Free Trade! Free Lunch!
Posted on February 24, 2016
We in agriculture talk about free trade agreements as if they are the international equivalent of a free lunch. All we need is a trade deal, we preach, and a full belly—easy profit—is an almost certainty.
This lovely belief, of course, overlooks the absolute certainty that there is no such thing as a free lunch. Someone somewhere always pays.
More often than not, that someone over the last 25 years has been the United States and its farmers, claims new research from the Agricultural Policy Analysis Center (APAC) at the University of Tennessee.
In the lead-up to the Obama Administration bringing the Trans- Pacific Partnership (the ocean-spanning trade deal between the U.S., Canada, Mexico, Australia, Chile, New Zealand, Brunei, Vietnam, Peru, Singapore, Malaysia, and Japan) to Congress, APAC’s Daryll E. Ray and Harwood D. Schaffer penned a series of columns that examined the effects of seven recent American “free” trade deals on U.S. farm and food exports and imports before and after implementation.
For example, when Ray and Schaffer squared the books on U.S. farm and food exports and imports to and from Canada under the North American Free Trade Agreement, they found that the “cumulative balance of trade” for the U.S. goods from 1997 to 2014 “was -$30.4 billion.”
That means Canada sent $30.4 billion more in ag goods—grains, meat, animals, fish, wood, and fur—south than America sent north under NAFTA once the 1994 deal was fully implemented.
Likewise, Mexico sold the U.S. $9.6 billion more in food and farm goods over the same 18-year period than the U.S. sold Mexico.
In total, they noted, NAFTA brought nearly $40 billion more Canadian and Mexican farm and food goods into the U.S. between 1997 and 2014 than the U.S. shipped to Canada and Mexico.
This isn’t breaking news; anyone who can read knows that NAFTA has been far more beneficial to international agbiz that works both sides of the border than farmers and ranchers who work on either side . What continues to be news, however, is that American farm and commodity groups stubbornly refuse to accept that NAFTA—like all trade deals—is a two-way street.
Ray and Schaffer explain this paved, nearly-flat roadway in and out of the U.S. this way: “As the NAFTA results suggest, high expectations that trade deals will accelerate growth in the value of total U.S. agricultural exports don’t always materialize.”
Now there’s a phrase U.S trade negotiators might tattoo on their, well, persons because when Ray and Schaffer examined other trade pacts signed by the U.S. since NAFTA what they found wasn’t that “high expectations” for trade “don’t always materialize” but rather that any expectations, high, low or in between, almost never materialize.
For example, overall the 2001 U.S.-Jordan pact is $224 million under water, the 2004 U.S.-Australia deal has netted U.S. farmers an piddling $175 million over 10 years, and the 2006 trade pacts with Bahrain and Morocco collectively are about $90 million in the hole.
The big loser, though, is the 2004 U.S.-Chile pact. In 10 years, Chile has sent the U.S. $24.7 billion in farm goods more than the U.S. sent there.
Overall, these post-NAFTA trade deals have, cumulatively, brought $1.6 billion more of imported food and farm goods here than we exported there.
“While that number is relatively small,” suggest the Tennessee co-authors, “it is likely not the size or direction of the of net change that trade agreement proponents would have had farmers believe at the time these agreements we put into place.”
Shorn of its academic niceties, what Ray and Schaffer mean is that American farmers and ranchers resemble sheep running toward often-promised greener pastures every time politicians and farm leaders ring the free trade bell. Those greener pastures, like the proverbial free lunch, however, rarely “materialize.” The proof is in the quiet numbers, not the clanging bell.
Sheep may not know the difference but, after decades of buying lunch for our “free trade” partners, we should.
© 2016 ag comm