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Email Content: Poultry Industry News, Comments and more by Simon M. Shane

A Reevaluation of our Trade Policy is now Justified


Robert B. Zoellick published an essay on trade in the Thursday September 5th edition of the The Wall Street Journal.  Ambassador Zoellick is a former president of the World Bank, a Deputy Secretary of State and a long-serving U.S. Trade Representative responsible in large measure for negotiation of the Trans Pacific Trade Agreement and other pacts beneficial to the U.S. poultry industry under previous administrations.


In his article Zoellick contends that the current aggressive approach to international trade involving tariffs and coercion is effectively reducing domestic investment and harming the economy.  Protectionism, not practiced since the administration of Herbert Hoover has returned with predictable results.  Zoellick maintains that the U.S. has lost markets especially for agricultural products.  The eleven nations that remained in the TPP reconstituted as the Comprehensive and Progressive Trans-Pacific Partnership have benefitted from lower tariffs.  To maintain the support of the agricultural community, the Administration has been forced to introduce a program of compensation.  Not only has the $12 billion in 2018 and the $19 billion to be made available in 2019 added to the national debt, farmers are inadequately remunerated and have lost markets that will take years to regain, if ever.  


Indirect effects of tariffs on aluminum and steel have impacted both consumers and industry through escalation in the cost of both domestic and imported products.  The Peterson Institute for International Economics estimated for every job in the steel industry added through tariffs, required an expenditure of $650,000 by direct and indirect consumers of steel.


Zoellick pointed to the reduction in foreign direct investment and disruption of supply chains that have adversely affected multinational companies based in the U.S. in addition to the subsidiaries of international companies.


Traditionally the leadership of the U.S. in international trade has been a significant factor in strengthening trade rules especially in technology and intellectual property rights.  While it is acknowledged that China has consistently ignored fair practices with regard to intellectual property, there does not appear to be any change in their policies crucial to attaining the goals of the Made in China 2025 objective.


Commentators support Zoellick over his concern that the Administration may unilaterally withdraw from the World Trade Organization, critical to regulation of international commerce. It is a reality that the U.S. has blocked appointment to the WTO appeals body necessary to adequately resolve conflicts. Participants at the G-7 Summit agreed to reform aspects of the WTO, a process requiring diplomacy and moral certitude.


Over the past 30-month period manufacturers and farmers in the U.S. have been confronted with uncertainty resulting in reduced capital investment. This has ultimately created the potential for a recession despite the current exuberance demonstrated by the stock market.  Adopting an eye-for-and-eye and a tooth-for-a-tooth trade policy will inevitably result in all parties being both blind and toothless.  The question now is how to restore trade equilibrium without disrupting international markets and eroding confidence in the U.S. as a world leader.

Copyright 2019 Simon M. Shane