The following article by Ana Swanson and Jim Tankersley was posted on the New York Times website January 7, 2018:
WASHINGTON — President Trump will head to Tennessee on Monday to appeal to farmers, a key demographic that helped elect him, as he promotes his tax law and previews a new White House strategy to help rural America.
But back in Washington, some of the economic policies his administration is pursuing are at odds with what many in the farm industry say is needed, from a potentially drastic shift in trade policies that have long supported agriculture to some little-noticed tax increases in the $1.5 trillion tax law.
American farmers are facing some of the most challenging times in a generation. Global prices for their products — including corn, wheat and other commodities — are mired in a multiyear slump, and the rural economy has remained sluggish since the recession. Net farm income has been roughly halved in the last four years, the largest four-year decrease since the Great Depression, the American Farm Bureau Federation says.
Many farmers and farm states supported the president, whose campaign made overtures to parts of America that had been left behind economically and felt overlooked in Washington. The farm community has cheered the president’s deregulatory agenda, especially a move to rescind tighter regulations on water pollution. Mr. Trump’s appearance at the American Farm Bureau Federation’s annual convention in Nashville on Monday will mark the first time in 25 years a president has attended.
In his speech to the group, the president is likely to touch on the successful passage of the tax bill and his administration’s initiatives to combat opioid addiction, White House officials said in a briefing on Friday. The White House is also expected to release a report Monday on reviving rural prosperity, which will outline goals for helping rural areas, including expanding high-speed internet, health services, work-force training and the use of biotechnology. The report stems from an executive order Mr. Trump signed in April.
“What we often see communicated about rural America is that there are these isolated pockets of despair that are beyond hope or recovery,” Ray Starling, the special assistant to the president for agriculture, agricultural trade and food assistance on the National Economic Council, said in a briefing Friday. The report makes clear that “that’s not what we believe.”
Yet some of the president’s economic policies could actually harm the farm industry. New analyses of the tax law by economists at the Department of Agriculture suggest it could actually lower farm output in the years to come and effectively raise taxes on the lowest-earning farm households, while delivering large gains for the richest farmers.
And the administration’s trade policies continue to be a concern for farmers, who benefit from access to other markets, including by exporting their products. Mr. Trump continues to threaten to withdraw from trade pacts if other countries do not grant the United States a better deal, a position that has put him at odds with much of the farm industry.
“Trade has become an increasingly important and substantial part of the ag economy. So anything that causes a ripple in that can have not just little effects but significant effects,” said Dale Moore, the executive director for public policy at the Farm Bureau.
Indeed, part of the White House report Monday is expected to discuss global markets’ importance to rural America.
Agriculture has been the biggest beneficiary of pacts like the North American Free Trade Agreement, which have allowed the United States to export grains and meat. In April, when the president came to the brink of withdrawing the United States from the pact, Agriculture Secretary Sonny Perdue helped to dissuade him by showing him a map of the part of the country that would be hardest hit — farming states that also helped to elect Mr. Trump.
“It creates a lot of anxiety across all of agriculture, particularly the U.S. pulling out of Nafta,” said Kevin Kester, a rancher in California and the president-elect of the National Cattlemen’s Beef Association.
Farmers and ranchers like Mr. Kester worry that they are losing ground to foreign competitors, as major markets like Japan, Europe and Mexico push ahead with their own trade pacts. Although Mr. Trump has talked about forging new bilateral deals, the United States does not appear to be close to forming any.
American beef exporters are now at a big disadvantage in Japan, Mr. Kester said, after Mr. Trump withdrew from the Trans-Pacific Partnership, a deal that would have included Japan, and Japan signed a free-trade agreement that cut tariffs for Australian beef. “We’re continuing to talk to the Trump administration and urge them to get on the horse and get going with talks with Japan in particular,” Mr. Kester said.
Nations like Canada are also beginning to export goods that have long been a staple of United States exports, such as lobster.
Farmers have lobbied the president in recent months to preserve free trade agreements with Canada, Mexico and South Korea. On Thursday, a group of six Republican senators visited the White House to lobby the president on trade.
Pat Roberts, the senator from Kansas who led the delegation, said the president had “really listened to our concerns” and “understands the difficulty farm country is going through.”
“I delivered the message that farmers and ranchers need to grow export markets and maintain our status as a reliable supplier, more especially with Canada and Mexico in Nafta renegotiations,” Mr. Roberts said.
Trade analysts said these visits from farm state representatives and the president’s trip to the Farm Bureau meeting were most likely the product of Nafta supporters inside the White House, who are trying to influence the president’s views on trade. Yet there is no sign yet that these meetings have altered the president’s long-held skepticism of Nafta.
“The reports we’re hearing is the message is being delivered,” said Michael Dykes, the president of the International Dairy Foods Association, an industry lobbying group. However, he said, “we haven’t seen anything visible to see that they’re taking it on and changing course.”
Without existing free trade agreements, many agricultural products would face prohibitively high tariffs as they cross borders. Food is still one of the most protected products under global rules. Without free trade agreements, Mexico could raise its tariffs to up to 75 percent on American chicken and Idaho potatoes. South Korea could raise its tariffs to 40 percent on beef and 36 percent on cheese.
“I believe the president is genuine when he says he wants to take care of the folks in rural America. I think he’s also hearing from rural America that, hey, Nafta is critical to agriculture,” Mr. Dykes said. “Nafta is woven into the fabric of our business.”
Mr. Trump has positioned his tax overhaul, which lowers individual and corporate rates, as an economic salve for rural America, including farmers. The new law won support from farmers, but many warn that its benefits could be blunted by a protectionist approach to trade.
Stanley H. Ryan, the chief executive of Darigold, said the tax bill was “helpful and supportive” for businesses like his, a century-old dairy producer in Washington State. However, “to get the full benefits of it, you’ve got to have market access,” he said.
The Farm Bureau endorsed both the House and Senate versions of the bill, and Mr. Trump signed a compromise measure into law in December. The final version included several provisions the bureau had championed, such as the ability for businesses to immediately deduct the cost of new investments. It also narrowed the number of households affected by the estate tax, a move the bureau praised even though it had pushed to eliminate the tax entirely.
But research presented on Friday in Philadelphia, at America’s annual mega-gathering of economists, suggests the bill contains downsides for the industry in general and particularly for lower-income farmers.
A model of the law’s effects on farm households by Siraj G. Bawa and James M. Williamson, of the Agriculture Department’s Economic Research Service, projects that 70 to 80 percent of the law’s benefits will flow to the top 1 percent of farm households by income.
The law actually shrinks tax refunds for the lowest-earning 20 percent of farm households, Mr. Bawa said in a session hosted by the Agriculture and Applied Economics Association. The reason stems from a combination of changes in the bill, including its elimination of a tax break for domestic production.
“The lowest quintile is actually getting a tax raise under this,” Mr. Bawa said.
A second paper, from Jayson Beckman and Munisamy Gopinath of the Agriculture Department and Marinos Tsigas of the United States International Trade Commission, projects that the law will reduce American farm production nearly 1 percent for primary agriculture, even though it reduces tax rates on farmers.
The reason, in part, is that the tax bill’s favorable treatment of other sectors, such as construction and factories, could draw investment away from agriculture.
The authors suggest those reductions could be offset — if America could secure better access to foreign consumers through trade negotiations.
Correction: January 9, 2018
An earlier version of this article misstated the size of the tariffs South Korea could raise on United States beef. It is 40 percent, not 27 percent.
View the post here.