Agricultural producers and those involved with the steel industry may not see eye to eye on how to solve international trade issues, but they do agree on the ultimate goal: They all want to see a level playing field.
The question is whether the strategies being used by the Trump administration — taking tough action by imposing tariffs on trade partners that aren’t playing fair — will ultimately improve the situation or merely cause harm along the way.
Many economists agree that protectionism, historically, hasn’t worked. They say that any benefits seen by, for example, domestic steel producers is short-lived, hurts international competitiveness and drives up prices for consumers.
Others see U.S. markets as flexible and particularly efficient, and suggest markets will ultimately re-balance, perhaps at least partly due to the president’s actions.
Until then, many project rocky times.
“The thing that concerns me is that farmers, farming and agriculture will become the collateral damage in these negotiations,” said Azzeddine Azzam, a University of Nebraska-Lincoln agricultural economist.
As an ag economist, he’s instinctively a free-trader and has worked in the field for 32 years specializing in various areas, including applied microeconomics, agricultural and natural resource economics.
He hesitates to wade into political and national security issues, but he can’t deny that these are all things at play in the current trade war. But he keeps coming back to the idea that, historically, countries that find trading partners unreliable will find other means to meet demands.
Azzam’s fellow economists at UNL have also expressed their opinions on trade, including Uche Jareet, an assistant professor of practice. He teaches international economics and aimed to clean up misconceptions about tariffs recently by posting comments online that made this argument: Tariffs that target importers will ultimately hurt both them and the consumer.
“The resulting increase in prices (of goods) will exceed the increase in wages,” he wrote. “Not only are you not going to see swelling employment numbers, you also will get a drop in purchasing power.”
Both Jareet and Azzam readily acknowledge that China has historically duplicitous trading behavior. And Azzam said he sees logic and reason in President Donald Trump’s attempts to level the playing field.
“I really can see the point in making sure the playing field is level because markets do not work the way we think they work in textbooks — there is a human element to trade,” he said. “(Trump) thinks very differently from somebody like a usual politician.”
But Azzam also said he believes the president’s tactics are troubling.
“The only thing I worry about is that he’s a lot like a gunslinger with two shotguns,” Azzam said. “He might cause a lot of collateral damage.”
Another University of Nebraska-Lincoln colleague said perhaps the better way to address dubious trade practices by nations such as China is to use avenues already available to the U.S.
In a July 18 “Cornhusker Economics” report discussing trade wars, ag economist Wesley Peterson said current U.S. policy has been discredited “for over 200 years” and suggests reinvesting in the World Trade Organization.
The WTO has historically provided member-states avenues to renegotiate trade agreements and settle trade disputes.
“If the judgment of the panel (hearing disputes) is that a country violated its commitments, it is expected to change its polices or offer compensatory payments to the complainant,” he wrote about filing complaints.
Peterson acknowledges in the report that dispute resolution is a lengthy process, but he said it’s also a fair process that prevents trade wars.
He also cautions that Trump’s current trade policies could result in WTO action against the U.S.
“The history of the WTO dispute settlement suggests that the United States will lose the cases being brought against it in the aftermath of the various tariff increases,” Peterson said. “The United States is more likely to attain its objectives on international trade by following normal WTO procedures than by declaring trade wars.”
Regardless of how the current trade war is resolved, Azzam said he considers this dispute as an emerging new normal. And it’s his hope that the university and his fellow economists can prepare farmers for it, while also putting faith in the resiliency of the U.S. economic system.
“I hope that farmers in the future ... internalize this idea that the world is entering another type of transition where economics and finance are the turf that people are going to fight on,” he said. “(But) the system is flexible. I’m very optimistic that things are going to go back to some sort of equilibrium where agriculture will continue to thrive.”