The political winds are shifting in many corners of the world, and with them, so are attitudes toward trade. The multilateral deals that came to define the global marketplace after World War II have started to sputter and stall; in their place, smaller pacts with fewer participants have begun to rise. Within this new, more compact model, the argument goes, countries are better able to home in on their core interests because there are fewer partners with which they must compromise.
The United States may not have been the first nation to latch on to this strategy, but it has certainly become the movement’s poster child. Only months after walking away from the Trans-Pacific Partnership (TPP), U.S. President Donald Trump is lining up a series of important trade talks with some of Washington’s biggest partners, including Canada, Mexico, South Korea and China. The United States isn’t alone, though. Across the pond, Brussels’ Trans-Atlantic Trade and Investment Partnership negotiations with Washington may have ground to a halt, but the European Union has struck deals with Japan and Canada while making strides in trade talks with the Common Market of the South, or Mercosur, in recent months.
As players swap seats at different negotiating tables, one sector will be particularly well-positioned to punch above its weight: agriculture. In most of these bartering rounds, countries will find room to compromise by making adjustments to the nontariff barriers they use to protect farmers at home. But bargaining will not go smoothly on every front; as bilateral agreements increasingly replace multiparty blocs, regional standards and regulations will start to diverge — and at times, compete — heralding greater inefficiencies for producers involved in several different deals at once.
Giving Farms Room to Flourish
The existential need for food security and the preservation of sectors that are deeply entwined in nations’ social identities are only part of what makes trade deals so tricky to negotiate. More often than not, countries are determined to defend agricultural pursuits whose historical and political prominence outweigh their actual contributions to GDP. And governments have many tools at their disposal for protecting those industries’ competitiveness in the global market. Agricultural tariffs, for instance, are often some of the highest countries impose and the most difficult to bargain down. Moreover, nations routinely grant generous subsidies to farmers, whether in the form of direct payments and disaster assistance or measures to steady volatile prices, to ensure that they are able to prosper.
Nontariff barriers are used in much the same way. The imposition of sanitary and phytosanitary (SPS) regulations — such things as pest controls, processing standards and rules on genetically modified organisms (GMOs), to name a few — is just another means of insulating domestic agricultural sectors from foreign competitors. Of course, these regulations can also be the most onerous and costly rules that supply chains are required to meet, and their reduction is often the subject of talks aimed at facilitating greater trade. In fact, it’s likely that the adjustment of nontariff barriers will rank among the most productive avenues of discussion in the United States’ approaching trade talks.
Fertile Ground for Compromise
This long and storied history of safeguarding agriculture will be tough to leave behind. But if the TPP talks are any indication, nontariff barriers such as biotech regulations and SPS laws are good places to start. Though the historic deal is now defunct, the TPP’s signatories were able to craft procedures for settling disputes over SPS barriers, increasing transparency in the regulation of biotechnology and mandating members’ notification of relevant national laws.
Though manufacturing has taken center stage ahead of the renegotiation of the North American Free Trade Agreement (NAFTA), it, too, will likely focus on agricultural trade among its three signatories. After all, agricultural disputes among the bloc’s members aren’t unique to the Trump administration. A recent agreement restricting U.S. sugar imports from Mexico came only after lengthy deliberation, while Canada’s support for its dairy sector has long been under scrutiny. Despite Ottawa’s recent reform in the sector, it will probably be a focal point of the upcoming talks even as the United States turns its attention to SPS and biotech policies.
Regulations in the former category were built into the original NAFTA draft in the 1990s, predating even the SPS standards of the World Trade Organization. Since then, however, members have targeted specific sectors, such as citrus fruit and Christmas trees, with emergency protections that have disrupted vital industries in influential U.S. states. As it seeks to revise NAFTA’s terms, the United States will push to update the bloc’s pioneering SPS standards and boost transparency and coordination among its members.
As a leader in agricultural biotechnology and genetic engineering, the United States will also look to promote those areas of research. U.S.-based biotech firm Monsanto is currently mired in a drawn-out dispute over the issue of growing genetically modified corn in Mexico; as GMO technology continues to evolve, the regulations that govern it will also have to change to keep up. Washington will therefore work to ensure that the intellectual property rights of agricultural innovations — from the use of big data and the internet of things to the reliance on automation and robotics in farming — are protected in its future trade agreements.
