Rounds Visits Vermillion

Sen. Mike Rounds said Tuesday that South Dakota ag producers are longing for a fair trade policy and are hoping that settlements with China and other countries will soon be reached.

U.S. Sen. Mike Rounds said Tuesday that South Dakota farmers appear to be willing to back President Trump’s trade battle with China, even if it means accepting government aid to make up for falling prices for soybeans and other crops.

“There has been a consistency in the responses that we’ve received that they’d much rather have a fair trade policy rather than a new government program,” Rounds told the Vermillion Plain Talk after speaking at a Tuesday morning session  of the 2019 Girls State program on the University of South Dakota campus in Vermillion. “The proposal that the administration has put out is about $16 billion to be divided out based on a county-wide basis and based on the number of acres planted in 2019.”

He said agriculture producers have expressed concerns about the rules that have been set forth for distributing the financial aid.

“Most producers would much prefer to have a fair trade policy and to have the negotiations complete,” Rounds said. “We agree with them as we’ve shared with them, the ag community has been on the tip of the spear in this trade war – that’s what it is, a trade war – and I think what the administration is trying to say is that they know that our ag economy has been impacted significantly by this trade war.

“Soybeans, just as an example, are down 20 percent from where they were,” he said. “In South Dakota, we produce close to about 250 million bushels of soybeans a year and that equates to more than a half of a billion dollars in income coming in that we didn’t get this last time around.”

South Dakota producers, in turn, are feeling the effects of those negative price trends, Rounds said.

“I know the administration wants to do something, but clearly the ag community would much rather just have the trade policies in place,” he said.

In a recent column, Rounds wrote, “For the past two years, President Trump and members of his administration have been working on a trade deal with China that will level the playing field and stop their trade ‘cheating’ once and for all. China has been an unfair trading partner for decades. When President Trump took office, the average tariff we imposed on China was approximately 4 percent. Conversely, China’s tariffs on U.S. goods were about 10 percent. While this alone is concerning, they are also stealing U.S. intellectual property, committing cyber espionage and engaging in unfair trade practices in order to gain advantages for Chinese companies. According to the U.S. Trade Representative, ‘Chinese theft of American IP currently costs between $225 billion and $600 billion annually.’ This must be stopped.

“While we appeared to be close to a deal just a few weeks ago, China backtracked at the last minute and tried to renegotiate previously-agreed upon terms. In response, the U.S. raised tariffs on some Chinese imports and China retaliated with additional tariffs on U.S. goods that will take effect June 1. Nobody wins in this situation – raising tariffs on China will ultimately hurt the economies of both countries. More importantly, our farmers, ranchers and manufacturers are already paying a price.”

As the impasse continues, concerns are growing louder. Senate Finance Committee Chairman Chuck Grassley of Iowa urged Trump to press forward on his goal of getting China to change its trade practices but warned that more tariffs will hurt both countries, according to a May 13 report by Politico.

"This intensifies the urgency of reaching an agreement as soon as possible to end this trade war," Grassley said in a lengthy statement on May 13. "Americans understand the need to hold China accountable, but they also need to know that the administration understands the economic pain they would feel in a prolonged trade war."

Rounds indicated that he, too, is urging that the U.S. must work to quickly to reach a trade agreement with China.

“We continue, each time that we meet with the President, to push that sooner would be better than later and that we have a lot of producers out here that are hanging on by a thread,” Rounds told the Plain Talk Tuesday. “We have five years in a row of net farm income decreases. Net farm (income) since 2013 is down 50 percent in the Upper Midwest. A lot of producers had assets, they had cash, but a lot of that has dried up over the last five years in part because of trade policies and the sooner we get this trade war completed and behind us, the better off we are.”

Grassley’s and Round’s assessment of the trade war’s effects matches what most mainstream economists believe to be the case but stands in stark contrast to Trump's own views, Politco reported May 13, which are centered on the idea that duties mean China will pay more money directly into the U.S. Treasury.

“Their [sic] is no reason for the U.S. Consumer to pay the Tariffs,” Trump wrote on Twitter May 13.

In reality, the tariffs are taxes paid by importers, such as U.S. companies, which bring in products from China. Those costs are typically passed on to consumers in the form of higher prices, which can drive down demand for Chinese imports, according to Politico.

Goldman Sachs wrote in a new research note mid-May that the cost of penalties imposed so far under the Trump administration has fallen "entirely" on U.S. businesses and households. It forecast that a further increase in trade tensions could lead to a 0.4 percent hit to GDP.

The most recent tit-for-tat between the world's two largest economies dashed hopes that a resolution to the U.S.-China dispute was within reach and jolted commodity markets from soybeans to pork to cotton, Politico reported a week ago.

The escalation also presaged another setback for U.S. farmers, whose products last year were hit with tariffs by major trading partners like Mexico, Canada and the European Union, in addition to the levies imposed by Beijing. The fallout on U.S. farms and ranches deepened what had already been a multi-year downturn in commodity prices that has helped fuel a sharp decline in net farm income since 2013.

Rounds and other proponents of the administration's trade-aid efforts contend agricultural producers shouldn’t have to bear the burden of a White House quest to balance U.S. trade relationships, including an attempt to crack down on China‘s practice of stealing intellectual property and forcing foreign companies to hand over valuable technology in order to access the Chinese market.

But critics are likely to argue that Trump is trying to placate farmers and ranchers — a key base of conservative political support — ahead of the 2020 election, according to Politico, by throwing more money at a problem of the administration’s own making.

“When I talk to ag producers, most of them say, ‘look, we know that we’ve got to have better trade policies than we’ve had in the past’ and most of them don’t fault the President for trying to fix them,” Rounds said. “They understand that intellectual properties (theft) have been a problem and they get that, but they’re hoping that the President has a plan in place that will be successful and it will be in time before they get to the end of their rope.”

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