Playing by the trade rules
Mar 18, 2010
By Terry Wanzek - Jamestown, North Dakota
In his speech at the Export-Import Bank’s annual conference last week, President Obama demanded that America’s trade partners live up to their international obligations. “Other countries have to play fair,” he said. “American companies [must] have free and fair access to those markets. And that begins by enforcing trade agreements we already have on the books.”
True enough. But before pointing a finger of blame at the tariff policies of other nations, perhaps the president should take a closer look at practices here in the United States. They’re hurting the exports that Obama says he wants to expand.
On March 8, Brazil announced plans to raise duties on American products worth $591 million. The World Trade Organization has approved this measure as a legal retaliation against trade-distorting subsidies to U.S. cotton farmers. The proposed tariffs affect more than 100 types of goods, including autos, bar-code readers, and sugar-free chewing gum.
The single most valuable item on the list is wheat, which I grow for a living. The current tariff of 10 percent will jump to 30 percent.
So instead of moving forward on exports, we’re falling behind.
This almost certainly will affect my bottom line. I never know exactly where the wheat from my own farm winds up, but about half of all U.S. wheat is exported to other countries. The North Dakota Wheat Commission and US Wheat Associates list Brazil as one of the top three wheat importing countries in the world. US wheat's market share in Brazil has been as high as 12%. If we could achieve a 20% share it would mean a $260 million economic gain for the US wheat industry and rural America.
During his State of the Union address, the president announced the ambitious goal of doubling U.S. exports over the next five years. This week, he provided the details of his National Export Initiative. It includes the establishment of an Export Promotion Cabinet and efforts to boost financing, advocacy, and assistance to American businesses that seek to tap foreign markets.
Yet the president said nothing about the emerging trade war with Brazil--even though it is entirely within the power of the United States to resolve. Washington simply must do the thing that Obama is now asking of other countries: abide by its international trade agreements.
Brazil isn’t a special case, but rather the latest example in a disturbing trend. Last month, China proposed new duties of up to 106 percent on imports of American poultry. This is widely viewed as a response to a tariff that the Obama administration slapped on Chinese tires last year.
Far worse is an ongoing dispute with Mexico. Under the rules of the North American Free Trade Agreement, our government must let Mexican long-haul truckers have access to U.S. highways. Congress, however, has repeatedly blocked them. As a result, Mexico has imposed $2.4 billion in tariffs on U.S. agricultural and manufactured goods.
If Washington merely would keep its own promises, Mexico would eliminate these barriers to American goods and services. Exports would increase immediately.
President Obama has come a long way on trade. As a presidential candidate, he threatened to quit NAFTA. He talked of “a potential opt out” and promised to “renegotiate” this pact with our two most important trade partners. Since becoming president, he has spoken more favorably--but always cautiously--about free trade.
In his State of the Union address, however, he delivered a strong endorsement of trade as a job-creating tool of economic growth. He called for the passage of long-stalled trade agreements with Columbia, Panama, and South Korea as well as the successful completion of the WTO’s Doha round.
These are worthy and achievable objectives--each one an important advancement that will improve the economy and also help the president realize his goal of doubling exports. But in trying to create new opportunities, the president shouldn’t neglect the existing ones.
“The United States will go to bat for our businesses and our workers,” he said on Thursday.
As baseball fans know, batters start at home.
Terry Wanzek, a board member of Truth About Trade and Technology, is a wheat, corn and soybean farmer and state senator in North Dakota. www.truthabouttrade.org