How CPTPP May Finish Brainless US Farmers

Those Yankee steaks ain't gonna be very saleable in CPTPP countries real soon

 The geniuses who voted for Trump knew full well that he campaigned on isolating the United States politically and economically from the rest of the world. Although what he says and does seldom coincide, there was always a risk that his rhetoric would turn into action. 2018 was the year when Trump's inward-looking economic policies finally came to fruition as (marginally) more sensible sorts were sidelined or left his administration. With hardliners now feeding his worst instincts, Trump erected Fortress America on trade. The rest--including a stock market collapse at year-end--is history.

American farmers have borne the brunt of Trump's trade war. The Chinese know full well that rural communities voted for Trump in droves, and their pain could translate into political pressure for Trump to roll back the trade war. As of now, though, the meager compensation Trump offered to tide them through the trade war is not enough and that war's fate are uncertain. Just as Trump-borne uncertainty has tanked stock markets, it's doing the same to the US agricultural sector.

But wait, there's more for 2019! Leaving the Trans-Pacific Partnership turns out to have been another Trump blunder. you see, the other TPP participants (TPP-11) have decided to push through with it--including several major agricultural exporters like Australia, Canada, and New Zealand. The upshot is that these agricultural exporters will soon gain preferential access to Asian countries the United States has long exported to like Japan and those it seeks to export more to like Malaysia and Vietnam. So, American farmers will lose even more soon. But first, let's get up to speed on what CPTPP is:

American farmers, already hit by low commodity prices and China’s punitive trade tariffs, are poised to endure further pain in 2019 now that a major Pacific trade deal has come into effect. The Comprehensive and Progressive Agreement for Trans-Pacific Pacific Partnership, or CPTPP, was ratified by seven of its member countries on Sunday. Now that the massive free trade pact is a reality for Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam, the remaining four members — Brunei, Chile, Malaysia and Peru — are soon expected to follow suit.

A lot of the hurt is going to come from what economists call "trade diversion." Even if the US is the more efficient producer of an agricultural good, other producers within CPTPP may be selected by virtue of having lower tariffs applied against them despite being less-efficient producers. Anyway...

The goods of non-CPTPP members such as the United States are now expected to be pricier and less competitive in the 11 CPTPP countries. The world’s largest economy was initially one of the countries negotiating the wide-ranging deal under former U.S. President Barack Obama but the U.S. withdraw under President Donald Trump’s administration in early 2017. American meat and agricultural products are particularly expected to suffer in CPTPP nations that don’t have free trade arrangements with Washington.

 Take beef and wheat (please):

Japan is a prime example. The Asian giant is the top market for U.S. beef, but Australia’s products could now take over America’s spot since foreign beef tariffs in Japan will be cut by 27.5 percent for Australian producers under the CPTPP, The National Cattlemen’s Beef Association has warned. “The US beef industry is at risk of losing significant market share in Japan unless immediate action is taken to level the playing field,” Kevin Kester, the association’s president, said in a statement earlier this month.

It’s a similar story for American wheat. Thanks to CPTPP, Canadian and Australian wheat exports to Japan now immediately benefit from a 7 percent drop in the Japanese government’s mark-up price, which will become a 12 percent reduction in April, U.S. Wheat Associates President Vince Peterson said in a recent statement. By April, American wheat will face a $14 per metric ton resale price disadvantage to Australia and Canada, he warned, adding that his industry faces “imminent collapse” in Japan.

In the end, American farmers will get what they deserve. If you want to make yourself poor and miserable, voting Trump delivers exactly that after a short wait.