It’s a familiar story: a once-dominant U.S. industry is challenged by low-cost competitors overseas and gradually loses market share. This time, however, the pressured industry isn’t a manufacturer. It’s the American farm.
Recent trade data and a new report from the U.S. Department of Agriculture reveal that U.S. leadership in exports of key agricultural products is eroding. The competition comes from Brazil and other low-cost countries that benefit from a range of government supports, including free trade agreements to which the U.S. isn't a partner. Over time, the impacts could be significant: Agriculture accounted for nearly 9% of all U.S. export value in 2022. By contrast, cars accounted for 3%.
Fortunately, there’s a solution. In recent weeks, coalitions of U.S. agriculture groups have demanded the Biden administration begin work on new free trade agreements to support farm exports. It won't be easy to overcome bipartisan hostility to free trade that’s rooted in a belief that it leads to unfair outcomes for U.S. workers. But if the U.S. is serious about sustaining farmers and its agricultural workforce, it must ensure that they can compete.
American farmers have been selling their crops to foreign buyers since at least the late 18th century. Agricultural exports grew rapidly over the next 200 years, accelerated by war, relief efforts, a growing global population and affluence. By the mid-1970s, grains and soybeans accounted for 15% of total American exports, and made the difference between a U.S. trade surplus and deficit.
In 1981, the U.S. shipped out a record $43.8 billion in agricultural goods. Then exports went into freefall, dropping to $26.3 billion in 1986. The causes were several, but the most addressable were trade barriers that the U.S. and other countries imposed to protect their domestic farmers. For example, in 1983 the Netherlands imposed levies as high as 70% on U.S. wheat. Combined with a strong dollar, such barriers eroded U.S. competitiveness worldwide.
Demolishing trade barriers wasn’t an easy lift in 1980s Washington, either. But the declining fortunes of U.S. farmers were among the reasons that the government began to negotiate and enter free trade agreements that lowered tariffs on agricultural products and opened new markets. The results exceeded what anybody could have imagined when they started.
For example, since 1994, the year the North American Free Trade Agreement (NAFTA) was enacted, U.S. agricultural exports to Canada and Mexico have nearly quadrupled. In the same period, overall U.S. agricultural exports expanded to a record $196 billion from $46.1 billion. According to USDA data, that trade supports more than 1 million jobs, over half of which are non-farm-related (such as trucking).
Yet just as policymakers in the 1970s failed to recognize trade barriers as a threat to farm exports, many of today’s policymakers are missing the consequences of turning away from free trade when the rest of the world is embracing it. For example, since 2010 Canada has enjoyed the benefits of 11 trade agreements coming into force, primarily with emerging market countries with growing middle-classes. Likewise, Chile has entered into 11 free trade agreements with emerging markets in Southeast Asia and South America. Meanwhile, a new USDA report points out that the U.S. entered into no new agreements between 2012 and 2020.
What are the consequences? The U.S. is losing its competitive edge in key commodities. For example, the EU surpassed the U.S. as the top wheat exporter in 2014 with 21.4% of market share. The U.S. had 40% of the export market as recently as 2000. Likewise, growing competition from Brazilian, Argentine and Ukrainian corn has driven down the U.S. global market share in the commodity to 30% from 71% in 2006.
The USDA, at least, senses a problem. “The importance of trade agreements to U.S. corn exports cannot be overstated,” its researchers note in the recent report on U.S. competitiveness.
Farm country knows there’s a problem. In September 2020, 70% of surveyed U.S. farmers believed exports would grow over the coming five years, according to the Purdue University/CME Group Ag Economy Barometer, a key farm sentiment poll. In February of this year, only 33% believed exports will grow. They’re probably right: The USDA has predicted that farm exports will shrink to $183 billion in 2023.
Rebuilding U.S. export competitiveness will take years. Among other factors, a weaker dollar — whenever it occurs — will help significantly. But just as the trade agreements of the 1980s gave rise to decades of farm country success from the 1990s onward, so can a new round of free trade spur a renaissance of export-driven success.
Unfortunately, the Biden administration (and earlier, the Trump administration) has resisted pressure to negotiate new trade agreements.
That’s a proven mistake — one that’s magnified by every free trade agreement negotiated by a U.S. competitor. Rather than set the U.S. up for another 1980s-style export drought, the Biden administration must seek to undertake new trade negotiations, especially with the fast-growing emerging markets that will become importers of American food in coming years.
To speed the process, Congress should provide the administration with the authority to fast-track the negotiations, just as it did in prior trade talks. The concept has broad support in farm country and among rural legislators. It also deserves the support of anyone worried that the U.S. is losing its global competitive edge. If American farmers can't compete, nobody can.
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ABOUT THE WRITER
Adam Minter is a Bloomberg Opinion columnist covering Asia, technology and the environment. He is author, most recently, of “Secondhand: Travels in the New Global Garage Sale.”
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
