No industry has been better served by the trend in recent decades toward increased globalization and free trade than agriculture, and more specifically the producers and traders of grain and grain-based products throughout the world.
Through the years, the walls of protectionism have been torn down as countries such as Russia and China, which for many years wanted nothing to do with free trade, have become willing and highly successful participants. Thirty years ago no one would have imagined that Russia would be the world’s leading wheat exporter, but that’s exactly what has transpired.
Likewise, no one would have envisioned the United States, always a powerful and fierce advocate of free trade, one day leading the charge against it, ripping up agreements with longtime trading partners and imposing high tariffs on foreign-made goods from countries that mercurial U.S. President Donald Trump claims are holding the upper hand in unfair trade deals with the United States.
But this wave of anti-globalization sentiment isn’t unique to America. Across the Atlantic Ocean, Europe is grappling with Britain’s jaw-dropping decision to leave the European Union, which is a deterrent to free trade in that part of the world.
Remarkably, that is the sobering reality today, and advocates of free trade everywhere, including World Grain, are alarmed at this stunning turn of events.
At the epicenter of these seismic developments is the trade war that is growing between the world’s two biggest economies, the United States and China. In July, Trump slapped 25% tariffs on steel and aluminum as well as other Chinese-made products, and China, in turn, imposed 25% tariffs on a number of U.S.-based items, most notably soybeans.
During a meeting of the World Trade Organization last month in Paris, WTO Director-General Roberto Azevedo outlined the economic and systemic threats posed by the growing tensions in global trade and called on “everyone who believes in trade as a force for good” to speak up in its defense.
Azevedo, who has been working feverishly with political leaders, business leaders and the media to increase the awareness and understanding of what’s at stake, correctly noted that a full-blown trade war between China and the United States would have a ripple effect that would expand to even the world’s smallest, least developed countries.
“Tensions are growing,” Azevedo told the assembled WTO members. “New measures are being announced with increasing frequency. There is real and justified concern about the escalation we are seeing. Whether or not you call it a trade war, certainly the first shots have been fired. Continued escalation would risk a major economic impact, which would pose a serious threat to jobs, growth and recovery in all countries.”
One ray of hope in this matter is that Trump, the unofficial ringleader of the anti-globalization movement and a businessman who is an experienced dealmaker, is known to ask for the moon and settle for the stars as a negotiating tactic. Already, after weeks of threats and bluster, Trump and E.U. Commission President Jean-Claude Juncker have agreed to hold off proposed automobile tariffs and work to resolve their dispute on steel and aluminum as they pursue a bilateral trade deal. One can only hope a similar agreement can be reached with China so that U.S. soybeans can start flowing into China, which is mutually beneficial for both countries.
In a world where most of the population lives in areas where agricultural production is limited, free trade is the key to providing affordable, nutritious food to the people of both highly developed and developing nations.
Going back to an era of “self-sufficiency” and protectionism would be foolish on so many levels. There would be no winners, only losers.