It is fair to say that elected officials in Washington, D.C., aren’t used to hearing unvarnished truth and oftentimes don’t want to hear it. However, the members on the House Ways and Means Committee recently heard truth from a Minnesota farmer.
The truth was told by Tim Dufault, a Crookston grain grower who testified during a committee hearing on U.S.-China trade. His testimony dovetailed with what many others have opined about the trade situation.
“As far as the phase one deal goes, the purchases, which have not yet materialized, are a promise while the tariffs are real. The ag economy doesn’t live on promises. Until China buys, we are not buying the promises. While there are some good provisions in the phase one deal addressing non-tariff barriers, those are, at best, singles, and we need a home run.’’
“Similarly, the administration’s trade mitigation payments, while they are welcome for many struggling farmers including myself, do nothing to alleviate the long-term consequences of the trade war. While we are getting paid not to sell to one of the fastest-growing markets in the world, our competitors are filling the void. Our loss is Canada, Brazil, Russia and Australia’s gain. In the past two years, Canada’s wheat exports to China have increased 400% while ours has fallen. It is why American farmers have nearly been universal in their desire for trade, not aid.’’
“Now, for any member of this committee who thinks we should just be patient, I want to remind you just how patient farmers and rural communities have been. We are now nearly two years into a trade war that we were told would be good and easy to win. Time and again, we have been told to hold out for a deal that would make all the pain worth it. And while you would be hard-pressed to find a farmer who would disagree that China has been a bad actor, farmers have shouldered the pain for a strategy that has seen only one minor tariff reduction and several tariff escalations.’’
Truth does indeed hurt.
President Donald Trump has dropped a hint that more trade mitigation may be coming in 2020. He insists the money will be produced from tariffs collected from other countries. That is a falsehood — the money comes from the U.S. Treasury.
The free trade era that began with the original North American Free Trade Agreement and other multilateral deals appears to be ebbing. The renegotiated NAFTA under Trump’s direction — the U.S.-Mexico-Canada Agreement — is much better.
The slow-moving trade negotiations with China are a crisis short-term and a disaster long-term. Those who remember the grain export boom of the 1970s, which ended when President Jimmy Carter slapped a trade embargo on the Soviet Union because of its invasion of Afghanistan, comprehend how damaging a trade disruption can be.
The current China-U.S. fight has left the barn door wide open for grain-producing competitors to step in and take greater market share.
Mitigation payments can be a bridge to a better farm financial future, but the solution is to finalize the Chinese deal without additional delay.