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NEBRASKANS SUPPORT TRADE BUT TRUST IN MEDIA AND WASHINGTON IS LOW

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NEBRASKANS SUPPORT TRADE BUT TRUST IN MEDIA AND WASHINGTON IS LOW

A new survey of Nebraskans finds that citizens appreciate trade’s benefits, especially for farmers and ranchers, but want more reliable information about trade policy.

Anxious but confident: the more international trade the better

Nebraskans surveyed are anxious about the economy but confident with respect to the importance of trade to their state’s agricultural production complex.

Released last month by the Carnegie Endowment for International Peace and the University of Nebraska-Lincoln (UNL), the new report, “U.S. Foreign Policy for the Middle Class: Perspectives from Nebraska,” assesses state views about how U.S. foreign policy interacts with the economic wellbeing of the middle class in the nation’s heartland. The research team interviewed over 130 Nebraskans in six communities across the state in the summer of 2019 (before the economy was further affected by the coronavirus pandemic) to gauge their perceptions.

Whether respondents hailed from urban Omaha or rural Scottsbluff, and whether they worked directly in agriculture or in health care, local government or education, those interviewed were remarkably consistent and clear on the subject of trade policy and the state’s agriculture sector: the more international trade, the better.

Focus Group Cities

The big picture is not the only picture in the Nebraska economy

Macro-level statistics obscure the importance of Nebraska’s agriculture sector. The Bureau of Labor Statistics reports that manufacturing contributes more than twice as much as agriculture to Nebraska’s GDP (10.9 percent versus 4.9 percent, respectively). But within manufacturing, “food and kindred products” is the top category. The broader agricultural production complex includes processing but also transportation, warehousing, agriculture-related research, and other professional services such as IT, legal, insurance, and financial.

Thus, while Nebraska has a diversified economy and workforce, one in four jobs is directly or indirectly tied to the state’s agricultural production complex, according to UNL researchers. Some interviewees pointed to main street businesses like car dealerships as a barometer for agriculture, saying that farmers are more likely to purchase new cars or trucks when they have profitable years.

As the report notes, “Even if they do not hold one of those ag-related jobs, most Nebraskans likely benefit in some way from the revenues the sector generates. That may explain why so many of those interviewed, whether directly involved with agriculture or not, said they supported any trade policies that worked best for farmers, ranchers, and others associated with the agricultural production complex.”

Trade a most important foreign policy

Exports dominate the discourse on trade

The Nebraskans interviewed spoke about trade almost exclusively in terms of exports, perhaps not surprising for a state that consistently ranks highly in the production and export of many agricultural products from soybeans and corn to beef and beef products. Nebraska’s most important export markets are Canada and Mexico, U.S. free trade agreement partners.

The majority of those interviewed saw U.S. trade agreements as benefiting Nebraskan agriculture, in particular the U.S.-Mexico-Canada Agreement (USMCA) and the U.S. trade deal with Japan (as a second best alternative to the Transpacific Partnership, from which the U.S. withdrew in 2017). While many supported the President’s tough stance against China, they also worried about the potential for future lost market share due to shifting supply chains brought on by the trade war. In the voice of one interviewee, over the long run, the United States needs to “focus [more] on developing markets…and less…on picking a fight with China.”

The seeming invisibility of imports

Imports were rarely mentioned by those interviewed, whether from a consumer or supply chain perspective. Aside from one manufacturer who said that increased steel tariffs had put cost pressure on his inputs, most discussion of tariffs revolved instead around retaliation on U.S. agriculture exports, not the impact of U.S. tariffs on imports. This is not surprising: exports are celebrated in news releases and headlines. Import data is portrayed in the negative light of trade imbalances. Imports of intermediate goods make up 60 percent of global trade by some estimates, but in the form of parts and components for the production of final goods, they lack visibility.

U.S. import tariffs have likely affected consumer prices to some degree. In research prepared for the Yeutter Institute by Edward Balistreri of Iowa State University, tariffs imposed in 2018 and 2019 as part of the U.S.-China trade war may have cost Nebraska’s households as much as $600 per year through a combination of lost export opportunities, increased productions costs, and increased consumer prices. A potential doubling of tariff costs on imported items theoretically risked households near the lower bounds of the middle-income range falling out of the middle-income bracket while those tariffs were in place. Despite being a pocketbook issue, the cost of imports was notably absent as a topic of discussion across interviews.

View on China engagement

There is more than one “heartland”

The Carnegie Endowment conducted similar interviews and focus groups in Ohio in 2018 and Colorado in 2019. There are important nuances among and within these three states. On trade policy, Nebraskans were far more aligned in their views than Ohioans.

Nebraskans tend to view agriculture as the backbone of the state’s economy, leading to more consistent opinions on the beneficial role of trade. Ohio has a much larger manufacturing workforce that has experienced heavy losses in recent years, with trade policy and globalization often taking the blame. This perception has led to deep divisions over trade policy among those interviewed in Ohio.

In comparing the three states, the report notes that such “place-based economic considerations appeared to drive attitudes on the intersection of U.S. foreign policy with the perceived economic interests of America’s middle class.”

“I don’t trust Washington”

Unfortunately, where participants in all three states did seem to agree was in their mistrust of institutions and their sources of information regarding foreign policy.

Project participants consistently said they did not trust the news media or official Washington to provide unbiased information about trade and foreign policy. As a result, many said they do not always feel they have enough knowledge to develop well-informed opinions. They also do not believe that decisions about foreign policy are made with middle America’s economic interests in mind.

