Trade deals not always sunshine and roses

posted Aug. 8, 2016 12:18 p.m. (CDT)
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by / Darin Von Ruden

There has been a lot of talk around the country about how the Trans-Pacific Partnership is good for our agriculture economy. But I’m not buying it.

Over the last several decades, the story of trade agreements ratified by Congress has been one broken promise after another. Backers of trade agreements such as the North American Free Trade Agreement and the Korea Free Trade Agreement promised U.S. farmers increases in farm income and more rural economic activity. These promises have largely been unfulfilled. In fact, agricultural imports have surged while exports have lagged behind under recent free-trade agreements, hurting U.S. farmers.

Now Congress is proposing yet another free-trade agreement, the Trans-Pacific Partnership. Wisconsin Farmers Union believes that the TPP, a global trade agreement among 12 Pacific Rim countries, poses a serious threat to dairy farmers. Among other concerns, the TPP could lead to greater imports of milk protein concentrates, which displace demand for milk produced on U.S. farms. New Zealand, the leading exporter of MPCs, is a member of the TPP.

Exchange rates are especially important when it comes to trade in agricultural commodities. When the value of the U.S. dollar is high, U.S. commodities are relatively more expensive to international traders, and they will opt to buy commodities from other countries instead. Since U.S. negotiators failed to secure binding prohibitions on currency manipulation in the TPP, all of the supposed gains to agricultural exports under the TPP could easily be wiped out by currency manipulation.

Currency manipulation could quickly erase supposed gains in agricultural trade. The TPP includes three known currency manipulators: Japan, Singapore and Malaysia. These countries use state-owned banks to buy up U.S. dollars, so their currencies stay cheap and the U.S. dollar stays expensive. The TPP contains voluntary measures, but no binding provisions, to curtail currency manipulation. Currency manipulation drives up our trade deficit, reduces our Gross Domestic Product by hundreds of billions of dollars, undermines U.S. job growth, and increases the U.S. federal deficit. During trade talks Japanese officials said that they would use this mechanism to protect their industries, especially the auto and banking sectors.

Another possible detriment to the TPP is that Canada’s milk quota system is supposed to be phased out over the next decade. Will they still have the ability to protect their farm structure? And how will that impact our fragile U.S. dairy market?

Meanwhile, the U.S. trade deficit continues to rise. Without some safeguards in place, and a provision to address currency manipulation, TPP is not going to be good for American agriculture.

Under TPP, dairy stands to be at a net loss in both price and farm numbers. Dairy prices will struggle under TPP as the U.S. Department of Agriculture estimates that imports will rise close to 5 billion pounds by 2025 under TPP versus less than 4 billion under current trade agreements.

But think of the exports, they say!

We’re told exports will save us, but look at what has happened over the last 18 months — exports have fallen by nearly 13 percent in volume and 33 percent in value. That means there is less money coming back to the local economy and more money leaving the U.S. to buy imports.

Dairy farm numbers in the U.S. have been declining for several decades. In 1970 there were around 648,000. In 2006 there were 75,000, and today we have less than 50,000 dairy farms across the country. Wisconsin is losing one farm a day on average and California is losing one to two per week as a result of the low prices that farmers are receiving for their milk.

So with the above scenario where exports are falling and imports are rising, there will be pressure for prices to remain below farmers’ production costs.

We can’t risk another economic downturn like those we’ve experienced under previous trade deals. The Wisconsin Farmers Union opposes the Trans Pacific Partnership and has urged our representatives in Washington to say no to TPP.

And just where do our candidates and elected officials stand? President Barack Obama has gone all in on his support of the TPP. In contrast, presidential candidates Hillary Clinton and Donald Trump all come out in opposition to the TPP.

Wisconsin Senate incumbent Ron Johnson says he “has not made up his mind” on TPP, even though the proposal was released in November of last year. Johnson did vote to give the president Trade Promotion Authority in order to “fast track” the TPP. His competitor, Russ Feingold, opposes TPP in no uncertain terms.

While many in our agricultural community would have you believe TPP is all sunshine and roses, past trade deals should give us serious pause.

Don’t believe the hype. Standing up for Wisconsin farmers means standing against the Trans-Pacific Partnership.

Darin Von Ruden is a Westby dairy farmer and president of the Wisconsin Farmers Union.






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