U.S. Sen. Sen Steve Daines was among farm-state lawmakers raising trade war concerns Thursday with President Donald Trump during a White House meeting.
“There’s a fair amount of angst and concern among the agriculture community,” Daines said during a post-meeting press call. “I spent time yesterday meeting with the Montana Stockgrowers who were here in Washington, D.C., and they want to make sure they have fair and free access to these important markets, one being of course China after we opened up the beef market there about a year ago.”
The threat of a trade war with China sparked by Trump’s call for tariffs on aluminum and steel is causing heartburn in farm country. China has threatened to respond with tariffs on 103 U.S. items, including wheat and beef, which has Montana's farmers and ranchers nervous.
But lost China trade wasn’t the only concern, or the biggest concern back home, Daines said. The state’s agriculture industry is dependent on export sales to buyers in the Asia-Pacific, where 11 nations have moved ahead on multilateral trade agreements without the United States.
Soon, American products will be at a tariff disadvantage in key markets like Japan because the U.S. chose to withdraw from the Trans-Pacific Partnership. Daines said he encouraged Trump to rejoin the TPP, a trade deal that had been previously initiated by President Barack Obama’s administration.
As the crisis of the hour, China took center stage. The roundtable of members of congress and governors with Trump on Thursday was heavily weighted with politicians from the Midwest, where soybean and corn farmers are bracing for a major financial blow if a U.S.-China trade war erupts.
In Montana, the potential trade war losses are smaller, but the loss of future business is considerable. The state sold about 13 million bushels of hard red spring wheat to China in 2017, though the state's total wheat crop was about 211 million bushels. Wheat marketers hoped to negotiate more Montana grain into China by getting the nation to fully realize its quota.
China began accepting U.S. beef in 2017 after a 14-year ban stemming from a 2003 mad cow disease scare. The move was hailed by Montana ranchers who sell more than a million cattle annually. China’s appetite for beef is second only to the United States. There’s even the promise of a $200 million Montana-specific cattle sale of 80,000 head spread over three years.
A 25 percent tariff on beef would put the United States at a disadvantage with nations like Australia, which because its shipping distances are shorter, can already afford to offer beef to China at a lower price than the U.S. can.
Daines has been encouraging Trump since February to rejoin Trans-Pacific Partnership talks. He previously used his position as a Senate Agriculture Committee member to send a letter, signed by 25 senators, asking for TPP involvement.
Trump indicated Thursday his administration would consider rejoining TPP, a major pivot, given that during the 2016 general election cycle, both Trump and Democrat Hillary Clinton vowed not to support the agreement, which had proven unpopular.
Daines supported fast-tracking TPP for former President Obama in 2015, though he was the only member of Montana's congressional delegation at that time who supported the measure, which would have given the trade deal an up- or down-vote in Congress. Democratic Sen. Jon Tester opposed fast-tracking TPP, as did Montana’s union Democrats, who praised Trump for withdrawing from TPP in January 2017. Daines said Thursday that TPP could be tweaked to win U.S. approval.
“That deal can be negotiated better for the United States, and that would result in significant wins for Montana agriculture, specifically beef, and getting access to the Japan market with significant tariff reduction,” Daines said. “I brought that up with the president. He asked me to resend the letter that I had sent back in February with 25 senators signing with me, actually sent that to Larry Kudlow, who is going to play point on renegotiating TPP, getting a better deal for us.”
Kudlow serves as National Economic Council director. Trump gave Kudlow and U.S. Trade Representative Robert Lighthizer orders to re-engage in TPP during the meeting.
Daines said Thursday the Trans-Pacific Partnership had strategic value in girding U.S. exports against China's influence in the Asia-Pacific. It was an argument that Obama made to Congress in 2015 and 2016, but received a poor reception.
President Trump has indicated he prefers bilateral trade agreements, but Daines said dealing with the 11 TPP nations in one agreement would give the United States needed trade allies to leverage China.
“The biggest winner when the United States pulled out of TPP was actually China because if we’re going to isolate China, which is really now the second-largest economy in the world, we’re going to need some multilateral kind of efforts through smaller trading partners so we can get a stronger bilateral agreement with one of our largest trading partners, which is China,” Daines said. “This is looking at it much more strategically, recognizing time is of the essence.”
Earlier this week, Gordon Stoner, an Outlook farmer and past president of the National Association of Wheat Growers, told the Gazette that it appeared Japan had left a few U.S.-specific TPP demands on the table just in case the United States wanted back in.
Trump has also suggested subsidizing U.S. farmers for any business losses stemming from a trade war. Subsidies specific to compensation for trade losses are not allowed by the World Trade Organization, which adjudicates trade disputes. Those restrictions lead some Montana producers, who spoke to The Gazette last week, to speculate that the U.S. Department of Agriculture could resurrect the Direct Payment Program.
Direct payments issued checks of $44,000 to each farm spouse who was a principle in an agriculture operation. The program avoided running afoul with the WTO by issuing checks every year, regardless of whether a farm planted anything, thereby creating a program that wasn’t a direct response to commodity sales.
At the Thursday roundtable, it was suggested that USDA use a Depression-era Commodity Credit Corporation to borrow federal money to stabilize farm incomes.
Daines said ranchers aren’t looking for subsidies. They want free-market access.