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DAVID KRUSE

By Staff | Oct 16, 2015

They did it. Trade negotiators finished the Trans-Pacific Partnership trade agreement. This agreement takes down many trade barriers that slow U.S. ag exports to 11 Pacific Rim trading partners.

U.S. ag wins. Canada even relented on dairy trade barriers. Canada was given special treatment under NAFTA on dairy and eggs that will be modified in the TPP.

The Canadian Government agreed to compensate dairy farmers for losses from giving up protectionism. The agreement did not include China which was meant to create a unified point of leverage in some future trade talks between the TPP group and China that will certainly come sometime.

They had to finish the agreement now before windows of opportunity close as the political election cycle heats up.

President Obama will officially inform Congress that he will sign TPP and they have 60 days to review the document. There will be more lying done about what is in this agreement than against any trade agreement that has come before it.

Liberals are looking for campaign funds from labor unions. This trade agreement has more labor union rights and worker protections than any negotiated before it because after all Obama is a labor union President.

He also negotiated environmental protections into TPP. That won’t stop them from lumping the TPP in with all the other past trade agreements. Whatever accommodations the President got included in the TPP, the anti-trade groups will ignore them. They are against trade period. They are not going to be fair minded about the TPP.

Bernie Sanders is with Trump in the protectionist loser’s camp on trade. Hillary is conflicted. She is vulnerable on the left so she can’t throw her open support behind TPP. But it is a better trade agreement than NAFTA negotiated by her husband.

Biden will support TPP. Donald Trump was expected to call TPP the “worst trade deal ever negotiated by idiots and morons that he has ever seen!” and he didn’t let us down. Trade has brought the right wing and left wing nuts together … or was that Obama?

It is unclear how the resignation of speaker Boehner will impact how the trade agreement is taken up in the House. To most GOP Conservatives the better the trade deal Obama negotiated, the more they will oppose it because Obama would get the credit. They hate Obama enough that they will oppose giving him credit for any positive trade deal.

With both wings of ideological crazies in the Congress in opposition to TPP, they have to have bipartisan cooperation, forming a coalition of sane Senators and Congressman from both parties for it to have a chance of ratification.

That doesn’t happen very often in Congress. It did happen once to get the President the Trade Promotion Authority needed to be able to finalize the agreement to bring it to Congress. So, we will see if lightning can strike twice. I would expect trouble in the House which is starting to resemble “Mad Max: Beyond Thunderdome.”

The objective of the TPP was to eliminate tariffs on ag trade. The agreement goes a long way getting there and in most instances does. Almost every ag commodity group has been pushing hard for this agreement because U.S. ag exports, under pressure from a strong dollar, would see some relief from the reduction of tariffs which would help balance off the strong dollar.

The U.S.D.A. said that the TPP will increase ag trade by $2.8 billion over the next decade. The TPP is the best shot that the Aug Sector has at a trade deal expanding exports, sorely needed given falling net farm income.

Cargill liked it as did other ag groups. Forty percent tariffs on U.S. poultry … gone. Thirty-five percent tariffs on U.S. soybeans … gone. Fifty-nine tariffs on U.S. machinery shipped for export … gone. The pork industry has as much in the game to get TPP approved as any other industry. ISU Economist, Dermot Hayes, called TPP the most important trade agreement ever for the pork industry. There is a lot of good stuff in the TPP blocking countries from export bans while setting the best set of international standards for trade yet seen. A Protectionist has been defined as a ‘Loser that has given up’. Trade policy will be the deal breaker for the ag sector and Donald. If he loses in Iowa that will be why. I do not think that Iowa Republicans are protectionists.

The NFU didn’t appear to refute the benefits in the TPP to the ag sector, but opposes it because the agreement doesn’t address currency manipulation. Trade agreements never do as it is not a platform where this can be addressed effectively. Markets set the value of currencies of these trading partners although fundamentals that drive the markets reflect monetary policy.

The 35-45-55 percent reductions in import tariffs in TPP gained for U.S. exporters balances off most weakness in currencies of these trading partners seen to the dollar. The reduction in tariffs in the TPP would be the equivalent of a weaker dollar which would help ag commodities.

What would be gained by rejecting TPP? I see only loss as then exporters have to endure both a strong dollar and foreign tariffs. TPP addressed flaws in NAFTA. The alternative to TPP is to withdraw into a domestic market and protectionism which has never ever benefited the ag sector. We are a lot better off with TPP than without it.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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