President Trump fails to understand the importance of free-trade to America’s long-term economic success.
In September of 1980, my wife and I attended a farm rally for Ronald Reagan. Our scrapbook from that fall is full of snapshots of our brush with history, faded Polaroids of the future president in his element, sporting a grin as wide as a Missouri cornfield and a Stetson no other politician could pull off.
I can remember being asked to stand on the bales of straw that surrounded the podium where Reagan spoke. We were honored, although it occurred to us later that we were serving as human shields, as the rally was on the top of a high hill visible for miles. I can’t remember that Reagan had much of a farm platform that year, because he didn’t need one. There was really only one issue we farmers cared about — the Russian grain embargo — and Reagan opposed it. President Jimmy Carter had put the embargo in place the year before as a response to the Russian invasion of Afghanistan, and it had devastated commodity markets, sending U.S. agricultural exports into a tailspin from which they wouldn’t recover until the mid 1990s. The embargo was ineffective at changing Russian behavior in Afghanistan, although it did prove a boon for South American farmers, who rapidly expanded production to fill Russian demand. Stinger missiles eventually did what the denial of American corn and wheat could not, but it was much too late for the Midwest, which spent the early ’80s dealing with a credit crisis and the exodus of a whole generation of farmers from the industry.
Last month, we traveled to Southwest Missouri to see another president, Donald Trump, as he announced his tax reform plan in a factory in Springfield, Mo. Trump’s speech was an effective, well-written, cogent argument for a modernized and streamlined tax code. He was almost poetic as he talked about Route 66, which travels through Springfield, recalling a time when the tuneful highway was a road “full of goods made in America, carrying families on vacation west.”
Then, he mentioned NAFTA.
To hear President Trump tell it, our most famous free-trade agreement is “horrible, terrible.” Well, then. Such talk was not music to this farmer’s ears, and it certainly detracted from the music President Trump made when he spoke of modernizing the American tax code to make our economy more competitive. NAFTA has been a boon for American farmers, with total farm exports to Mexico and Canada growing from $9 billion in 1993 to $41 billion in 2014. One out of every ten of the acres planted by U.S. farmers produces food eaten in Canada or Mexico. Mexico has taken Trump’s comments to heart, and is actively searching for new suppliers in Brazil, Argentina, and the European Union.
Most within the farm industry initially supported President Carter’s embargo on grain exports to the USSR 40 years ago. Although they knew that the embargo would harm their markets, they felt patriotism demanded support for an action that the Carter administration believed would advance American interests during a particularly tense time in the Cold War. As the Soviet Union ignored the embargo and continued its aggressive actions in Afghanistan and elsewhere, farmers realized that the grain embargo had harmed them without deterring those actions. To be asked to tighten your belt in order to support your country in a generation-defining conflict is one thing. To be asked to sacrifice your industry to a statistical artifact is quite another. Farmers aren’t willing to risk their economic well-being because the trade deficit is higher than some hypothetical future administration might like.
Opposition to trade agreements has been a consistent position of Trump’s over the years, and that’s clearly at least in part because he believes globalization has been particularly harmful to American manufacturing and the Midwest. Hundreds of articles have been written since the election describing heartland communities once home to a thriving manufacturing economy and now beset by opioids, shuttered factories, and empty storefronts lining Main Street. In contrast, the winners from NAFTA or other trade agreements are portrayed as flying around the globe on their private jets from vacation home to five-star resort, doing deals that benefit their counterparts in Beijing and London while leaving their fellow Americans to economic ruin and social decay.
Surely there are millions of Trump voters who owe their jobs to the increased trade NAFTA has made possible.
This may be true, for all I know. We certainly have lots of empty store fronts and shrinking schools in my neck of the woods. But yesterday, as I waded into cold water, hooking up a cable to my combine to pull it out of the mud, I hardly felt like a member of the global elite. Though I’m well aware that increased global trade is responsible for most of the prosperity I enjoy, surely I’m not the problem. Surely my farm hasn’t caused the distress of my neighbors. Surely there are millions of Trump voters who owe their jobs to the increased trade NAFTA has made possible. (As it turns out, the U.S. Chamber of Commerce estimates that 14 million Americans are directly employed by companies engaging in trade between Canada, Mexico, and the U.S.)
America’s balance of trade has been in the red since the early 1980s, through times of rapid economic growth and times when the economy’s performance was less robust. It is largely an artifact of government deficits and our paltry savings rate, as our demand for foreign capital has driven a deficit in the trade of goods and services. It is not clear that a negative balance of trade has any effect on the performance of our economy at all.
What’s more, a reversion to pre-NAFTA tariff levels would increase the price of my corn for my Mexican customers by at least 15 percent. Trump won election by promising to stop illegal immigration, but surely no single change would be more likely to make the U.S a desirable destination to poverty-stricken citizens of Mexico than increasing the price of corn, a staple of the Mexican diet. It is entirely possible that the protectionist policies Trump favors would do little to change the trade deficit while increasing the pressure on our southern border.
We’re in the fourth round of NAFTA renegotiation, and the Trump administration has ushered in the round with increasing demands and hotter rhetoric. Its latest proposal asks for an easier exit from the agreement, which it hopes can be reevaluated every five years. In any such reevaluation, the administration says, the White House would take into account America’s trade deficit, presumably killing the agreement if it is too high. This demand is seen as a deal-killer by most observers of the negotiations, and would remove the certainty business needs when planning long-term investments.
Perhaps this is all tactical, a negotiating strategy that will result in a much-improved deal. Or maybe, just maybe, our president means exactly what he says, and is prepared to shrink the agriculture industry by a tenth, sacrificing one of America’s most globally competitive sectors to an ill-advised campaign promise.
President Reagan was successful in ending the Cold War, and his commitment to defeating Communism was never in question. He understood, however, that there are other values worth defending, including the freedom for American businesses and consumers to buy and sell to the rest of the world. Standing on a bale of straw some 40 years ago, I could never have imagined that the yields on our farm would double from that day to this one and that worldwide demand for our products would keep pace with our growing output. I like to think that Ronald Reagan did understand that, and in a speech in rural Clay County, Mo., he described a promising future that came to pass. Like President Reagan, Donald Trump understands that tax reform is necessary to economic growth. Unlike Reagan, he fails to understand that trade is equally important to our economic future.
As I drive my combine down row after row of soybeans that I always expected to sell to Mexico, I worry.
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