While the coronavirus pandemic was hammering global trade earlier this year, the various bureaucracies devoted to trade barely skipped a beat before returning to their usual grind.
For example, the U.S. and the United Kingdom (U.K.) just began talks on a bilateral trade pact prior to the U.K.’s Oct. 31 “Brexit” from the European Union (EU). Also, on July 1, NAFTA 2.0, the new-but-not-new North American Free Trade Agreement, will go into effect as scheduled.
What has changed drastically, however, is trade itself. In short, it’s a beaten-up mess, even more sickly than the economies of key traders like the U.S., China, and the European Union.
“In the current alternate universe we’re living in,” Bloomberg News noted June 15, “global trade is collapsing and the WTO (World Trade Organization) and the liberal order itself are in a true existential crisis.”
“Liberal order” is a little-used phrase in North American ag circles even though almost every farmer and rancher — due to their increasing dependence on government and global markets — would be sunk without it.
In fact, it isn’t a political term; it’s perfectly descriptive: The liberal order is a rules-based, international system organized by the U.S. and its democratic allies on key principles like open markets, democracy, and multilateral institutions such as the WTO and World Bank. Its broader goal is peace and its key tool is commerce.
Farmers and ranchers have long used a colourful phrase to explain it more accurately: Hungry people don’t shoot their grocers. They’re right. Since the liberal order’s rise, the United States has built three generations of peaceful farm policy on its core foundations: open markets, free trade, and international rules.
The proof is in the postwar pudding. U.S. farmers and ranchers have dominated global ag export markets for decades, from decidedly anti-democratic Cold War enemies like the Soviet Union in the 1970s to the vast, reawakening giant, China, in the 2000s.
But for all its strengths, the liberal order is still a delicate balancing act. If you want its benefits — open markets, free trade, and peace — you must constantly reinvest to maintain its foundations — rules, trust in its institutions, and strong, unwavering American leadership.
Alas, the Trump administration has turned America’s traditional leadership role in international trade on its head. Within hours of taking office in 2017 it pulled the U.S. out of the nearly completed Trans-Pacific Pact, a 12-nation trade deal that involves about 40 per cent of global trade. A year later, it began a largely phoney tariff war with Canada, China, the European Union, and other key food importers that remains unresolved today.
But the biggest victim in the White House’s ongoing undermining of international ag trade is the World Trade Organization. The WTO is like baseball’s home plate umpire — few players or fans for either side love the ump, but there wouldn’t be a game without someone ensuring fairness.
Long before the pandemic began to erode global markets, the Trump White House began to erode the WTO’s role in market rule enforcement. Its most cutting action occurred last year when it blocked the nomination of new judges to the WTO’s “dispute resolution forum, the Appellate Body.” That effectively meant the WTO “was no longer able to operate.”
Other key global traders, sensing an opportunity to seize part of America’s global authority, stepped in to do just that. “In January, 17 WTO members, including the European Union, China, and Brazil, began setting up a parallel WTO court without the U.S.,” reported Politico June 14.
So where does that leave farmers and ranchers?
Here’s where: The pandemic has crushed 25 per cent of the world economy; U.S. farm prices are stuck in a tariff-dug, years-long profitless rut, leaving producers heavily dependent on federal assistance in 2020 and 2021; and our ag export competitors and customers are now forming their own ruling trade organization without us.
In short, we’re the pouty schoolboy who grabs the bat and ball and stomps off the field because we don’t like the rules. Rules we, in fact, wrote.
Worse, we know how that game ends.
The Farm and Food File is published weekly in newspapers throughout Canada and the U.S.