New trade deal creates uncertainty for farmers

Lack of water availability for our state’s farmers due to the drought is creating unprecedented challenges for winegrowers and all growers across the state. The recently finalized trade pact, the Trans Pacific Partnership (TPP) will make the future of farming in our state even more uncertain.
California winegrowers face risks inherent in farming as we strive to produce healthy crops and desirable wines. In some years we may have our blossoms knocked off by a late frost, hail or heavy rain. Fungal diseases are an ever-present but usually manageable threat. More recently, global climate change has played an increasingly large role. In this part of Northern California, many growers harvested only 50 percent of a normal crop due to springtime climate irregularities and the ongoing effects of the drought.
One might think that the challenges end there. However, international trade presents problems on several orders of magnitude greater for farmers in our state. This is especially true for value-added items. My own firm exports very little and only to very selected markets, and it’s no wonder.
What we have found is that our wines cost the consumer in Japan or the European Union (EU) about two and a half times what they would cost here in the U.S. This is occurring at a time when wines from the EU are marked up comparatively less when they enter the U.S. It simply makes no sense.
The phenomenon is not confined to just wine. One might think that California, with its abundant and, hopefully sustainably managed forests, would be an exporter of finished lumber. Instead we export raw logs to Asia. In effect, along with those logs we are exporting profits away from our domestic companies and jobs for our communities.
Going forward, we have got to find a better way to overcome the various barriers in trade we face as we enter new and expanding trade deals.
These trade barriers come primarily in the form of value-added taxes (VATs) and currency manipulation, which together place American products at a tremendous disadvantage.  Currency manipulation has become our trading competitors’ favorite gimmick for skirting hard-fought trade deals. Periodic currency revaluation ensures that the playing field is never fair.
A 50 percent currency devaluation on the part of a trade competitor can double the price of a U.S. product in the Japanese market literally overnight.
The United States is set to enter the Trans-Pacific Partnership, a massive trade pact that includes the U.S. and 11 other Pacific Rim nations. The U.S. has been entering into trade agreements for decades, and one thing has held constant over the last 40 years: Our trade deficit has grown in each of those 40 years.
In fact, the U.S. trade deficit sits at $505 billion. This deficit has not only caused the loss of well paying American jobs, but has also harmed our domestic economy by an estimated 2.5 to 5.5 percent growth every year for the last decade. Without that drain on the economy, we could have had economic growth this nation hasn’t witnessed for decades.
In August, Vietnam – one of the countries participating in TPP – devalued its currency in response to a major devaluation by China earlier this summer. Singapore and Malaysia have also manipulated their currencies by increasing reserves by an unprecedented amount. There’s little or nothing stopping others in the agreement from manipulating their currencies as well.
So here we are ready to sign yet another trade deal that demonstrates once again that we have not learned from past mistakes.
The current TPP trade deal lacks enforceable language against currency manipulation, and there has been an unwillingness of our government to include enforceable language along those lines.
If it’s going to be worthy of the reality that American business faces, the TPP agreement must include a chapter on currency manipulation that establishes enforceable rules and procedures to address currency manipulation.
Year after year, deal after deal, it appears that our team is playing with two or three cards, and our opponents are playing with something resembling a full deck. We show up in these negotiations hoping for goodwill and prosperity for both sides and instead experience trade deficits and lost American jobs.
If I ran my wine business the way the U.S. runs our trade agreements, I would have been bankrupt years ago.
George Davis is a Healdsburg wine grower and is vice president of California Farmers Union, a member of a trade advisory committee of USDA.