The most significant policy issue of 2018 looms large over the outlook for the new year. Ag leaders of both parties say actions on trade in the first half of 2019 will decide agriculture’s fate for years to come.
It’s not just the on-again, off-again haggling with China that dragged soybean markets up and down at breakneck speed, but also the lingering issues of the U.S. Mexico Canada Agreement (USMCA) that still must pass Congressional muster.
“I just think it’s hard for Democrats to vote yes on trade agreements,” said former USDA secretary and senator Mike Johanns (R-Neb.)
With the House turning to Democrat control in January, that could pave a tough road for the USMCA that President Donald Trump negotiated.
“I can write the speech for Nancy Pelosi,” Johanns said. “It's going to have two key features: it's going to be environment, it's going to be labor. She’s going to want tougher environmental standards in Mexico and Canada She's going to want greater labor rights in Mexico and Canada. And off you go, because those countries will push back and say, ‘Hey, wait a minute; here we have an agreement, I'm not going to go renegotiate this agreement.’ I don't want to be negative about this, but I think that change on the House side is going to make it tough to get trade agreements done.”
“We will eventually have to get an agreement with China. If we don't, then talk about pain, not just in agriculture, but across many business sectors, because then you're going to have the restructuring of the world economies." - Jim Wiesemeyer
Optimism on China
When it comes to resolving trade issues with China, there is a high degree of optimism, if only because the alternative is too bleak to consider.
“We will eventually have to get an agreement with China,” said Pro Farmer Washington analyst Jim Wiesemeyer. “If we don't, then talk about pain, not just in agriculture, but across many business sectors, because then you're going to have the restructuring of the world economies. That's how big this thing is with China.”
There remains significant support in farm country for the ends being sought by President Donald Trump when it comes to China, including reduction of the overall trade deficit and protections of intellectual property. In fact, a recent Farm Journal Pulse poll showed 62% of farmers and ranchers hold a favorable view of the president. But there is a chorus of concern about how the president has approached China.
“It would have been a lot better to go with our friends from Canada and Mexico, in the EU and Japan and elsewhere and say, as a group, this is something we have to handle,” said longtime ag lobbyist Mary Kay Thatcher of Syngenta. “But instead, we've done a bit of alienating some of those folks by having all these other trade interruptions.”
“The reality is the EU, Japan, they're all being treated in the same way we are terms of doing business in China,” added former USDA Secretary Tom Vilsack. “So why not go as a coalition of nations to say to the Chinese ‘Look, you got to change the way you're doing business here.’”
By going alone in the tariff battle with China, it has made it easy for the Chinese to single out U.S. agriculture for retaliation, according to Vilsack.
The battle for trade access should be the top 2019 policy priority for USDA, according to Johanns.
“To me, that would be a front and center issue,” Johanns said. “I would be in the Oval Office, and I would be with White House staff saying, ‘Turn me loose; let me help you in any way I can to sort through some of these trade issues.’”
“I don't think that there's a full understanding and appreciation for the work of USDA in Washington, D.C. I don't think people understand the flexibility, the capacity of that department to really make a difference in rural America.” - Tom Vilsack
2019 Budget Concerns
In addition to those trade issues, budget concerns should be top of mind for USDA Secretary Sonny Perdue according to his predecessor.
“The reality is that the President has indicated a desire to focus on deficit reduction, and whenever I hear that, I essentially automatically assume that what they're looking at are departments that aren't the Department of Defense, the department, Veterans Affairs and Homeland Security,” Vilsack said. “I don't think that there's a full understanding and appreciation for the work of USDA in Washington, D.C. I don't think people understand the flexibility, the capacity of that department (USDA) to really make a difference in rural America.”
That budget fight takes on a new dimension in 2019 as Democrats take control of the House. Johanns, Vilsack, Thatcher and Wiesemeyer all indicated that the change in party control should not substantially impact ag policy as the House Ag Committee chairmanship will likely return to Collin Peterson (D-Min.) a longtime member of the committee and vocal proponent of agriculture.
"I think one of the side stories in 2019 may be some Republicans barking that the President is working too closely with the Democrats." - Jim Wiesemeyer
Immigration and Infrastructure
But, according to Wiesemeyer, the divided Congress may actually bring movement on some long-stalled policy priorities for agriculture.
“I think the Democrats want something done now on immigration reform, and they're probably going to be far more willing to work with President Trump than people realize right now,” Wiesemeyer explained. “To such a degree that I think one of the side stories in 2019 may be some Republicans barking that the President is working too closely with the Democrats.
I think immigration reform is one area infrastructure spending is another, and Nancy Pelosi has already said those are two of some of the top issues.”
2019 is shaping up to be a defining year for U.S. agriculture on the policy front, and despite a multi-year recession in the sector and ongoing trade uncertainty, ag leaders continue the belief that the new year will bring positive structural changes for farming and exports.
“I see the glass a little more than half full, and once we get these trade agreements it's going to be three-quarters full,” noted Wiesemeyer.