By Dalton Henry, USW Vice President of Policy<\/p>\n
History doesn\u2019t repeat itself, but it does rhyme, or so quipped Mark Twain. A casual reading of headlines in any given week this year might give the impression that the U.S. has steered its trade policy into uncharted waters along with Huckleberry Finn, but the reality is that trade tensions, bilateral deal-making and pressure campaigns between governments is hardly new. In fact, these negotiation strategies, while turbulent at times, are more the norm than the exception over the scope of modern history than broad free trade policies, which have nominally only existed for around three decades.<\/p>\n
If we accept this fact as a truth, the pressing question becomes \u2013 how do we find the opportunities in the quick-changing trade environment to set the policy stage for market success?<\/p>\n
Modern U.S. trade policy was built on the principle of comparative advantage, which assumes two countries benefit from specializing in the production of a good and then trading with each other. In practice, however, trade has always come with a healthy dose of protectionism and management for certain sectors.<\/p>\n
From the perspective of an agricultural commodity sold in bulk, many past free trade agreements granted open or duty-free access for a commodity like wheat to a market in exchange for given market access to the U.S. consumer market for their manufactured goods like apparel from Morocco.<\/p>\n
This tradeoff made good sense for years. But, as anyone who has sat in a congressional town hall in the last decade knows, the argument in favor of these types of agreement isn\u2019t as clearcut as it once was. Simply put, ag market access doesn\u2019t pack the bang that it used to as global competitors have emerged.<\/p>\n
More often than not, once a country makes the decision to open themselves up to U.S. ag imports, they end up making the same offering on a most-favored-nation (MFN) basis. Mexico is one example. The U.S. secured a preferential zero-duty rate for sales of wheat into Mexico as part of the North American Free Trade Agreement (NAFTA), which went into effect in 1998. Less than 10 years later, that same rate became available to all World Trade Organization (WTO) members, including major competitors for wheat like Argentina and Russia. As a result, Mexico is still the U.S. wheat farmer\u2019s largest customer, but the trade advantage we once enjoyed is no longer unique to the United States.<\/p>\n
With plentiful global supplies of wheat, trade is no longer a two-way trade of manufactured goods or services for ag commodities. Instead, importers looking for the cheapest price can pick and choose. Israel was the first country to sign a free trade agreement with the United States and has gained considerable access to the U.S. for manufactured products and pharmaceuticals. But Israel often buys the lowest-dollar wheat available, usually from Russia, rather than sourcing that wheat from a stronger partner like the United States.<\/p>\n
Over the long run, this \u201cdo as we say, not what we do\u201d approach to trade has led to increased skepticism in the true power of free trade, so much so that the last real attempt the United States made at securing a large free trade agreement (the Trans-Pacific Partnership or TPP) was negotiated under President Barack Obama but never submitted to Congress for a vote.<\/p>\n
We can argue about who was at fault for the TPP not being realized \u2013 President Obama\u2019s for not submitting it to Congress before the next election, Hillary Clinton\u2019s for promising not to submit when she was a Presidential candidate or President Donald J. Trump\u2019s for formally withdrawing from the agreement. In reality, that discussion misses the point \u2013 all three leaders put political space between themselves and the TPP because U.S. public sentiment had shifted away from supporting the agreement from the time it was originally conceived.<\/p>\n
Go to a farm meeting in America\u2019s heartland today and you\u2019ll find fewer true free trade champions. Instead, there is strong enthusiasm for the negotiated purchase commitments and one-off trade deals that are the current focus of the Trump administration.<\/p>\n
For trade policy staff and wonks, the real question at the end of this churning current is not to get stuck debating whether these changes are inherently good or bad on paper, but rather \u2013 \u201cCan we make progress in this environment?\u201d For me, that answer is an overriding yes.<\/p>\n
This answer is not absolute for every trade scenario. There\u2019s no doubt that the White House\u2019s outwardly chaotic negotiating strategy and repeated tariff cliffs or artificial deadlines have had negative impacts. After all, bulk wheat is purchased two to five months into the future and the impact of a potential higher-than-anticipated retaliatory tariff or a new exorbitant port fee scares the bejeezes out of global wheat buyers. Still, I see three reasons for optimism that we can find a way forward that benefits our U.S. wheat farmers.<\/p>\n
Global Trade Needed a Reset<\/p>\n
First, global trade needed a reset. I firmly believe the WTO did incredibly important work for global ag trade and could do even more. The United States has stepped back from a leadership position and took up one of an antagonist, which may be frustrating to many. Still, the long game here is this shift can lead to a reset that presents an opportunity to forge a new path in the longer term \u2013 decades versus next quarter or next year.<\/p>\n
