a problem that remains today, but imagine the immigration problems if Venezuela—on the verge of political and economic collapse—were on our southern border. You get the picture.

China’s plentiful labor, low wages and minimal regulations made it a magnet for manufacturing cheap goods for the U.S. consumer market, but led to theft of American intellectual property, forced technology transfers, cyber theft and non-tariff barriers, and fueling a massive trade deficit with the U.S. that is unsustainable. Yet China is critically important to solving the continued military threat from North Korea. A very thin needle to thread.

Trade negotiations between nations are notorious for being slow. The President has little time or patience for the typical delays in traditional negotiations. President Trump imposed import tariffs on steel and aluminum (in some cases, many other products) on many of our trading partners to create immediate economic leverage to quickly renegotiate existing agreements or forge new ones. It forces the other party to the table to resolve the differences as quickly as possible because of the economic implications and pain of delays. These are very bold and controversial moves objected to by many, but essential to force parties to accelerate the negotiations. You will continue to witness tough, ugly and bruising rhetoric until the deals are struck.

From an agriculture perspective, the President personally understands the importance of the American farmer both economically and politically. He has a first-rate negotiating team at the USDA and USTR with a proven track record of getting concessions from other countries on agriculture issues that were once thought untouchable. Senator Chuck Grassley of Iowa is a farmer and chairman of the Senate Finance Committee, which is responsible for overseeing trade agreements. The U.S. ambassador to China is former longtime Iowa governor Terry Branstad, who clearly knows the importance of agriculture and has a longstanding relationship with China’s leadership. They clearly understand the pain farmers are suffering right now and are anxiously working to resolve the core problems that will put farm trade on a new and stronger trajectory. So the simple message from the administration to agriculture is, “You may hate the journey, but you will love the destination.” Only time will tell how this plays out, but I remain optimistic.

From a sugar perspective, as the world’s third-largest importer, we always have a defensive position in any trade negotiation. Market access to any foreign market is not an objective for us, but limiting access from a foreign supplier is critical. The renegotiated NAFTA or U.S.-Mexico-Canada Agreement (USMCA) did not provide any additional access from Mexico and minimal amounts of sugar and sugar-containing products from Canada. The North American trade with these two countries account for 34 percent of our country’s total global exports and 26 percent of our total global imports. Together, they are our largest trading partners and neighbors, and the trade agreement needs to pass Congress this year. The sugar industry will support the agreement.