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America falling behind due to current trade policy

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New analysis reveals world competitors are surging ahead in setting the rules of the game for trade.

The U.S. is lagging behind competitors in reducing global trade barriers and the Biden administration’s trade policy does not look to alter that trajectory, according to a new analysis from the Corn Refiners Association and unveiled during a recent roundtable virtual discussion hosted by the Farmers for Free Trade. The findings, which track trade agreement since 2010, show that rival trading nations have outpaced the U.S. in cutting bilateral and multilateral trade arrangements.

After several months of “review,” the Biden administration’s announced trade policy omits pursuit of new trade agreements. Further, potential for new trade agreements fell further with expiration of Trade Promotion Authority last June, a key tool for expedited consideration of new trade agreements in the Congress.

Instead, the administration’s trade policy agenda, as articulated by the Office of the U.S. Trade Representative, remains squarely focused on enforcing existing trade agreements, most notably the recently ratified U.S.-Mexico-Canada Agreement and the China Phase One agreement. New trade agreement negotiations with the United Kingdom and Kenya, initiated by the prior administration, have not been revived. Further, reconsideration of the prior administration’s withdrawal from the Trans-Pacific Partnership, now called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, has been rejected in favor of pursuit of a still undefined Indo-Pacific Economic Framework.

In offering an overview of the report, John Bode, CRA president, says while the U.S. loses markets and investments as our competitors set the rules of trade, the U.S. economic influence also is substantially reduced. “Competitors are picking up momentum in a game where it takes a long time to score,” he says.

While the U.S. has completed four trade agreements since 2010, including the modernization of the North American Free Trade Agreement, China has entered into ten new agreements, Japan has entered into seven, the EU has entered into eight, and Canada has entered into eight.

Beyond the sheer number of new trade agreements, several key U.S. trade partners are outpacing the U.S. in the level of trade, benefitting from lower tariffs and reductions in non-tariff barriers contained in formal trade agreements. The EU and China for example, are experiencing lower tariffs and other reduced trade barriers on an estimated $553 billion and $420 billion in total trade, respectively, through comprehensive trade pacts in the last decade, compared with $171 billion for the United States.

“Not moving forward on trade expansion through formal trade agreements may carry significant risks for U.S. exporters, including in the agriculture sector, who rely on increased foreign market access to enhance their global competitiveness and economic security,” the report notes.

“The United States’ self-removal from the game to set the rules for trade in the Asia-Pacific, South America, or other promising regions of economic growth and rising consumer demand encourages potential partners to move forward without us and ensures that our trade rivals will define the path of global trade rules, standards, and practices,” the report concludes. “When the U.S. engages and pursues market access through bilateral and multilateral trade agreements it demonstrates global leadership and ensures that the United States leads the way on setting global trade rules.”

Struggling to compete

Manuel Sanchez, China director for the U.S. Grains Council, says not having an FTA with key Asian markets such as Vietnam, Philippines and Indonesia, has hindered the ability to position U.S. agricultural products competitively.

For example, Russia has an FTA with Vietnam, a major importer of U.S. corn which increased from barely 1 million metric tons in the early 2000s to 12.5 mmt today. The current tariff rate for U.S. corn is 5%, which has been lowered recently to 2%, but that 2-3% difference “puts us at a disadvantage” with Russia and others, Sanchez says. “We want to see it at zero.”

Russia is also the biggest supplier of pork into Vietnam, benefiting from preferential treatment under its FTA, says Erin Borror, economist at the U.S. Meat Export Federation.

“FTA in a country like Vietnam would do wonders for U.S. ag, not only today but in the future as we see growth,” Sanchez says.

Indonesia, with a burgeoning middle class and hunger for more proteins, is seeing other markets such as Australia come in and service that market. Sanchez says it’s a struggle to position U.S. course grains and coproducts without an FTA.

Robert Chesler, CEO of the United Dairymen of Arizona, emphasized during the roundtable discussion the importance of securing new market access opportunities. He notes U.S. dairy producers are falling behind in key marketing regions and secured trade agreements with only nine nations from 2017 to 2020.

The United States produces six times more milk volume than New Zealand, yet with the same number of trade agreements, and 13 times the volume of milk compared to Australia, yet they have 12 new trade agreements. The United States has two-thirds the volume of milk as the EU and they have 20 FTAs.

“We need more help if we are going to maintain our place in the market in the world and seen as a premium product,” says Chesler.

Sanchez says the ASEAN region is crucial, but the abandoned discussions with the United Kingdom and Kenya are also important, and it doesn’t have to be a choice between one or the other. “We need to start,” he says of discussions in all these markets. “The more we delay, the worse it puts us.”

We should be able to make progress on all fronts, he adds. “It doesn’t need to be a zero-sum game.”

TAGS: Trade
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