By former USDA Secretary John R. Block
I want to focus on trade today. From agriculture’s perspective, it is extremely important. 25% of ag income comes from products sold to other countries. Production from 1 out of every 3 acres is exported. Agriculture has a positive trade balance of more than $30 billion. As positive as our ag trade balance is, total U.S. trade is running a massive trade deficit – roughly $700 billion. Trump has already rejected the Trans Pacific Partnership trade agreement. He wants bilateral agreements with individual countries.
My first question is – what trading partners are pushing up this huge imbalance?
Answer – China gets the prize.
Half of the deficit is because of Chinese trade. Then, we can blame the EU for 20%; Japan for 9%; Mexico for 8%; and Canada for a tiny 2%. Other countries in the world make up the rest.
The fact is that China has been a very important market for our ag products, but they are not consistent. They are a manipulator. They have given a subsidy of more than $100 billion to their farmers over the last 3 years. That distorts the market. The Chinese government tries to manage everything. Two years ago, China supported the price of corn at $10 per bushel. It is now supported at $5 per bushel. The U.S. has launched a World Trade Organization case against China’s grains policy. China has raised tariffs on U.S. ethanol from 5% to 30%. They have effectively closed the door on our exports of distillers dried grain. Duties, tariffs, and manipulation of the market is not fair trade. The U.S. has by far the most open market of any developed country in the world. Other countries – at the drop of a hat – slam a tariff on our imports.
Turn to Europe now. The EU is responsible for 20% of our trade deficit. They can be very restrictive. The EU closes the door on most biotech products. When I was Secretary of Agriculture, they stopped importing any of our meat. They had to inspect every one of our processing plants. And after 2 years, they started accepting only horse meat. The French just couldn’t get enough horse meat.
We don’t want a trade war. Agriculture could be hurt, but we need to do something. A “border adjustment tax” could be the answer.
John Block was Secretary of the U.S. Department of Agriculture from 1981-1985, where he played a key role in the development of the 1985 Farm Bill. If you would like to review his radio shows going back more than 20 years, visit johnblockreports.com.