Washington Insider: Trump's Tariff War Channels 1980 Export Embargo Debate

So, the Trump Administration’s trade fight is continuing on many fronts, and is generating increasing discussion at state fairs and farm shows around the country--along with debates concerning the administration’s “farm aid” program that is intended to offset some trade policy impacts.It also is generating comparisons with the 1980 partial embargo of ag exports to Russia and is resurrecting some of the numerous economic studies done in the mid-1980s by land grant universities, USDA’s Economic Research Service and other institutions.Now the results of all this are complicated, as you might expect, but this history does not seem to be turning up much good news for the administration. For example, USDA’s Economic Research Service concluded in 1986 that “the embargos and moratoria had limited impact on the quantity of U.S. exports in the short run.”Looking back at the ag situation in 1980 and after, the Daily Oklahoman said that “for President Carter's action to be successful, two factors were imperative: Cooperation of other exporters particularly Australia, Canada, the European Community and Argentina and the major grain companies were needed. In addition, exporters and farmers would have to be compensated to offset losses.”The Oklahoman continued, “as it turned out, cooperation from other exporters, particularly Argentina, was insufficient. And predictions by the Central Intelligence Agency that disrupting grain supplies would trim Soviet meat consumption didn't occur, either. That was because “the Soviets were able to make up for loss of American imports by buying from the United States' key competitors.In addition, the Oklahoman concluded in 1986 the “shift from U.S. supplies has plagued American farmers ever since."USDA was similarly cautious. While acknowledging the difficulty in assessing long-term impacts, it attributed most of the decline in U.S. exports that followed the 1980 USSR grain embargo to the increase in the value of the U.S. dollar and a slowing of world economic growth—as well as interference from emergency programs that raised “already high loan rates for corn and wheat in the wake of the 1980 embargo, and which provided an umbrella for the rest of the world to expand production,” which it did.The “umbrella” remained in place until the 1985 farm bill substantially reduced loan rates,” USDA said.So, what do the universities think of the current trade policy? They seem to be concentrating on a longer-term view of the impacts this time. For example, a University of Illinois report says that U.S. exports of corn and wheat “have never exceeded early 1980 levels” despite long-term world economic growth, large fluctuations in the value of the U.S. dollar, and the dramatic U.S. farm policy changes in 1985. The report notes that U.S. share of world exports for main U.S. crops has continued to decline; and that “now, after nearly 40 years, it is reasonable to ask whether the long-term impacts of the embargos and moratoria of the 1970s/1980s were more than the USDA thought in the 1980s.”The report hedges this conclusion a bit by noting that exports can be “shuffled” among world buyers, and as long as China continues to buy farm commodities, the main impact on the quantity of exports in the short run may once again, be a “rearrangement” of their destination.But it suggests that “more troubling is the potential long-term impact.” And, even though the U.S. “is not using food as a weapon” in the current trade war but food availability and price are politically sensitive topics in all countries,” and that it is not unreasonable to think that U.S. trade actions could impact the thinking of importers for a long time when it comes to sourcing food—and, it may make U.S. products less competitive, as well.The study concludes that it “should be sobering to the U.S. that the quantity of U.S. corn and wheat exports have never really exceeded the levels of the early 1980s, a time span now approaching 40 years and that “it is the long-term consequences of current U.S. trade policy for U.S. ag exports that bear watching and will likely be the most important ag trade storyline coming out of the current trade war.”That’s far short of the short and intermediate term disaster some are predicting—one Canadian ag opinion writer called the impacts of administration policy the “equivalent of nuclear winter for ag trade.” Still, it is ammunition for critics of the “get tough” tariff policy now being used, and for the farm aid program the administration is proposing.So, this is a policy and political fight that is still under way, and should continue to be watched closely by producers—and that, based on evidence from the 1980 experience, could mean both fundamental an long term impacts for U.S agriculture, Washington Insider believes.