WASHINGTON, DC, US — In a May 9 commentary in the Wall Street Journal, Robert Zoellick, a former US Trade Representative, wrote that “President Biden’s new international policy is missing one big pillar: trade.” Reflecting a similar conclusion, the May/June 2021 issue of Foreign Affairs ran five essays on how to use trade policy more wisely in the emerging geopolitical competition between the United States and China. Though little was said about agriculture in any of these essays, the US farm community has much at stake in seeing this void filled.
The Doha Round of trade negotiations promised to put agriculture at the center of its liberalizing initiative. That proved an important reason why the negotiations eventually failed, as many countries resisted farm policy reform. The impediments to trade reform and globalization, however, run much deeper. Beginning with the Tokyo Round of the 1970s, the domestic US consensus in favor of trade liberalization has atrophied. The final stake was driven into the heart of freer trade in the wake of China’s 2001 admission to the World Trade Organization. Media coverage and domestic politics focused on the estimated 2 million US manufacturing jobs lost to China from 2000 to 2015.
Missed in this misguided debate was the small real impact trade has on the US job market.
As Adam Posen put it in his Foreign Affairs commentary, “The Price of Nostalgia,” …“for each manufacturing job lost to Chinese competition, there were roughly 150 jobs lost to similar-feeling shocks in other industries.” Trade-related job loss is a small fraction of the turnover of jobs in the United States, but it has proven to be a powerful poster child for struggling workers and communities.
The cause of freer trade has suffered badly from this misunderstanding. President Obama negotiated the Trans Pacific Partnership (TPP) but feared that bringing it to Congress for approval would result in its defeat. Instead, a successor agreement has gone forward without US membership. President Trump claimed to be “tariff man,” slapping large duties on many basic and Chinese imports as part of his “America First” pledge, which failed to bring back the promised “good jobs,” and the US-Mexico-Canada agreement he negotiated heightened protection of the American auto industry under the guise of reform.
President Biden has pledged a “worker-centric” trade policy but with little new content and some reversion to misguided “Buy American” strategies.
The result is a disconcerting state of affairs. The United States is disengaging from globalization at a time when other countries are opening further. In addition to joining TPP’s successor, key Asian allies like Japan, Australia, South Korea and New Zealand have signed up with China for the Regional Comprehensive Economic Partnership. Though Brexit took England out of the European Union, the EU has added a dozen new member states since Doha was launched and has struck bilateral trade deals with Canada and several Asian countries. Trade’s share of global GDP is approaching 60% while US trade remains well below 30% of its GDP. Globalization is moving ahead without US leadership or participation.
Two cornerstones to renewing US involvement and leadership in the globalizing world economy exist. One is the need for an effective safety net at home for all who suffer dislocation from economic change in all its forms. According to Posen, the best way to accomplish this is to replace the failed “trade adjustment assistance” approach launched in 1962 with a more European approach, spending up to “1 percent of GDP annually on helping unemployed people find work.” This would both advance economic justice and reduce the stigma that has wrongly been attached to trade-related job loss.
The other cornerstone is the need to recognize that “data is now the center of global trade,” as explained by Matthew J. Slaughter and David H. McCormick in their Foreign Affairs essay. They call on the United States to “help craft a new multilateral framework for data” with other countries that share a vision “that maximizes its immense economic potential without sacrificing privacy and individual liberty.” An open framework of this sort should offer an appealing contrast for many countries to China’s model: “...a combination of laws and technologies that restricts the flow of data in and out of China… (and)...mandates government access to data generated in the country.”
US farmers are unlikely to benefit directly either from larger domestic investments in helping displaced workers transition to new jobs or from an international agreement on data flows that creates an open, collaborative market that stimulates innovation. The lack of direct benefits, however, reflects too narrow a view of US agricultural interests. What really drives demand for US farm-product exports is rising global incomes, especially in developing countries.
Most of the world’s malnourished, hungry or diet-limited people live in developing countries. As their incomes rise, their demand for the grains, oilseeds and livestock products that are the core of US agricultural exports will rise rapidly, often outstripping their own national production capabilities. Their willingness to import food products from the United States will be enhanced to the extent that US markets are open to their exports and US policies support their access to the health, energy and environmental innovations that open data flows promote.
That remains the promise of open markets, and US farm support remains a critical factor in making US policy supportive of freer trade. That voice needs to be heard if trade liberalization is to gain new life under a Biden presidency.