Interesting times for trade
Wednesday, June 13, 2018
Posted by: John Holevoet, director of government affairs
“May you live in interesting times.” That saying is often described as an old Chinese curse. The idea being that even though “interesting times” might sound good, you will eventually long for stability and calm. This sentiment is certainly true for anyone following developments in American trade policy.
The Trump administration’s tariffs on imported steel and aluminum were already in place against some countries, including their supposed primary target, China. At the same time, Canada, Mexico and European Union had been granted a temporary reprieve to allow them to negotiate exemptions for their steel and aluminum exports to the United States. However, a deal was not reached, and the tariffs went into effect against our allies.
Retaliatory tariffs against goods made in the United States are planned. Agriculture and dairy are among the sectors that are being targeted. For example, Mexico, a major market of U.S. dairy products, announced that various cheeses would be targeted. This comes at a time when our market share there is already under threat because of uncertainty over NAFTA and a new trade agreement between Mexico and the European Union. The Canadians and Europeans may also target dairy.
Unfortunately, NAFTA renegotiations have also stalled. Multiple rounds of negotiations have not produced an agreement. They have given way to direct ministerial talks, which were supposed to wrap up the deal as quickly as possible so they do not disrupt nor are they disrupted by elections in Mexico or the United States. This no longer seems possible.
Talks have broken down over non-ag issues, such as a sunset clause and what the Canadians and Mexicans have described as a lack of flexibility on the part of the U.S. trade representative. Mexico’s elections are scheduled to for July 1, and it is difficult to imagine a deal occurring before then. To add to anxieties over NAFTA’s future, the frontrunner in the race for Mexican president in Andrés Manuel López Obrador, a populist leftist candidate. All indications are that future negotiations will be become even more challenging if Lopéz Obrador wins.
Edge issued a media statement expressing concern about the new tariffs and their potentially negative impact on dairy exports. We have urged caution and expressed hope for a quick resolution of the dispute with some of our closest allies and strongest trading partners.
At the same time, Edge is doing its best to show support for NAFTA and other trade agreements. At the end of May, Edge staff and members participated in a roundtable discussion about the importance of NAFTA and trade. This event was sponsored by Farmers for Free Trade, a group trying to raise the profile of NAFTA and trade both in and outside of Washington, D.C. Edge staff and members will also be traveling to D.C. at the end of June and trade will be among the top issues they discuss with lawmakers.
At first blush it might appear the saying “may you live in interesting times” is another Chinese export that America could live without. However, this “Chinese” curse is not from China. It was made up in the late 19th century by a British politician. In this way, too, it is instructive when it comes to trade.
Things are not always what they appear and trade relationships are complicated. We can all hope our current uncertainty over trade is resolved quickly and we can go back to living in some boring times.