U.S. Withdrawal from TPP May Cost State's Wheat Farmers

President Donald Trump’s order withdrawing the United States from the Trans-Pacific Partnership (TPP) was issued with the promise of saving American jobs, but it may also mean fewer opportunities for Washington farmers.

The agricultural industry supported the TPP. Washington wheat growers hoped it would help them expand their markets in countries like Vietnam and Malaysia where demand for grain is growing.

Wheat is a $600 million industry in Washington, which ranks fifth in the country for wheat production. Last year, wheat growers harvested more than 157,290 bushels from 2.2 million acres of farmland. Almost all that wheat — 85 to 90 percent of annual production — is sold to markets in Asia and the Pacific, competing primarily against wheat growers in Russia and Ukraine.

The TPP could have made that competition easier for Washington farmers by lowering tariffs, making Washington products more competitive, said Randy Fortenbery, a professor of agricultural economics at Washington State University. With the pact’s failure, there are fewer safeguards to stop tariffs from climbing, he said.

“There would have been significantly lower tariffs for Japanese imports, including wheat, and could have lowered the playing field and given exporters like the U.S., Canada, and Australia, the same treatment as buying countries in Asia,” Fortenbery said. “The TPP’s failure would not necessarily mean a raise in tariffs, but they would be allowed to.”

Drafted in 2015, the TPP was designed to strengthen commercial ties between its 12 member nations. In theory, the pact would increase trade, create new economics regulations and lower tariffs.

On Jan. 23, President Trump signed an executive order directing the United States full withdrawal from the TPP, which he called “a horrible deal” throughout his 2016 presidential campaign.

President Barack Obama spent much of his presidency negotiating the TPP, but the deal was never approved by Congress and opponents worried it could ship more American jobs overseas.

Last year, Washington’s total grain production grew from 108,460 bushels in 2014 to 157,290 bushels in 2016. The increase has resulted in falling commodity prices and farm gate values –or the total sale of a crop and its net value when it leaves the farm, respectively.

According to Washington Grain Commission CEO Glen Squires, Asian markets have become more important than ever to Washington’s wheat farmers as they struggle to meet demand and rising production costs.

“Say a bushel of wheat goes for $4 or less,” Squires said. “A loaf of bread can go for $4, $5, or even $6 at the store. Next time you go to the grocery store, take a look at the bread aisle. If you bought 73 loaves of bread, that would cost you a pretty penny, but the farmer’s getting just $4 for that.”

According to a 2016 report by the nonpartisan Congressional Research Service, the TPP would have eliminated Vietnamese tariffs of up to 31 percent within four years. U.S. tariffs as high as 6.8 percent would be eliminated within 10 years. Tariffs as high as 7 percent in Malaysia would be eliminated upon the pact’s ratification.

For Fortenbery, America’s withdrawal from the pact may create a vacuum in the global agricultural industry that could prove challenging to fill.

“Any trade issues with the TPP would have a negative impact on soy beans in Washington,” Fortenbery said. “China has always been in the agricultural market, but the question now is, do they take more aggressive stance? Will they seek trade relations with other traders like Canada or South Korea?”

The TPP’s original member nations — Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile, Peru, and the U.S. — make up nearly 40 percent of global trade. Japan was the only nation to have ratified the pact prior to the U.S. withdrawal from negotiations.

At least six nations that accounted for 85 percent of the group’s economic output would have to ratify the deal by February 2018 for it to take effect. The U.S. withdrawal from the pact renders the deal dead in its current form.

Hector Castro, director of communications for the Washington State Department of Agriculture, expressed concern that without any clear plans to renegotiate the TPP, the Trump administration’s opaque stance on trade policies could hurt more than help the U.S. partnerships overseas.

“It takes work to maintain the partnerships and the relationships that we have with our overseas customers and sometimes when something happens in the market to make them go elsewhere, it can take even more work to try and win them back,” Castro said. “In all respects, we’re in a wait-and-see (mode), which can be an uncomfortable position when you’re dealing with international markets.”

(This story is part of a series of news reports from the Washington State Legislature provided through a reporting internship sponsored by the Washington Newspaper Publishers Association Foundation. Contact reporter Tim Gruver at timgruver92@gmail.com).