Many of these themes will crop up in the renegotiation of the U.S.-South Korea free trade agreement, as well. Though the original deal called for a scheduled reduction in tariffs in several important agricultural sectors, it has not been especially proactive in seeing those barriers torn down. As in the United States’ other trade deals, then, it is likely that the agreement will be reworked to include greater transparency and new avenues for contesting signatories’ actions.
Who Will Rule the Roost?
In addition to amending its existing agreements, the United States is cultivating new deals as well. One of the countries it has set its sights on is the United Kingdom, which is preparing to make its exit from the European Union. Brussels and Washington have historically disagreed on food safety regulations and the use of genetically modified crops. Yet while the United Kingdom has aligned more closely with the United States on the second issue in the past, the two may have a tough time seeing eye to eye when trade negotiations begin.
Though the most recent round of talks in July were informal, they unearthed both a small point of contention and a bigger problem at its root. On the surface, the two states’ dispute had to do with safety standards in poultry processing: The United States permits chlorine washes of poultry while the European Union does not, arguing that such washes enable livestock producers to maintain lower standards prior to the cleansings. British Secretary of State for Environment, Food and Rural Affairs Michael Gove has said his country will not lower its food safety standards for the sake of striking a trade deal with the United States. Washington is likely to interpret that stance as the promotion of a nontariff barrier.
This sticking point is indicative of the bigger rivalry between the United States and Europe that Washington’s trade talks with London may fuel. The international coordination of food safety and biotech regulations is critical to building efficient supply chains, keeping production costs down and minimizing product loss. But as bilateral trade arrangements become the norm, nations may be pushed or pulled toward the demands of one major trade partner over another on these matters. And all the while, the world’s largest producers and consumers — armed with the corresponding political clout — will jockey for the opportunity to control the market by dictating the rules that govern it.
On this front the European Union has already made some notable strides. The Continental bloc recently signed an agreement with Japan that increases transparency between them and allows for the exchange of information on food safety. Brussels also signed a free trade agreement with Canada in February, capping off seven years of negotiation. (The deal’s implementation has stalled, however, in part because of a controversial Canadian dairy policy.) Meanwhile, Europe has revived its trade discussions with Mercosur, though beef, sugar and ethanol have proved to be thorny issues to navigate. As the talks progress, the two blocs may butt heads over questions of Mercosur members’ adherence to international food safety standards.
Feeding the Dragon
One of the most notable absences in this flurry of trade talks is Beijing. Perhaps no country holds more sway over global agriculture than China, whose demand for imported goods will shape the sector’s decisions for years to come — something the globe’s biggest agricultural producers are well aware of. Hoping to gain access to the giant consumer market, Canberra signed a trade deal with Beijing in 2015. Australia, a sparsely populated but flourishing producer, was a perfect match for its rapidly growing neighbor, whose strategies for food security and self-sufficiency have grown more flexible in recent years.
China has had trouble finding the same common ground in trade with the United States. In mid-July, the two countries completed their 100-day action plan, having made small gains in relatively uncontroversial areas. For example, certain genetically modified crops received long-awaited approval, U.S. beef imports from China resumed and a new rice protocol was established, opening up the Chinese market after nearly a decade of haggling. U.S. businesses, however, decried the remaining restrictions on issues such as the inclusion of growth hormones in products, onerous beef trade documentation and a long, opaque GMO approval process. Yet even if a formal free trade agreement between the two countries is still a ways off, the Chinese market is too lucrative for the United States to ignore in any one sector for long.
In fact, as the world’s largest agricultural importer, China will have the ability to shape international standards regardless of whether it reaches many bilateral trade deals at all. Consider genetically modified crops. Farmers who plant these crops with the intention of selling them to China stand to lose millions of dollars if they aren’t approved for the Chinese market in a timely manner. American farmers are still caught in a legal battle with biotech giant Syngenta over just such a loss. (In 2011, the company introduced a genetically modified variety of corn to the U.S. market three years before China approved it.) As trade negotiations drag on and China continues to use its opaque approval process to its advantage, similar roadblocks are doubtless on the horizon, promising further delays for crops still awaiting their fate.
Despite how it may seem, China’s decision to open its market ever so slightly doesn’t contradict its long-term agricultural strategy of ensuring the country’s food security by investing in agriculture abroad and biotech development at home. Rather, it enables China to benefit in the near term from its position as a hefty importer, steering the industry’s regulations and direction through the sheer size of its consumers’ demand. So while the United States and Europe will work to make their mark on food safety and biotech standards, many producers will place a higher priority on meeting the standards set by the world’s biggest and ever-growing market.