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Editorial: Beggar-thy-neighbour

To steal a line from “Star Wars” filmmaker George Lucas, on the night of Nov. 8, 2016, I felt a ‘great disturbance in the force.’

The occasion, of course, was the election of Donald Trump as U.S. president, and the subsequent horror of many.

At the time I was more sanguine. He may arguably be one of the least-qualified presidents ever, and he certainly had amassed a proven track record of unstatesmanlike conduct. But the farmers of the U.S. constitution wisely built a series of robust checks and balances.

My feeling was their republic could surely withstand this protest vote run amok, having survived a civil war, two world wars, the Cold War and other challenges, domestic and international, too long to list.

I vowed to find a comfortable chair, make some popcorn and watch the show.

So far that plan has worked out just fine, as the U.S. Supreme Court and legislators have blunted the worst of President Trump’s ill-considered excesses. Even his rhetoric has been tolerable, viewed through the lens of his own autobiography The Art of the Deal.

That tome lays out one of his key strategies — to stake out an initial position so outrageous that any later position seems reasonable by contrast.

Lately however, that sense of security has begun to erode, and from an unlikely source — trade negotiations. Here many thought Trump’s rhetoric on the topic was just that, and in the end a businessman would understand the value of trade.

However, now it seems no deal, no matter how sweetened, is good enough.

The NAFTA negotiations seem periodically set to unwind on his insistence on a “sunset clause.”

Trade specialists have noted that if that’s the case, there’s no point in an agreement. Nobody is going to make investments based on anything that could be unwound every five years.

Even during quieter periods, his mercurial presence hangs over the talks.

His latest target is China and here one wonders if Trump has bitten off more than he can chew. Its economy is nearly as large as the U.S. economy. The two nations have become deeply intertwined, one the world’s workshop, the other the world’s consumer.

In a fit of populist posturing, Trump seems set to undo that, setting the stage for who knows what.

It essentially boils down to the discredited economic policy of the 1930s blamed for worsening the Great Depression, known as beggar-thy-neighbour. That’s when a country attempts to address domestic economic woes at the expense of other nations.

For the Manitoba farmer, this is a concerning situation to say the least. As our Allan Dawson wrote recently, the sector is deeply trade dependent and any decisions made in Ottawa, Washington or Beijing could quickly come home to roost.

They’re already hitting home in the U.S. Midwest, where some of Trump’s strongest supporters, U.S. farmers, are feeling the pinch of lower commodity prices and uncertain markets.

July 24 the Trump administration promised those farmers an aid package that’s been described as “unprecedented,” which would see them getting US$12 billion in aid to offset their tariff losses.

Some experts, including Joseph Glauber, a former USDA chief economist who spoke to the U.S. cable news service CNBSC, have warned the new subsidies could distort or disrupt markets and ultimately have negative consequences for the agriculture industry.

That also includes the possibility it could lead to more retaliation on other agricultural exports, leading to more pain for U.S. farmers and the need for yet more subsidies.

U.S. farmers have the advantage of access — no matter how begrudging — to the U.S. treasury. Canadian farmers, on the other hand, don’t always have similar levels of support.

The last time they were caught in the crossfire of a trade war, it was the 1980s and early 1990s, as the EU and U.S. had a battle of subsidies, leaving farmers in Canada, Australia and Latin America in dire straits.

Exactly where this will end up is anyone’s guess. The looming U.S. midterm elections could leave Trump a toothless lion, roaring into the wind but unable to bite. There could be a new president in two years, and this could soon all be a bad memory.

But it would be a mistake to count on that. Both Trump and the Brexit vote on the other side of the Atlantic were a powerful symbolic rejection of the existing global order.

Now Trump has the benefit of a strong tailwind from a growing economy. The U.S. GDP grew at an annualized rate of 4.1 per cent in the second quarter of this year. One U.S. Federal Reserve committee says that could climb to five per cent in the third quarter.

That’s sure to please a voter base that ignored his excesses once already. Enough U.S. voters could choose to continue down the same path, taking us all with them.

About the author

Editor

Gord Gilmour is Editor of the Manitoba Co-operator.

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