After years of frustration and setbacks, American farmers are finally seeing real action to resolve trade disputes. Recent agreements signed with China, Canada, Mexico, and Japan are proving that the Trump administration can close a deal with some of our biggest trading partners.
Although Japan is the third-largest economy in the world, behind only the U.S. and China, it received the least press of all of the recent trade deals. Japan reduced tariffs on beef, pork, and other ag products to put the U.S. on par with most trading rivals. Once fully phased in, over 90 percent of U.S. ag products will enter Japan either duty-free or under preferential tariff rates.
The newest agreement, the “Phase 1 Deal” with China, brings the most immediate promise. China agreed to purchase $36.5 billion in agricultural goods in 2020 and another $43.5 billion in 2021, for an average of $40 billion per year over the next two years. If realized, this would be $16 billion more than the previous record of $24 billion of ag goods sold to China in 2017.
The China agreement is particularly promising for Missouri farmers. Before the U.S.-China trade dispute, the U.S. exported about 60 percent of its soybeans to China. According to the Missouri Department of Agriculture, soybeans are the largest crop in the state by value. After China instituted a retaliatory tariff on American soybeans, the market took a beating. Many Missouri farmers had little choice but to store their crop in bins and hope for a resolution soon.
Negotiators agreed to targets for specific types of goods, but they were not disclosed to avoid distorting markets. Realistically, though, it would be hard to reach the proposed numbers without a large soybean commitment.
The day after President Trump signed the China Phase 1 Deal, the U.S. Senate passed the new United States-Mexico-Canada Agreement, or USMCA, by an overwhelming 89-10 vote. Missouri Senators Roy Blunt and Josh Hawley both supported the measure. A month earlier, the House passed the agreement 385-41, with the support of all Missouri Representatives but Lacy Clay.
USMCA will modernize trade rules between the U.S. and Missouri’s top two agricultural trading partners, but the real importance is the signal it sends to other nations. Both houses of Congress were able to pass a politically divisive trade agreement with 90 percent margins in the midst of an impeachment battle. This shows that despite deep political disagreements, Washington has a huge appetite to get trade deals done.
As with all trade agreements, enforcement will be key. The Trump administration appears very confident they have included mechanisms to hold these countries to their bargains. Hopefully, the enforcement provisions will work so these agreements can achieve their full potential.
Both President Trump and U.S. Secretary of Agriculture Sonny Perdue have said they want to complete trade deals soon with India, the European Union, and the United Kingdom. Each of these would be heavy lifts for their own reasons, but the markets have huge potential for American agricultural goods.
Eric Bohl, of Columbia., is the director of Public Affairs and Advocacy for the Missouri Farm Bureau, the state’s largest farm organization.