Former Chief Ag Negotiator: Impact From Trade War Will Last

October 2, 2018 09:29 AM

After months of raising eyebrows and lowering grain prices amid an escalating trade war with a host of global trade partners, President Donald Trump has racked up a number of trade wins in recent days, finalizing deals with Canada, Mexico and South Korea as well as opening trade talks with the European Union and Japan. Still, there will be some lingering trade pain for U.S. agriculture according to the former chief ag negotiator for the U.S. Trade Representative (USTR.)

“More concerning to me are changes in investment and production decisions that may flow from the current trade tensions with China,” said Darci Vetter, formerly the chief ag negotiator at USTR and now general manager of public affairs at Edelman. “So Brazil has every incentive now to add soybean acres knowing that their beans are now trading at a premium into China because ours are hit with tariffs.”

Vetter made the comments Wednesday at a conference exploring the future of food sponsored by ING Capital, LLC.

She noted that Chinese tariffs are causing some U.S. companies to rethink their planned investments in the U.S.

“We’ve seen companies like the Maschhoffs, the largest hog producer in the United States, say that their investment dollars will probably go to build facilities in Eastern Europe or Latin America because they know that they’ll be able to export their product to more places if they build there,” Vetter explained. “So even if those trade tensions with China are to end tomorrow, what we know is that we’ll now be competing with more facilities in other countries and more acres in countries like Brazil.”

According to Vetter, the Maschhoffs had $30 million targeted for facility investment in the U.S. that will now be shifted to other countries in order to avoid tariff challenges.

Vetter also noted that U.S. companies have enjoyed a trade advantage because of regulatory stability, but that advantage is dissipating.

“In my experience as a negotiator, a lot of foreign companies would say to me that doing business with the U.S. and U.S. based companies had value because of the consistency of U.S. policy and their adherence to contracts, the fact that we didn’t typically change our tariffs at the border,” Vetter explained. “There was a certain certainty that comes with doing business with the United States. There’s no longer sort of that premium of certainty that goes with doing business with a U.S. company.”

Higher value markets like wine, fruit, and nuts will likely face the longest impact from the trade disruption according to Vetter who meanwhile predicted a quicker recovery for soybeans.

“I think soybeans will flow to the market that is most efficient,” She said. “I think those (commodity) markets could return to similar patterns more quickly.”


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Spell Check

Billings, MT
10/3/2018 10:23 AM

  And I am sure all these companies are going to just as honest about their future intentions as farmers are when they are asked what their future harvest amounts are going to be like. And I like how a certain group of people blame the tariffs for everything no matter what the supply is.

Wayne, NE
10/3/2018 10:34 AM

  It's a long game, with a long history. Many here are old enough to remember when Red China was a sworn enemy, the worst of the worst. In the 70s Nixon went to China and opened negotiations. The US (wisely in my opinion) elected to back away from confrontation and encourage China to evolve from a communist economy to a market economy via trade. The trade grew, and China evolved despite maintaining the same governing party throughout the past decades. Did China get a good deal? Of course. Did the US also benefit? Very much so if you consider the alternative may have been an eventual war. Farmers also benefited a LOT. Trump has apparently declared victory, and prefers China as an adversary. I'm not certain this is a wise choice for a long game.

Augusta, ME
10/3/2018 11:01 AM

  From what I hear the "new" NAFTA has changed very little from the old other than the name and in the end will not have that great an impact except maybe for Dairy. I guess we'll wait and see... of course everyone always has a different take and spin on actually what's going on, so we may never know for sure. Personally for most of the country, NAFTA was NOT a bad deal. Yes, it needed a tune up but that was all, and that's likely all we got. Hopefully it ends trumps hysterical and nonsensical tweets on the subject as well. NOW that would be the best takeaway from the settlement!


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