Trump emphasis on trade balance challenged

From left, Michael Dykes, president and CEO, International Dairy Foods Association; Darci Vetter, former Chief Agricultural Negotiator, U.S. trade representative; Tim Groser, New Zealand's ambassador to the U.S.; David O'Sullivan, delegation of the European Union to the U.S.

A panel of trade negotiators at the International Dairy Forum in Palm Desert, Calif., agreed there’s growing opportunity in world dairy trade, given a growing population and expanding middle class.

But they also agreed the current political atmosphere in the U.S. and the Trump administration’s position on trade could sideline the U.S.

David O’Sullivan, EU ambassador to the U.S., said he’s fairly optimistic “that the rest of us are moving towards increased trade liberalization and barrier-removing trade deals.”

President Trump has put a lot of emphasis on the balance of trade, other countries selling more to the U.S. than the U.S. buys from them, said Michael Dykes, president and CEO of the International Dairy Foods Association.

“We haven’t heard those kinds of arguments in the past,” he said, asking negotiators their view of the issue.

“I’ll put it directly but not too harshly. We don’t see the world like that at all,” said Tim Groser, New Zealand’s ambassador to the U.S.

New Zealand chooses to import product from fair trading partners that have a surplus with New Zealand because it makes sense, such as importing most of its refined oil from Singapore. And an opposite statement could be made regarding trade with countries that have a deficit, he said.

“We look at our overall global current account deficit and surplus, and we address this with macroeconomic policy rather than with trade policy,” he said.

In general, trade deficits and surpluses are driven by macroeconomic considerations, O’Sullivan said.

“Respectfully, I think that’s much more the case of the United States’ deficit than it is elsewhere,” he said.

That’s not to say there aren’t situations where people are behaving unfairly, he said.

“I think we share common concerns about China. I don’t think any of us feel it’s a level playing field and we have issues with China that need to be addressed,” he said.

But there needs to be a distinction between addressing those who aren’t playing by the rules verses looking at the macroeconomic numbers of deficits and surpluses, which don’t necessarily identify who’s cheating and who’s trading fairly, he said.

There are in fact cases of actors not playing by the rules, said Darci Vetter, former chief U.S. agricultural negotiator.

“But it strikes me that the language we’re using in the U.S. to talk about trade is winning and losing, rather than a comparative advantage or finding opportunities to add value by using supply chains that are increasingly global,” she said.

Trying to measure success in a global economy by an accounting with one trading partner is missing the bigger picture, she said.

The U.S. has a trade deficit with Mexico. But it isn’t logical to think with its 150 million people, Mexico could buy as much from the U.S. as the 350 million U.S. consumers can buy from Mexico, she said.

Much of what the U.S. imports from Mexico are inputs to create something of greater value for export, adding jobs and new value in the process, she said.

A bilateral trade deficit isn’t a very good measure of whether the U.S. is winning or losing at trade in general or even with a particular country, she said.

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