Trump, farmers need more free trade agreements, not fewer

Trump, farmers need more free trade agreements, not fewer
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With apologies to fictional Wall Street financier Gordon Gekko: Free trade is good; free trade is right; free trade works. And it works for almost every sector of the U.S. economy, including America’s hog farmers.

Which is why recent White House intimations of withdrawing from the North American Free Trade Agreement (NAFTA) and from the Korea-U.S. (KORUS) deal are perplexing.

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Since the United States concluded its first free trade agreement in 1988, with Canada, exports of U.S. goods and services have increased significantly, adding billions of dollars and hundreds of thousands of jobs to the U.S. economy.

 

For the 27 years prior, according to data from the U.S. Census Bureau, American exports plodded along, totaling just under $26 billion in 1960 and increasing to about $349 billion in 1987. But in 1988, they jumped to $431 billion — a 24 percent increase – and have been on a steep upward trajectory ever since. Last year, U.S. exports topped $2.2 trillion.

Much of that growth has come as a result of the 14 free trade deals, covering 20 countries, the United States has finalized over the past three decades, starting with that U.S.-Canada pact. In fact, now nearly 50 percent of all U.S. exports go to America’s free trade agreement partners, while half go to the other 173 countries of the world.

That’s because free trade agreements eliminate tariff and non-tariff barriers to U.S. goods and services, making American products more competitive in the countries to which they’re exported. Additionally, in most cases, the United States gets most of the benefits of any trade agreement since countries exporting to America already enjoy low or no tariffs on their products through U.S. trade programs such as the Generalized System of Preferences or “most favored nation” status. 

NAFTA and KORUS have been particularly beneficial to American agriculture. In 2016, U.S. farmers exported more than $38 billion of products to NAFTA partners Canada – the No. 2 export market for U.S. agriculture – and Mexico – the No. 3 market. Those shipments, which represented 28 percent of all U.S. agricultural exports, generated more than $48 billion in additional economic activity in the United States and supported nearly 287,000 American agricultural jobs.

Farm exports to South Korea were $6.2 billion last year, making it the fifth largest agricultural export market for the United States. The U.S. pork industry, for example, sent $365 million of product to the Asian nation in 2016, when import duties on most U.S. pork cuts of commercial significance went to zero. Before KORUS, tariffs were 25 percent on frozen U.S. pork and 22.5 percent on fresh or chilled pork products.

Free trade agreements also provide benefits beyond trade, including improved relations between the United States and its partner countries, better investment and supply chains, increased cooperation on matters of mutual interest — such as terrorism and drug trafficking — and greater political stability in the partner countries.

While there’s almost always room for improvement in any agreement, including the 23-year-old NAFTA, the United States shouldn’t walk away from them.

Abandoning NAFTA and KORUS would result in the U.S. pork industry, for example, losing the Mexican and South Korean markets to competitor countries such as Canada, Chile and the European Union. That would mean thousands of lost jobs and costs to America’s hog farmers of nearly $1.7 billion and $556 million, respectively, according to Iowa State University economist Dermot Hayes. 

And terminating those deals also would harm America’s ability to conclude future free trade deals. After all, which countries would be willing to spend years negotiating and finalizing agreements only to see them torn up a few years down the road? 

With U.S. economic growth and jobs increasingly dependent on exports and on expanding trade and with more than 95 percent of the world’s population and 80 percent its purchasing power being outside America’s borders, the United States can’t afford not to trade, and free trade agreements have proved the best way to promote robust trade.

That’s why the U.S. pork industry and other agricultural sectors are urging the Trump administration to stay in NAFTA and KORUS and to work on new agreements, beginning with Japan, the top destination for many U.S. farm products.

The United States needs more free trade agreements, not fewer.

Rich Deaton is president of the Ohio Pork Council.