by Sean Higgins
For almost three decades Republican and Democratic administrations alike pursued free trade deals, arguing that expanding access to foreign markets is always to the benefit of the overall U.S. economy. That bipartisan consensus was shattered with the arrival of the Trump administration.
President Trump believes those deals allowed the U.S.’ trading partners to hollow out domestic industry, pointing to persistent trade deficits as proof. Since taking office he has prevented the U.S. from joining the Trans-Pacific Partnership, forced Canada and Mexico to begin talks to renegotiate the 1993 North American Free Trade Agreement, instituted new tariffs on steel and aluminum imports and picked a trade fight with China over its technology policies.
He’s done it all with his trademark lack of subtly, tweeting in March, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win."
One of the key insiders in the fight is Agriculture Secretary Sonny Perdue, a Democrat-turned Republican and former governor of Georgia. One thing should be clear, Perdue says: Trade policy is being directed by the “chief economist for the United States — President Trump.”
Washington Examiner: Where does NAFTA stand? Is there going to be any deal this year?
Perdue: I think so. I’m hearing encouraging reports from the USTR [U.S. Trade Representative’s Office]. I’m hearing encouraging reports from our contacts in other countries. My impression is that we’re much closer and much more amicable with Mexico. Canada still just seems to be somewhat intransigent on some of their issues, but I think we will get a deal.
Washington Examiner: What are some of the issues with Canada that remain outstanding? Agriculture was one of them. Is it the poultry and dairy issues?
Perdue: Well, I think the open access for U.S. agriculture products, yes. In all fairness, I need to say that I’ve not been engaged in those direct negotiations. That is the responsibility of the USTR, and I’ve tried to stay out of his way. We communicate about that, but I’ve not had direct input into the conversations per se.
TRUMP AS 'CHIEF ECONOMIST'
Washington Examiner: A lot of economists argue that trade deficits are not a bad thing in and of themselves. Even Larry Kudlow, the president’s new economic adviser, made that argument in the not-too-distant past.
Washington Examiner: What is the administration’s view or economic argument for why trade deficits are a bad thing and must be significantly addressed?
Perdue: Well, I have read those same economist reports. Obviously, the chief economist for the United States — President Trump — doesn’t ascribe to those views. He feels very strongly that it is a transfer of wealth. Frankly, you can look at China’s ascension from joining the World Trade Organization, and it does track with the deficits to our country. I think what some economists say is it’s just a function of wealth and disposable income. We have the opportunity to buy products that other countries make more than they have the opportunity to buy ours.
So, I understand and read every economist that way. All I can tell you is that the president does not ascribe to that. This is not a newfound belief either. You can go back and look at some of the things he said or wrote years ago. And he’s had this philosophy for a long time, and, frankly, I think there has to be some concern when you see the imbalance between China feeding their economy and ours having that much consumption [of foreign products]. It’s an imbalance, and I think he’s committed to re-establish some sense of balance.
Washington Examiner: Trade Promotion Authority, the law that limits Congress to straight up or down votes on trade deals, runs out this summer. The administration has said it wants to extend the law, but there’s no guarantee that Congress will go along on that. If TPA expires, what does that mean for the NAFTA renegotiations?
Perdue: Well, hopefully we’ll have NAFTA done by then. But, there again, I don’t really think a lot of TPA was a tough vote last time. I think everyone in Congress understands how important trade is. And Trade Promotion Authority is critical to making deals. You can’t do these kinds of things by committee. It takes an executive branch to negotiate and put those things on the table. Obviously, Congress will want to have a say in how those are conducted, and that’s entirely appropriate, but I’m hopeful that the TPA will not be allowed to expire.
Washington Examiner: Is the president still ready and willing to pull out of NAFTA if a satisfactory deal cannot be reached?
Perdue: Well, he says that he is, and I have to take him at his word. Certainly, my hope and my concern is that we are able to get a modernized, renewed NAFTA 2.0 that benefits all of America. I accept that overall it has been beneficial, and I don’t think our constituents like to contemplate the withdrawal from that. The president always mentions withdrawing from NAFTA in order to get a better deal. So, he believes that it would be not a permanent situation, but a temporary situation, from a tough negotiating tactic perspective.
Washington Examiner: You mentioned last year that USDA was coming up with contingency plans for that eventuality should it happen. Obviously, you don’t want it to happen, but are those plans done, and can you give any indication of what the department would do?
Perdue: These things are ongoing. It has to do with looking for other markets, certainly. Both China, Canada, and Mexico are always in our top three [buyers of U.S. exports]. So, when you have challenges just with your top three customers, that puts a lot of pressure on our sales force and our negotiating team to go around the world and find a place for these products.
You know the facts as well as I do: Our farmers rely on exports for about 20 percent of their farm dollar. So, it’s hard to cut your business by 20 percent and continue to thrive.
WHITE HOUSE AUTHORITY
Washington Examiner: Can the administration pull out of NAFTA on its own? Some trade lawyers have pointed out that enabling legislation passed by Congress regarding NAFTA would still be in place even after the administration pulled out. Has the administration looked into the legal aspects of this, and what would be the result should the president do this?
Perdue: My understanding from USTR Ambassador [Robert] Lighthizer, who is an attorney, is that [the president] absolutely has the authority to withdraw from NAFTA unilaterally. Others may have other opinions. I think the president’s counsel and USTR counsel feel very clearly and very confidently that he can withdraw on his own.
