Struggling U.S. farm sector faces new threat as TPP dies

Ag groups oppose Trump's move to back out of Pacific trade pact

(Dave Bedard photo)

Chicago | Reuters — U.S. President Donald Trump’s decision to back out of the Trans-Pacific Partnership (TPP) trade deal, a US$62 billion market for U.S. farmers, provides a fresh threat to a slumping agricultural economy that has grown increasingly dependent on exports.

Agricultural groups expressed disappointment over the move and urged the new administration to find alternative ways to boost product shipments to Asian countries. Trump announced the cancellation on Monday, quickly fulfilling a campaign promise.

Trump won nearly two-thirds of the rural vote in November, with big agricultural states including Iowa, Nebraska, Ohio and Indiana all lining up for the Republican.

The TPP, which was never approved by Congress, was a 12-nation trade pact which the Obama administration framed as way for the U.S. to establish economic leadership in the region. But Trump, who wants to boost manufacturing, claimed the deal hurt the U.S. job market.

“The TPP held great promise for us, and has been a key priority for several years now. We’re very disappointed to see the withdrawal,” said Ron Moore, president of the American Soybean Association.

Soybeans have been a rare bright spot in the struggling agriculture sector and even helped boost overall U.S. economic growth as prices for most crops have faded. But strength in the oilseed’s price was largely due to overseas demand.

A 10 per cent jump in soybean shipments during the third quarter helped spur the biggest gross domestic product gains in two years. The U.S. Department of Agriculture (USDA) expects 2016-17 soy exports to hit a record 2.05 billion bushels, accounting for nearly half of the recently harvested U.S. crop.

The U.S. is a net exporter of agricultural goods, and shipments to the 11 other countries in the TPP deal totaled US$61.735 billion in 2015, latest data shows. The Obama administration had touted TPP as a trigger for further gains. At its annual Outlook Forum in 2016, the USDA had themed its trade-related sessions “U.S. Exports in the warm glow of a completed Trans-Pacific Partnership.”

Trump signaled he wants to strike trade pacts with individual countries instead of joining TPP, said U.S. Senator Charles Grassley, a Republican from Iowa. The message to the country was: “I like trade and we need to negotiate down barriers,” Grassley told reporters on a conference call on Tuesday.

Negotiating bilateral deals could take years, though, Grassley said, adding that “it’s just not an easy thing to do.” Japan is the top priority, he added.

The China factor

U.S. farmers and trade groups are also concerned that backing out of the deal could provide other countries with better access to China, a major agriculture goods importer that was not part of the TPP negotiations.

“Mounting competition and new trade agreements within that region that exclude the U.S. continue to block opportunities for the U.S. feed industry to capture this demand,” Joel Newman, president and chief executive of the American Feed Industry Association, said in a statement.

Australia and New Zealand said on Tuesday they would encourage China and other Asian countries to join the trade pact.

The U.S. Meat Export Federation, a trade group that promotes sales of U.S. meat overseas, wants to hear details on what the Trump administration plans to do to improve trade now that TPP is officially dead.

“We urge the new administration to utilize all means available to return the United States to a competitive position, so that our industry can continue to serve this important international customer base and further expand our export opportunities,” Philip Seng, the federation’s chief executive, said.

U.S. meat exporters could have made their biggest potential gains in Japan, which bought US$2.88 billion of U.S. beef and pork in 2015, and Vietnam if TPP had been implemented, said Joe Schuele, federation spokesman. He declined to quantify in dollar amounts those possible gains.

“We look at access to the Asia Pacific region as being very, very important to both the beef and pork industries,” Schuele said.

— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Tom Polansek and Julie Ingwersen in Chicago.

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