Governor Reynolds’ growing budget crisis is a direct result of the Trump administration’s war on our agricultural trading partners. Trump campaigned on a promise to renegotiate our trade agreements, not destroy them. He bragged that he would bring his art-of-the-deal persuasion to the trade negotiating table. He boasted that he would save American jobs and reverse trade imbalances.
Instead, in his first year in office, he has insulted our trading partners, frightened our allies and opened the door to our (China) competitors. He’s threatening to pull out of the North American Free Trade Agreement (NAFTA) which could destroy Iowa’s agricultural export business for years to come. He pulled out of the Trans-Pacific Partnership (TPP), which most farm leaders agree severely damaged America’s agricultural export trade potential.
Where is the Republican Party of free trade? Why are Reynolds and the rest of Iowa’s Republican delegation allowing Trump to wage war on Iowa farmers? It appears Reynolds only answer is to simply let agricultural trade crash and accept the inevitable budget cuts to state services and programs.
Over 50 percent of Iowa’s economy is indirectly dependent on sales of our agriculture products. When Iowa’s export demand falls, commodity prices drop and state revenues plunge as well. The continuing decline in Iowa revenues is directly related to our falling agricultural income.
Iowa State University economist Alejandro Plastina, who specializes in agricultural economics, said, “Iowa’s revenue shortfall was driven by agriculture and its ripple effect on other businesses such as seed, machinery dealers and local banks.”
It’s often said that Iowa feeds the world, but that requires our worldwide customers to buy our surplus corn, soybeans, beef and pork. Iowa farmers’ growing productivity results in huge commodity surpluses that drives down prices unless we can market these surpluses abroad.
Two of our best and largest trading partners, Mexico and Canada, are members of (NAFTA). These two countries buy 49 percent of Iowa exports. The Chamber of Commerce estimates that 8.2 percent of the Iowa workforce depends on trade with our NAFTA partners.
The Iowa farm economy is in a depression and the Trump administration’s only response is to alienate our best agricultural customers, Mexico and Canada.
Governor Reynolds’ Economic Development Director Debi Durham warned in her December fiscal budget presentation about the dangers of pulling out of NAFTA. She reported that “Iowa exports declined from $15.1 billion in 2014 to $13.2 billion in 2015 and to $12.1 billion in 2016.”
She predicted that Iowa’s 2017 exports would be flat at best. Durham said Iowa would be among the top 10 U.S. states “most negatively impacted” if the United States pulls out of the NAFTA.
One of the most puzzling questions is why Iowa Republicans are allowing this to happen. Traditionally, they have promoted free trade and understand that expanding export markets is essential to growing Iowa’s economy. Yet, they have remained silent as Trump pulled out of TPP and now threatens to pullout of NAFTA.
Are they so intimidated by Trump’s anti-trade base that they are afraid to challenge him? Or do they believe they have been wrong about free trade all these years? Iowa farmers deserve some answers.
by Rick Smith