June 22, 2017

CornsTalk: What Happens When Trade Agreements are Renegotiated?

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U.S. agricultural exports have been larger than U.S. agricultural imports since 1960, generating a surplus in U.S. agricultural trade. This surplus helps counter the persistent deficit in non-agricultural U.S. merchandise trade. 

At the same time, leaders in Washington, D.C. have made trade a hot topic as they propose to rethink America’s current trade agreements and participation in trade talks.

Chris Novak, CEO of the National Corn Growers Association, said there is some value in taking a second look at trade agreements to ensure that the U.S. is getting a fair shake. But there is a downside, especially when it comes to breaking apart multilateral agreements involving several countries and, instead, negotiating one-on-one with individual nations.

 “You’re more or less going back to Ground Zero, but now, instead of one negotiation, you have a dozen or more,” said Novak. “History has shown us that these negotiations are not something you can hammer out overnight. It can take three to five years or more—even with a bilateral deal.” 

Tom Sleight, president and CEO of the U.S. Grains Council agrees. “You can’t use the words ‘fast’ and ‘trade agreements’ in a sentence at the same time,” he said. 
In the meantime, the U.S. stands the risk of losing valuable market share. “Not having trade agreements in place is going to provide an advantage for many of our competitors during a time when we’re fighting for access to every bushel of demand here at home and around the globe,” Novak added.

“If the U.S. is not part of a trade agreement, somebody else will fill that vacuum,” said Sleight. “A great example is the TransPacific Partnership (TPP) that the U.S. recently decided to exit. Obviously, China wants to fill that void with their own version of TPP and capture that rapidly growing market in Southeast Asia and the Pacific Rim.” 

Q: If we don’t have a trade agreement in place, can we still sell ag products to other countries? 

A: Not having a trade agreement in place does not totally shut out the U.S. from doing business with a nation. But if there is no trade agreement, countries can establish quotas on the amount of product they import from any single country or impose duties and tariffs. If the U.S. has to pay a duty or tariff to ship its corn into a country—and a competitor such as Brazil, for example, does not—that puts the U.S. at a price disadvantage.

 To read more about trade in Nebraska click here to view the whole Spring 2017 CornsTalk publication.

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