The next trade war could be a food fight

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Published Jun 24, 2017

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Washington - In a time of warfare, a country doesn't want to suddenly

discover that it relies on far-off trading partners for the goods its people or

military need. It's far better for a country to be able to produce the basic

stuff of survival within its own borders. To ensure those domestic industries

survive, a country may need to take action against foreign competition.

It's the argument the Trump administration is considering

about steel. It has also been China's

argument about wheat for years. The Trump administration is preparing to

release, perhaps within days, what could be its biggest step on trade yet - the

results of an investigation that could impose limitations on imported steel and

aluminum on the grounds of protecting US national security.

But that prospect is sparking concern among some US industries,

which argue that other countries may turn to the same explanation to bar

American products from their markets. Agricultural products, one of America's

biggest exports, could be particularly vulnerable.

European officials have told US officials and business

groups that they may respond to restrictions on steel and aluminum with their

own tariffs, and that US

agriculture could be a target, according to people familiar with the exchange.

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In its public comments about the administration's

investigation, US Wheat Associates, an export promotion group for the wheat

industry, said it was "extremely concerned about the potential

ramifications of import protections based on national security arguments,"

adding "the results could be devastating."

"Wheat is probably the commodity most associated with

food security in the world. We're proud of that," said Ben Conner, the

group's director of policy. "We just don't want that to get turned around

on us."

Any investigation that leads to new tariffs on imports could

spark retaliatory duties or tariffs on US products, said a spokesperson for a

separate farm industry group, who spoke on condition of anonymity because of

the sensitivity of upcoming North American Free Trade Agreement negotiations.

"As we've seen historically, agricultural products tend to be on the front

line for retaliation."

Industries and trade experts say they are concerned that the

administration, by using a justification as broad as national security, could

set a precedent for other countries to follow suit.

The administration has turned to a little-used statute that

gives it broad purview to impose restrictions on any imports that it deems a

threat to national security. The Trump administration hasn't specified how it

defines national security, but statements from Commerce Secretary Wilbur Ross

and others suggest that their definition may go beyond defence equipment to

include broader security issues, like infrastructure and the industrial base.

The World Trade Organization, which typically polices

international trade actions, gives countries a lot of autonomy when it comes to

dealing with national security matters. Supporters say the Trump

administration's actions could offer relief for the domestic steel and aluminum

industries, which have struggled as a flood of overcapacity from China

has weighed on prices.

But others say that citing on national security as a reason

for limiting trade could prove to be a dangerous precedent. "You could

imagine extending this argument to almost anything, and I think that's one of

the difficulties with employing it at all," said Chad Bown, a senior

fellow at the Peterson Institute for International Economics. "Once you

open that Pandora's box, it's really an argument you can apply almost

limitlessly."

Other countries have tried to protect seemingly unrelated

industries on national security grounds, sometimes with laughable results. In

1975, Sweden

famously put restrictions on shoes, arguing that the drop-off in domestic

production was a threat to shodding its emergency defense services. The move

was ridiculed domestically, especially given Sweden's long history of remaining

neutral in conflicts, and the country revoked the measure two years later.

Far less humorously, China

has cited national security as justification for its cybersecurity law, which

requires companies to store their data within China's borders and individuals to

register on social media services with their real names.

Critics describe the law as a tool for China to

compromise the intellectual property of foreign countries, crack down on

dissidents and restrict freedom of speech. Under the law, companies as diverse

as banks and power providers may need to provide Beijing with their program source code and

other details of their intellectual property, which critics fear could be

passed to Chinese competitors.

When it comes to food, countries like China and India have cited security concerns

as a reason for protecting their domestic industries. India has been fighting at the WTO for years to

carve out exemptions for developing countries to stockpile food, something that

agricultural exporters like the United States

and Canada

firmly oppose.

Depending on the results of the Trump administration's

investigation, the US

agriculture sector could become a focus of retaliation because of its heavy

dependence on global markets. The United States exports roughly half

of all the soybeans and wheat it grows.

Foreign governments are also likely searching for the right

pressure points to persuade the Trump administration to alter their trade

policies, and they may conclude that the president's base of support among

voters in the Midwest makes agriculture a good

target, said Bown of Peterson.

Bown also points out that US

agriculture has served as a choke point in the past, including the other major

incident in history in which a US

president imposed restrictions on imported steel.

In 2003, the Bush administration opted to lift its

20-month-old tariffs on steel after the WTO ruled they were illegal and

European countries vowed to impose sanctions on up to $2.2 billion in US exports.

The Europeans' threats included restrictions on orange juice

and other citrus exports from Florida

- a key swing state that President George W. Bush was then looking to win in

the 2004 presidential election.

WASHINGTON POST 

 

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