Washington Examiner: Getting to the China issue. There’s news this morning that the Chinese economic minister was saying that President Xi Jinping’s comments the other day — which were interpreted, as a sort of step-down in the trade conflict — weren’t necessarily that. Where do you see things standing right now with China and the tariff issue there?
Perdue: I’m not surprised that they tried to roll back President Xi’s comments over the weekend. I thought they were very helpful, and I think probably demonstrated his personal views on that, certainly from a face-saving perspective. I was not surprised by their trying to modify those comments to some degree today. So, I don’t think that’s any big issue from that perspective. I think China understands that their economy would be severely hurt if we got this elevated into a full-bore trade dispute.
To their credit, I think they’re trying to do and say the things that would send a signal that, “Let’s talk.” Obviously, the president’s goal all along, I think, has been one of negotiation, and the frustrating part has been that China has wanted to talk all along, but you never see it reach fulfillment. They will commit to things, and there’s always some kind of hitch to it so that it never fully gets implemented.
NO CHOICE BUT TARIFFS
Washington Examiner: Comments by the president and others in the administration indicate they seem to believe that China almost forced the U.S. into calling for the tariffs because, as you say, they don’t necessarily follow through with what they promise. Is that a fair characterization of the administration’s position, that China hasn’t given it much choice but to propose tariffs?
Perdue: Well, that’s certainly the premise of Ambassador Lighthizer’s [Section] 301 investigation. He went back several years and showed what China had agreed to and what they’d actually done, which was much less than what they’d agreed to. So, that was the frustration here that led Ambassador Lighthizer and the president to say, “We don’t know. We’ve got to get their attention and let them know that it’s not gonna be trade as usual.”
So, yes, I think that was certainly part of the calculus here: “You’ve done these things ever since you’ve been in WTO. You haven’t played by the rules.” Every time we tried to call their hand on it, they would smile and say, “We’ll do better,” but never did.
Washington Examiner: Well, that being the case, then how do you come up with a concrete deal that you can believe that they would honor?
Perdue: I think they realize they’re dealing with a different player in President Trump. Again, he sometimes has to demonstrate his seriousness about these issues in a forceful way that sometimes even I don’t understand. But I think, again, when you’re dealing with an actor like China, who’s gone along for years and gotten away with things that they shouldn’t have gotten away with, I think they need to understand this time a deal is a deal. And on the enforcement part, which is part of Ambassador Lighthizer’s responsibility, I think you’ll see a much more aggressive enforcement of any deal that’s made.
FARMERS AS PATRIOTS
Washington Examiner: The other day before a Cabinet meeting, President Trump said, “I tell you, our farmers are great patriots — these are great patriots. They understand that they’re doing this for the country, and we’ll make it up to them in the end. They’re going to be much stronger than they are right now.” This was in regards to a question about China and tariffs. What exactly did he mean by “they’re doing this for the country”? He seems to be implying that farmers are taking it on the chin for the rest of us.
Perdue: Well, if you look at the retaliation measures and tariffs that China has put forth, I think you would agree with that. We know that the concern in the ag community overall is agriculture has always been the tip of the spear in retaliatory measures in trade disputes. And the reason for that is our producers are productive, and they have to depend on exports in part of their whole production protocol.
China is politically very wise to that fact. They thought they can get to the president by attacking his base in rural farm areas. They know exactly the political landscape. They go to Wisconsin and a little county that has ginseng, and so they put ginseng on the list. They put cherries on the list. And they put, again, citrus on the list.
These are not random types of picks here. They could have done cutback on soybeans, which is widespread. But they are very smart and wily in their actions here. The president understands that they wanted to pressure agriculture so that agriculture would pressure him to back down.
Washington Examiner: But he didn’t mean to imply that the farmers were sort of on board with this plan, that they were willingly taking it on the chin? Or did he?
Perdue: I think the president may have used the word that I used last week on tour [through Michigan, Ohio, and Kentucky] — that farmers are patriots first. They are Americans first. They’re red-blooded patriots in the fact that they want the United States to succeed. But they are also anxious in the fact that while they understand that while they are the tip of the spear, they don’t want their livelihoods or their futures threatened alone. They’re willing to sacrifice together with the country, but they want the acknowledgment that they are the weapons used in the war.
And that’s what I think the president meant. Farmers, by and large, if you ask them, “Do you think China’s been playing fair? Do you think we should take action?” most of them would say, “Yes.” They are not so self-serving they’d say, “Oh, no, don’t do anything to China because it would hurt me.” I think that’s what the president was trying to say.
TRADE WAR PLANS
Washington Examiner: Does the president have a plan in place to counter China’s tariffs should it follow through? I mean your department has said it’s working on mitigation efforts. Is that done, and can you give any sense of what it would involve?
Perdue: I could, but I won’t. Obviously, we have some authorities that you’re probably aware of at USDA. The president, frankly, has authorized me to use those to the extent that we have those. And if that’s not enough, then he’s willing to go and say we need more. We don’t know exactly. We’re trying not to disclose really what specific measures we would take, but I think when the president tells the ag community in the United States that we’d never let them suffer unilaterally, then I think that they can take that to the bank.
Washington Examiner: Will you go to Congress and ask for something along these lines?
Perdue: We did go to Congress, and they were helpful in giving us some flexibility on some of those tools already. We made them aware as early as last fall about the potential for trade disputes when early on was first mentioned and indicated to them that there were tools that we needed [to be] flexible for the battle, and they put that in the last Bipartisan Budget Act.
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