Vaden: U.S. locked into ag trade deficit by static policies
By Mary Hightower
U of Arkansas System Division of Agriculture
June 21, 2024
Fast facts:
- US has record agricultural trade deficit in 2024
- Vaden: Current policy may seek to benefit manufacturing
- Expects deficit to linger unless policies change
(834 words)
(Newsrooms: with art of Vaden)
RENO, Nevada — The rising cost of labor, the higher value of the dollar, competition from Brazil and the lack of new trade agreements are cementing the United States into a trade deficit for agricultural products, said Stephen Vaden, a judge on the United States Court of International Trade.
Vaden delivered the conference keynote for the National Agricultural Law Center’s Western Agricultural and Environmental Law Conference. The event was held at the University of Nevada, Reno, on June 13-14.
“Just a couple of weeks ago the Department of Agriculture came out with a new estimate expecting that the trade deficit for this calendar year 2024 was going to be $32 billion,” Vaden said. “That is a record for all time.
“We are going to import $32 billion for all of our agricultural goods,” he said. “That is an increase of $1.5 billion from what the United States Department of Agriculture has said it would be just a few months ago.”
Vaden said this is a reversal from what the U.S. has known from the 1960s.
“If you go back to the 60s, it was the exact opposite from the early 60s to just a couple of years ago,” he said. What Vaden calls the “structural trade deficit” will remain intact unless the U.S. makes some policy changes.
“What I see in our trade policy is stasis. We will not negotiate any new trade agreements
with anyone that will result in the reduction of tariffs,” Vaden said. “We will not
be opening any more markets to agricultural goods. That is not good news for producers.
”Without new customers, prices for American goods will eventually decline, he said.
“If you are a producer of a particular good — it doesn’t have to be agricultural — and every year you are producing more and more of that good but you have no increase in the number of people who are able and willing to buy that good, what is going to happen to the price?” Vaden said. “It’s going to decline. That’s just simple economics.”
Why the stasis?
With a caveat that he was not speaking on behalf of either side, Vaden said what the current administration might say is that while “agriculture benefits from greater trade access, other parts of the economy, most notably the manufacturers, seem to have not.”
“They have lost a lot of manufacturing jobs to places where it is a lot cheaper — Mexico, parts of China, parts of southeast Asia, for example,” Vaden said. “Because our trade policy has not been good for large slices of the American economy — though it may have been good for agriculture — we need to have a change to see if we can rebuild our manufacturing base.”
And while the U.S. may not be willing to negotiate any new trade agreements that would reduce tariffs, other countries don’t have that policy.
“While we are standing still, Brazil is in the fast lane, making it easier for people to purchase their agricultural products,” Vaden said, adding the gap in the cost of production between the U.S. and Brazil has never been bigger. “It costs, on average, 22 percent less to produce an acre of soybeans in Brazil.
“They can sell it cheaper and still make a healthy profit,” he said.
Other issues contributing to the trade deficit is an increase in the cost of production, which includes what Vaden called “incredible and substantial” inflation, costs related to increased environmental regulations, and the rising cost of farm labor.
The last named “is particularly an issue out west, where our specialty crop growers are located,” he said.
Vaden cited the adverse effect wage rates for temporary farm workers with H2-A visas set by the Department of Labor. California has the highest rate of $19.75 per hour. However, the same workers in British Columbia, Canada, would be paid $12.56 an hour in U.S. dollars. In Mexico, the amount would be on average $1.50 an hour.
“It would be little wonder then, based on the statistics that you would find, that we are importing more and more specialty crops from overseas, particularly Mexico,” he said. “Since specialty crops are some of our most high-value per unit of agricultural production, that has an oversized effect on our trade deficit and is helping to throw us into deficit
“America, beginning in the specialty crop area, is becoming uncompetitive,” Vaden said. “How long can certain specialty crop producers, especially those who rely on imported labor, can continue to be in business?”
America’s strong dollar also plays a role in the agricultural trade deficit.
“America sells agricultural commodities overseas, it wants to sell it in dollars” and that means it costs more for buyers whose currency might be weaker against the dollar.
“You compound all of these four things: No new customers because no new trade deals, Brazil, regulations/labor costs and the currency issue — the dollar being very strong right now — it just paints a decidedly negative outlook for American agriculture, when it comes to trade,” he said.
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About the Division of Agriculture
The University of Arkansas System Division of Agriculture’s mission is to strengthen agriculture, communities, and families by connecting trusted research to the adoption of best practices. Through the Agricultural Experiment Station and the Cooperative Extension Service, the Division of Agriculture conducts research and extension work within the nation’s historic land grant education system.
The Division of Agriculture is one of 20 entities within the University of Arkansas System. It has offices in all 75 counties in Arkansas and faculty on five system campuses.
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Media contact: Mary Hightower
mhightower@uada.edu