World Grain - September 2024 - 6

FROM THE EDITOR
Instability taking
toll on free trade
he tug of war between free trade
and protectionism in a world
that's becoming increasingly
geopolitically unstable is worth watching
in the coming months, with federal elections
being held in dozens of countries,
including the United States.
T
The US election is noteworthy as it pits
former president Donald Trump, who
makes no secret about favoring large tariffs
on imported goods, particularly when
they're produced by countries not allied
with the United States, against current
vice president Kamala Harris, who has
been part of the Biden administration that
also has shown protectionist tendencies,
particularly regarding China.
It was during Trump's first term (201620)
that the United States became embroiled
in a nasty trade war with China.
Among the items on the high-tariff list
were US soybeans. After many years of
relying on the United States as its primary
soybean supplier, China began importing
a larger share from Brazil, a trend that
has continued long after Trump lost his
re-election bid and the trade war cooled.
If re-elected, Trump has promised a 60%
tariff on Chinese imports, which would
almost certainly lead to retaliatory tariffs
on US agricultural commodities.
The big question is whether Harris
would continue with the Biden administration's
protectionist measures, if elected.
If so, the election will be less consequential
in terms of its impact on trade.
The election of Javier Milei, a populist
and nationalist cut from the same
cloth as Trump, as president of Argentina
last November is impacting the
MERCOSUR trade bloc comprised of
several South American countries, including
agricultural powerhouses Brazil
and Argentina.
Founded in 1991, MERCOSUR has
helped its members, which also include
Paraguay and Uruguay, pull in one direc6
tion
regarding trade policy. But Milei has
threatened to pull Argentina out of the alliance,
a stance reinforced by his decision
to skip the MERCOSUR Summit in July.
Although reviled by globalists and big
government advocates, Milei is popular
with Argentine farmers for vowing to remove
regulations that they say harm their
ability to produce and export grain.
One could argue that MERCOSUR
has run its course. Three decades ago,
countries in the region were starting to
embrace free-market ideas, and the alliance
initially helped send capital surging
across borders. But it has become less
effective due to political volatility and
loopholes in the group's common external
tariff that members have exploited.
In addition to protectionism, global
agricultural trade has been under tremendous
strain the past four years because of
logistical problems related to the COVID
pandemic, a war between major grain
exporters Russia and Ukraine, and soaring
inflation. To try to tame food inflation,
some countries have halted or limited
grain exports, including India, which
continues to ban wheat and rice exports.
Holding on more tightly to what is yours
is a natural tendency in times of uncertainty
and instability.
Given the tension between the United
States and China, and the wars being
fought in Eastern Europe and the Middle
East, a return to a
golden era of agricultural
free trade anytime
soon is unlikely. That's
unfortunate, because
protectionist policies
harm farmers and put
countries that depend on agricultural imports
at higher risk for food insecurity.
The world is better off when products are
flowing freely between countries.
Arvin Donley
Editor
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World Grain - September 2024

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