Sweetener users urged to get involved in Trump trade policy
February 28, 2017
DANA POINT, Calif. — Darci Vetter, the chief U.S. agricultural negotiator in the Obama administration, urged sweetener industry executives on Feb. 27 to get involved in President Donald Trump's trade policy decision making because Trump's decision to withdraw from the Trans Pacific Partnership is a "loss for the global trading system," and Trump's approach to revamping the North American Free Trade Agreement is still unclear.
In a speech to the International Sweeter Colloquium, which is co-sponsored by the Sweetener Users Association and the International Dairy Foods Association, Vetter noted that Trump had asked where the people who have negotiated trade deals came from and that she came from Nebraska and grew up on a farm.
Vetter, who negotiated the agricultural provisions of the TPP, defended that agreement, but said the issues now are how the administration proceeds after withdrawing from TPP and how it will handle Trump's promises to turn NAFTA into a better deal for the U.S.
Agriculture needs to monitor the Trump administration carefully, Vetter said, because "frankly, the administration has broad latitude" to act on trade without congressional action. To withdraw from NAFTA, Vetter said, Trump would have to follow rules that would take some time, but any announcement of that intention would cause industry to rethink investment and planning decisions.
Vetter said the sweetener users need to find out whether the Office of the U.S. Trade Representative, the Commerce Department or the White House will be the lead negotiator and where Congress fits into future negotiations and renegotiations. The Trade Promotion Authority law provides a blueprint on how to proceed with a negotiation, but is not clear about how to pull back from NAFTA and other multilateral agreements, she said.
The industry must find out "how stakeholders should make their views known," Vetter said. "Industries and trade associations provide vital data on what they sell."
IN THE COLD
Vetter told the sweetener users that the TPP would not have mattered much to them because countries were resistant to a big liberalization in the sweetener trade. But the 12 TPP countries did all put every farm product on the table, and there would have been a small increase in sugar from Australia and in sweetener-containing products from Canada.
For the rest of agriculture, Vetter said, "pulling out of TPP leaves us in the cold."
The biggest loss, she said, was the ambition that the 12 TPP member countries would reduce tariffs and establish better rules of trade, and that other countries — including China — would eventually join the agreement.
While Trump has said he believes that the U.S. would get better deals in bilateral agreements, Vetter said the U.S. chose the 11 other countries because "we took those that would be the most ambitious, and then we would invite others to join."
Provisions establishing standards on biotechnology and on organic agriculture would both have been of benefit to the sweetener industry and the rest of American agriculture, she said. The agreement would also have protected U.S. products from the impact of European campaigns on geographic indicators in those Asian markets, she added.
TPP may move forward without the U.S., she said, but it is unlikely to have the same high standards because for those standards the U.S. was the "demandeur."
In two weeks, she noted, Chile will host a meeting of the remaining TPP countries and has invited China to attend. The U.S. cannot have a seat at that table, she said, but if the U.S. is not even represented at the meeting "it is not good."
What happens with NAFTA, she said, depends a lot on whether the U.S. is "going to withdraw, renegotiate it, modernize it, tweak it a lot," Vetter said, noting that administration officials have used all those words to describe the path forward.
"NAFTA withdrawal would be the most drastic and harmful" because goods have been moving back and forth across the borders with Mexico and Canada for decades.
There are reasons to modernize the 20-year-old NAFTA to include labor and environmental provisions that are handled in side letters in NAFTA but are integral to more recent agreements, and to improve science-based decision making in sanitary and phytosanitary provisions and intellectual property provisions that would cover the Internet, which did not exist when NAFTA was negotiated.
Renegotiating, she said, "suggests the fundamental tenets will be revisited, including market access." Since tariffs are already at zero, "there is nowhere to go but down," meaning that tariffs would be raised, she said.
Speaking to an audience of sugar users who want to buy sugar as cheaply as possible and have been in conflict with U.S. sugar growers over imports of Mexican sugar, Vetter noted that in a renegotiation U.S. growers "might want to change the rules on how sugar enters the U.S.," while Mexico would want "greater certainty in how we use the trade remedy laws" that have led to U.S. growers bringing cases against Mexico over subsidized and dumped sugar. Canada, Vetter said, would ask for much greater access to the U.S. market for refined sugar and rules of origin that would allow that country to import sugar and put it into products which would be considered Canadian.
In a renegotiation, Vetter said, the U.S. should be careful about what it asks for and what it might get.
If the U.S. tries to start a renegotiation with Mexico and Canada over manufacturing, "could we contain that discussion?" she asked.
Mexico and Canada are two of the top three markets for U.S. ag exports, and previous NAFTA disputes with Canada over the country-of-origin labeling of red meat and with Mexico over truck transportation have shown that when those countries want to retaliate, they put ag products at the top of the list.
Mexican officials have already made plans to travel to Brazil and Argentina to discuss importing grains from those countries. That would not be easy for Mexico because the U.S. and Mexican infrastructure is integrated, Vetter said, but even a small percentage loss of sales to Mexico would have an impact on U.S. ag markets that are in surplus with low prices.
Vetter urged the sweetener users to maintain contacts with both government officials and business trading partners in Mexico and Canada while the Trump team figures out its trade agenda.
"Given the heated rhetoric about trade, frankly, our commercial partners need to hear you," Vetter said.
Vetter ended her formal remarks by repeating statements she had made when trying to convince Congress to pass TPP — that the people who experience problems from free trade speak up a lot more than those who benefit from it.
"There is a great deal of angst about globalization," Vetter said, but not enough commentary about jobs created and people fed.
If there is an upside to the current situation, she said, it is that both Democrats and Republicans are talking about how to better prepare the U.S. workforce for the globalized economy.
Asked in a question-and-answer period about the effect of the withdrawal from TPP on U.S. relations with China, Vetter noted that the strongest allies on economic policy have usually been the strongest allies on foreign policy.
"In some years (the Chinese are) our No. 1 market, but they are a very fickle market," she said.
TPP, she said, was not created to isolate China but eventually to bring China into the system. TPP included a provision requiring state-owned companies to operate under market rules when engaging in international trade, and there was hope that China would "be part of that fold."
It is hard to predict a U.S. bilateral trade agreement with the United Kingdom because the UK has not yet triggered Article 50 that would begin its exit process from the European Union, and that will take two years, she said.
The viability of a border adjustment tax would depend on whether it would fit into international trade rules and, "as a foreign policy matter, it would also create ripples far beyond just the tax code," she said.
"The bottom line," Vetter concluded, is that globalization will not stop even if the U.S. is not part of the process. In an interview afterward, Vetter said her real fear is that globalization will proceed without the U.S. and its values being represented. ❖