One Nebraska participant illustrated a common sentiment in expressing, “I don’t think anybody knows what the truth is and I don’t …trust Washington to tell me what the truth is.” If participants wanted to learn more about trade and foreign policy, they often said they did not know where to find trustworthy sources of information.

Quote about trust

How to amplify middle-class voices?

At a time of intense debate over what the aims of U.S. trade policy should be, such depth of perspective from Americans across the country is important. Do we need new structures to gather it?

The Office of the U.S. Trade Representative formally seeks public comment as part of its process to determine negotiating priorities and statutorily maintains 26 advisory committees to make sure U.S. negotiating objectives “reflect U.S. public and private sector interests.” The advisory system includes a committee designed for input from state and local level leaders. Yet these structures are neither visible nor accessible to most Americans.

Elected officials may of course offer input outside of these constructs. Nebraska Governor Pete Ricketts gave an example on an episode of the Yeutter Institute’s Trade Matters podcast:

“When there was a rumor that the United States was going to pull out of the South Korean Trade Agreement, I picked up the phone on a Friday afternoon to call our U.S. Trade Representative, Ambassador Lighthizer, to tell him how bad that would be for Nebraska,” Governor Ricketts said.

“He called me back on Sunday afternoon, so very responsive…he doesn’t always tell you what you want to hear, but certainly wanted to listen as I was talking about why South Korea was such an important trading partner.”

Place-based trade policies?

Governor Ricketts’ comments and the report findings reinforce a central conundrum of trade policy: it has disparate impacts on the economies of different U.S. states.

In their pursuit of the national interest, foreign policy professionals, including trade negotiators, understandably do not want to pick winners and losers or wade into domestic politics. But integrating more information about the economic experience of middle-class Americans into the trade policymaking process can help inform policy options that anticipate the losses — and local opportunities — from trade policy.

Meanwhile, what about those who said they wanted to learn more about trade and foreign policy, but did not know where to find information they could trust? They also reported that locally trusted leaders can play a key role in how people think about policies. Perhaps such leaders are a starting point for deeper conversations about trade.

Related in the series by The Carnegie Endowment on U.S. Foreign Policy for the Middle Class:

-Perspectives from Colorado

-Perspectives from Ohio

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Jill O'Donnell

Jill O’Donnell is a professor of practice and the director of the Clayton Yeutter Institute of International Trade and Finance at the University of Nebraska-Lincoln. She is the host of the institute’s Trade Matters podcast. She served on the research team for the report discussed in this article, along with colleagues from the University of Nebraska-Lincoln’s Bureau of Business Research and the University of Nebraska Public Policy Center, in partnership with the Carnegie Endowment for International Peace.

This article originally appeared on TradeVistas.org. Republished with permission.

U.S. Export Volume Expected to Climb in 2015

Baltimore, MD –   U.S. exports are expected to grow by $88 billion or 5 percent, in 2015, despite tepid global GDP growth, according to a research report just released by trade credit insurance provider, Euler Hermes.

According to the company’s latest Economic Insight report, the U.S.’s biggest export gains in 2015 will come from Canada, China and Mexico.

The report also projects strong export increases to smaller countries in Asia, Latin America and the Middle East, “reflecting recent rapid growth in these emerging markets, while also providing the U.S. with more diversification in its export composition.”

Export gains will primarily come from the agrifood, chemicals, energy and mechanical sectors. Textiles and ferrous metals show the smallest increases as the U.S. has become a much smaller player globally within these industries.

As U.S. energy companies are expected to start exporting natural gas globally by the end of 2015, revenues from this sector could be significant, growing from $16 billion in 2012 to $42 billion in 2040 or nearly 1 percent of GDP.

The planned 2016 expansion of the Panama Canal, which may double its capacity, “will also boost U.S. trade by allowing larger ships to carry exports from the U.S. through the canal, significantly reducing costs and making those exports more competitive.”

The U.S.’s largest trade deficit is with China, but several factors could shrink it, especially as China pivots toward a more domestically driven economy, and as the U.S. natural gas boon and favorable labor conditions have reduced China’s competitive wage advantage to the point that a growing number of companies are opting to ‘in-source’ their manufacturing.

In the coming year, the value of the U.S. dollar is expected to rise in 2015 making U.S. exports more expensive and less competitive with export financing faces several challenges, including tight lending conditions and risk-averse bankers.

Rising rates in 2015, the report says, “may make financing more costly and/or harder to obtain, especially given fragile global growth and geopolitical uncertainty.”

In addition, global business insolvencies “are expected to fall 3 percent, a much slower rate than 2014’s decrease of 12 percent.”

At the same time, insolvencies still remain 12 percent above 2007’s pre-crisis levels, meaning that exporters will need to continue stringently evaluating their partners for insolvency risk.

To further promote U.S. exports, two major trade agreements – the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership – are currently being negotiated.

Both agreements  are being structured to reduce the burden of Customs, regulations, tariffs and taxes, lower barriers to trade, and allow increased access to new markets.

“Demand for U.S. exports is, of course, dependent on the strength of the global economy,” said Dan North, senior economist for Euler Hermes Americas.

“While the global economy is set to enter its fourth straight year of lackluster growth, the U.S. economy continues to grow and many of our industrial sectors are showing strength both at home and abroad.”

12/11/2014