Selling TPP as the Farm Economy Drops off a Cliff
The farm economy is beyond struggling. Farm income was 50 percent lower in 2015 than in 2013 and is expected to drop further in 2016, reports the USDA. Prices for commodity crops, livestock and poultry are tumbling. Farmland prices are declining. Farm debt is rising. Approximately 45 percent of crop farms are in poor financial condition. Under these dire conditions, a new proposed trade agreement, the Trans Pacific Partnership (TPP), is being pitched as a savior for the farm economy. But given the experience of past trade deals, this will be a tough sell.
Supporters of the 12-nation TPP have had a hard time explaining its benefits from the beginning—mostly because even the rosiest scenarios conclude that the economic gains are tiny. None of the economic projections completed thus far are willing to claim the TPP will increase jobs. The often-cited Peterson Institute projection for the TPP found very small economic gains for the U.S. (only .5 percent after 15 years), and some 500,000 job losses in the first 10 years. A World Bank analysis found that TPP countries would, on average, see only a 1.1 percent gain in their economy annually by 2030. The U.S. would have the smallest gain, at just .4 percent by 2030—with Vietnam (10 percent), Malaysia (8 percent) and Japan (2.7 percent) as the biggest winners.
And most troubling, a TPP analysis by Tufts University, using updated methodology, found that the deal would actually result in both a net loss of jobs and increased income inequality. The Tufts analysis criticizes the older Peterson and World Bank methodology for assuming full employment (any jobs lost will be picked up elsewhere), as well as not accounting for declining wages, as seen in previous trade agreements.
In the case of agriculture, it’s been a time-honored tradition to grossly overstate the benefits of proposed free trade deals for farmers and the TPP is no different. Last month, the Farm Bureau released a new study claiming that the TPP would boost net farm income by $4.4 billion. The Farm Bureau sent 500 members to Capitol Hill to tout the study and lobby on behalf of the TPP—USDA Secretary Tom Vilsack has since cited those projections. But the study has some serious problems, including that it hasn’t publicly posted where the numbers come from. The Coalition for a Prosperous America raised 10 reliability concerns about the Farm Bureau study, including that it lists no author and doesn’t publicly and fully disclose its methods and data. It’s hard to tell whether or how it accounts for increased imports under the TPP—an essential component of assessing any trade deal.
While the projections from the Farm Bureau study remain cryptic, the track record from past trade agreements is unfortunately all too clear. In a series of recent columns, University of Tennessee agriculture economists Dr. Daryll Ray and Harwood Schaffer documented the record of past U.S. free trade agreements, including NAFTA and CAFTA. They found a negative cumulative balance of agriculture trade from 1997-2014 for the U.S. with Canada (-$30 billion) and Mexico (-$9.6 billion) under NAFTA, as well as negative balances with CAFTA countries. Ray and Schaffer write, “Given the history of trade deals and the structure of US agriculture, we would be very cautious in making too many promises about the trade-balance benefits of any given trade agreement for the whole of US agriculture.”
When Ray and Schaffer mention the structure of U.S. agriculture, they are referring to the tight control of the sector held by a small handful of mostly global corporations. In the U.S., the largest beef company (JBS) and the biggest pork producer (Smithfield-Shuanghui) are not U.S. corporations but are based in Brazil and China respectively. There is little doubt that the global agribusiness companies pushing so hard for TPP, like Cargill, Tyson’s, ADM, Monsanto and others will gain from the agreement. They operate in most of the TPP countries and will not only gain from tariff reductions, but also the TPP’s focus on harmonizing regulations—from food safety, to intellectual property to environmental protection.
Not all farm organizations are buying the TPP sales job. The National Farmers Union, the National Family Farm Coalition and a growing number of family farms and organizations around the country oppose the deal. The failure of past trade deals to achieve gains for farmers raises questions about whether that was ever the intention. As economist Dani Rodrik writes, “today’s world economy is the product of explicit decisions that governments have made in the past." This is most certainly true for the struggling U.S. farm economy today.