Fears Of Resurging U.S. Protectionism Downplayed

Republican gains in the United States’ recent midterm elections may not be as negative for Canada-U. S. trade as some fear, an American industry analyst says.

Historically, Republicans are friendlier to free trade than Democrats. That will likely continue, despite the prevailing recession, said Ron Plain, a University of Missouri livestock-marketing economist.

“Our expectation is that’s probably going to carry forward following this election,” Plain said after speaking to a Nov. 4 hog producers’ meeting.

The balance of power in the U.S. Congress underwent a major shift in the Nov. 2 elections when Republicans gained a majority of seats in the House of Representatives. Democrats had previously controlled the House. Their previous majority in the Senate has been reduced.

Canadian analysts worry vehemently anti-liberal Republicans, encouraged by voters angry at the U.S. economic slump, will promote protectionism and hurt Canada-U. S. trade.

They needn’t worry, said Plain.

“We will have a more friendly trade environment in the House of Representatives than has been the case,” he said.

Plain’s prediction goes against surveys showing over half of Americans today view free trade negatively. The figure is even higher among Tea Party members and other activists.

Some fear political gridlock between a Republican-dominated House, a Democrat-controlled Senate and a weakened President Barack Obama means the jobs crisis in the U.S. will get worse before it gets better.

That’ll mean more voter anger and more anti-trade sentiment, some say.

But Plain said gridlock may actually benefit U.S. business in a backhand sort of way.

When the same party controls both congressional houses, a lot of legislation gets passed because it’s easier to do. Often, a raft of new laws creates a shaky business climate because of uncertainty over future rules, taxes and regulations, said Plain.

To obtain economic growth, business must spend money. Less legislation means businesses don’t have to worry so much about changing rules, he said. As a result, they get on with the job of spending and investing, said Plain.

Historically, the U.S. economy does better when the balance of political power is split, as it is now, he said.

“Recent history would indicate gridlock in our government is good for business.”

What’s good for business in the U.S. is also good for Canada because the two countries’ economies are closely tied, he added.

“Stronger economic growth in the United States will be good news for Canada, too.”

But he acknowledged economic recovery will be slow because the recession has caused so much damage in lost jobs and consumer indebtedness.

In his presentation to the Manitoba Pork Marketing Co-op, Plain noted North American hog prices slumped significantly this summer after showing promising gains earlier in the year.

U.S. hog prices for August were the lowest so far this year when they should be the highest because of summer barbecue season demand, he said.

Perry Mohr, the co-op’s CEO, said packer margins are near $40 a hog, the highest seen this year, because of the divergence between cash bids and wholesale pork prices.

But Mohr said traders believe packers will have to pay higher bids in December as producer contracts expire.

The marketing co-op’s bulletins say Maple Leaf fixed forward contract prices will climb steadily through 2011 and peak in August. [email protected]

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