With the onset of the Trump Administration, cold winds are blowing through the international trade policy arena. The U.S. withdrew from the Trans Pacific Partnership, a twelve nation trade pact nearing completion, and President Trump is talking about renegotiating NAFTA, the trade agreement between the U.S., Mexico, and Canada. Most farmers and rural areas voted for President Trump over Hillary Clinton, but now they are hoping that he drops most of his threats about trade and resumes the post-war trend of ever-freer and ever-growing international trade flows. The reason farmers and rural regions support trade is simple, U.S. agriculture is a winner in the trade arena.
How important is trade to agriculture? Listen to Zippy Duvall, president of the American Farm Bureau Federation. “Trade is critical to the livelihood of the U.S. agricultural sector because it spurs economic growth for our farmers, ranchers and their rural communities. The fact is, 95 percent of the world’s consumers live outside of the United States and more than 20 percent of U.S. farm income is based on exports. Agriculture supports jobs in the food and agricultural industries and beyond.”
We hear about economic multipliers probably more than we should, but they are particularly relevant and appropriate here. Fully one-fifth of U.S. agricultural production goes to export markets and the money that flows back doesn’t just make American farmers richer. It also helps create all sorts of jobs in rural communities selling farmers products or selling things to those who sold farmers other things. A trade war could devastate rural economies that are often fragile to begin with.
Putting agriculture and rural communities in particular jeopardy is the fact that the U.S. runs a trade surplus relative to the rest of the world (we export more agricultural products than we import) thanks to strong exports to some of the countries with which we run the largest trade deficits when all trade in goods and services is considered. The top four export markets for U.S. agriculture are China, Canada, Mexico, and Japan, with South Korea in sixth place. Trade wars with any of these countries could cause significant economic damage to U.S. agriculture and the rural towns it supports.
Roughly one-quarter of all U.S. soybeans are sold to China with another quarter of our soybeans sold to the rest of the world. Mexico, Japan, and South Korea purchase large quantities of U.S. corn. China is the number one purchaser of U.S. cotton, with prospective Trans Pacific Partnership member Vietnam right behind at number two. Even the sort of low-wage countries that are often painted as the source of U.S. job losses are big buyers from U.S. agriculture. The Philippines and Vietnam are both top ten destinations for U.S. agricultural exports.
Mike Giles, president of the Georgia Poultry Federation, explains the importance of trade for his industry: “Exports are vitally important to the poultry industry. In a normal year, about 20% of broiler production in the United States is exported. There is tremendous potential for growth in the future due to the fact that the per capita consumption of chicken in the United States is about 91 pounds, while per capita consumption in the rest of the world is considerably lower. As consumption of chicken increases throughout the world, the increased demand is likely to create new export opportunities for producers in the United States.”
Think about that. U.S. agriculture is already a winner in the international trade arena, running a trade surplus that is normally around $15-20 billion per year. As much of the rest of the world gets richer, they will likely buy more agricultural commodities from us, including higher priced products such as beef and poultry. When we buy goods from these countries, it increases local incomes and therefore food budgets and some of that money comes right back into the pocket of an American farmer.