This reset is needed. The Doha Round, the current round of WTO global trade negotiations that started in 2001, has been going on so long that it could legally drink in the U.S. if it was a person. There hasn\u2019t been any meaningful progress on a comprehensive outcome in my entire career.<\/p>\n
Why? Many countries perceive that the potential gains from an agreement are outweighed by the benefits of the status quo where bad actors flaunt current rules. Watching India \u2013 one of the WTO\u2019s least compliant members with existing rules \u2013 stand up to defend the current multilateral system only makes this point crystal clear. It may not be a pretty process, but the last four presidential administrations have changed the status quo within the WTO. An optimist can look at the WTO today and see a future where a new type of global trade could emerge from this tumultuous time, similar to how the 1994 Marrakesh Agreement that established the WTO was the result of shared frustration with trade barriers, import schemes and export subsidies.<\/p>\n
This trade policy reset is incredibly broad, but it is not absolute. The Trump administration has continued to exempt goods traded under the United States-Mexico-Canada Agreement (USMCA) from the very beginning \u2013 an important recognition of the strength of that agreement and the benefits of working with our partners in Mexico and Canada\u2026 no matter how frustrating it can be at times.<\/p>\n
Purchase Commitments Open Doors for Future Sales<\/p>\n
Second, purchase commitments open doors and build future opportunities. Economists could point out that short-term purchase commitments may be muted in the long-term by shifts in other countries, but that analysis often neglects to include one key factor \u2013 market development work like that of USW. Purchase commitments \u2013 like those recently secured in Indonesia, Vietnam and Bangladesh \u2013 can be a powerful tool alongside USW\u2019s traditional market development work that builds familiarity with USW programs and a long-term preference for U.S.-grown wheat.<\/p>\n
For those benefits to accrue, these purchase commitments need to be seen as binding and be in place for multiple years. Then, it\u2019s up to organizations like USW and USDA to prioritize work in those countries when planning for trade servicing, technical assistance and other market development and access activities. To date, many of the MOUs put in place or under consideration meet these criteria.<\/p>\n
Negotiated Volumes are the New Tarriff-Rate Quota<\/p>\n
Finally, negotiated volumes for purchases outside of reciprocal or national security tariffs are really just an updated version of a tool as old as free trade itself \u2013 a tariff rate quota. Under this tool, a specific quantity of a product can be imported at a lower \u201cin-quota\u201d tariff rate and then that tariff rate is increased for any additional imports of the same product.<\/p>\n
Agreeing to buy a certain volume of product at a negotiated price is not so unique from the TRQ approach, even if the current deal-making style and system of trade negotiations is significantly different than other presidential administrations. After the initial shock of the White House\u2019s reciprocal tariff announcement on April 2, 2025, countries have been eager to find ways to purchase U.S. goods and to negotiate access, including specific volumes for key products. Admittedly, this process is messy, but it is a way for countries (including the United States) to open their markets to some level of additional goods, while providing protection against a surge of imports that could threaten or upend key domestic industries.<\/p>\n
The coming years are likely to continue to be uncomfortable for those of us in trade-dependent industries and raised in the era of the pursuit of free trade agreements. Still, there can be light in this transition. We can bemoan the current U.S. trade policy for what it is \u2013 uncertain. Or we can engage and be part of the effort to find opportunities \u2013 both in the near term and to prepare for the trade policy work of the future.<\/p>\n
For our part, the guiding star of USW\u2019s work since the organization\u2019s inception remains the same \u2013 looking for opportunities for America\u2019s wheat farmers in whatever form they may take.<\/p>\n","protected":false},"excerpt":{"rendered":"By Dalton Henry, USW Vice President of Policy History doesn\u2019t repeat itself, but it does rhyme, or so…\n","protected":false},"author":2,"featured_media":344569,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[49,978,659],"class_list":{"0":"post-344568","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-united-states","9":"tag-us","10":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115028640683871019","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/344568","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=344568"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/344568\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/344569"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=344568"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=344568"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=344568"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}