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Serving: United States

Variables influencing 2021 and beyond

12-09-20 2021GettyImages-1193767879.jpg
Complexity and uncertainty will be the name of the game in the decade of the 2020s.

The recent weeks have resulted in much tension here in the U.S. with the results of the Presidential, Senate, and House of Representatives election outcomes. This will no doubt be a factor in charting the future for producers and agribusinesses. However, beyond our borders, trade and export markets have observed some changes that strategic planners must take into consideration as well.

While our nation was focused on the pandemic, election results, and weekend sporting events, a major trade alliance was developed that could result in changes in global competitive balance. The Regional Comprehensive Economic Partnership (RCEP) is a trade agreement that includes 15 countries in the Asian region, including China. This impactful agreement represents 30 percent of the world's economy and potentially 50 percent by the 2030s. The RCEP represents a total population of 2.7 billion people, a cumulative gross domestic product (GDP) of $25.8 trillion, and a total global trade value of $12.5 trillion. When compared to the USMCA, which is a trade agreement between the United States, Mexico, and Canada that represents 500 million people, $24.4 trillion of GDP, and a global trade value of $7.8 trillion, one can see how important it is to take note of the RCEP.

It will be interesting to see how aggressive the U.S. will be to enter the Comprehensive Progressive Agreement for Trans-Pacific Partnership (CPTPP), which includes Canada and ten other countries in the Asian-Pacific region. The CPTPP represents over 500 million people, a total GDP of $11.1 trillion, and $7.6 trillion in global trade value.

The key is whether the U.S. will use the CPTPP as a blocking strategy to China's growing global economic influence. China's dual circulation strategy, unveiled in their fourteenth five-year plan, is to become a dominant player in the Asian region by providing incentives for domestic consumption. This strategy is synergistic with China’s Belt and Road Initiative, which was launched in 2013. Since that time, they have provided approximately $1 trillion of financial assistance and infrastructure support to 68 countries around the world.

All of the above will impact the bottom-line profitability of U.S. agriculture producers. Moving forward, expect more economic volatility based on headlines as key trading partners position themselves in a technology, manufacturing, and agriculture world. In the RCEP agreement, tariffs and sanctions have been reduced for the 15 member countries, which may influence the United States’ global competitiveness. Other sectors, such as technology and manufacturing, may influence agriculture trade negotiations.

Complexity and uncertainty will be the name of the game in the decade of the 2020s, which for some will create opportunities. Favorable outcomes will live with producers who have a high business IQ and who follow a process and monitor results. The term glocal, which means to think globally and act locally, has never been more relevant and imperative.

The opinions of Dr. David Kohl are not necessarily those of Farm Progress.

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