As Japan struck a multinational trade agreement in principle Thursday with the European Union, farmers in Montana watched from the outside with their noses pressed against the glass.
Japan is a top three customer for Montana commodities, the state’s largest grain buyer in the Asian Pacific, where roughly 80 percent of Montana’s hard red spring and hard red winter wheat is exported.
The deal with the European Union promises to sew up trade terms for one third of the world economy. It was not unlike the U.S.-brokered, 13-nation Trans Pacific Partnership that Montana farmers had hoped would level the playing field for Montana products in Japan and other Pacific countries by removing tariffs and other restrictions.
TPP nations accounted for 42 percent of the world’s gross domestic product, according to the U.S. Trade Representative. Would-be partners like Vietnam had economic growth that was three times that of more advanced nations. The deal fell apart under a new wave of nationalism in the United States. It was declared dead the day President Donald Trump took office.
“We’re seeing this as a direct result of us pulling out of TPP,” said Gordon Stoner, an Outlook farmer and National Association of Wheat Growers past president. “As long as we were at the table with TPP, Japan was not going to upset the apple cart with us.”
The Trump administration has promised a bilateral agreement with Japan that includes parts of the TPP deal that the president likes, though while campaigning in 2016, Trump wrote off TPP and other multinational trade deals, like the North America Free Trade Agreement as disastrous for the U.S. employment, particularly manufacturing.
For Stoner and other Montana farmers with a voice on national farm economic issues, the issue with the bilateral trade talks is time. The United States invested years in making TPP work. Switching to bilateral agreements could take several more years.
Whether the EU deal will hurt Montana grain trade remains to be seen. Europe and the United States compete directly in global wheat markets, but on specific grain types like Montana’s hard red spring and winter wheat varieties, Europe may not be a threat. Those high-protein varieties aren’t grown everywhere.
Asian millers are used to importing those grains from Montana and North Dakota. The majority of Montana’s large grain elevators, designed to load mile-long trains bound for Pacific Northwest ports, are at least partially owned by Asian corporations.
Stoner is hopeful there’s enough of an Asian stake in the Montana grain trade and a unique enough offering by Montana farmers to gird against an EU trade deal.
A deal between Japan and the EU is generally unfavorable for the United States, said Vincent Smith, economist at Montana State University, who specializes in agricultural policy and international trade.
The United States buys steel from both Japan and European Union nations. Manufacturers in the United States could also be affected by a Japan-EU trade agreement.
The obvious win for Japan is easier sales of Japanese automobiles in Europe, an arrangement that will likely increase the price of Japanese autos in the United States by virtue of increased demand in the EU.
“The biggest story is what it says about the U.S.,” Smith said. “Is this another indicator that the U.S. is less important in the world, particularly because of the president’s attitude, at least as he articulates it to world trade?
“The world is saying ‘If your administration is going to assume that it can play by any rules it chooses, then we’re not going to worry about you. We’re going to work in another direction.' ”
There are Montanans who were opposed to the TPP regardless of what it meant for the state’s $5 billion agricultural economy.
Matthew Koehler, of the Wild West Institute, said the inclusion of underdeveloped nations with labor policies that permitted child factory workers, poor working conditions and low pay, was reason enough oppose TPP. There were environmental policies related to industry that also didn’t line up with policies in the United States. Even if the U.S. insisted those policies improve, trade terms still weren’t supportive of U.S. workers, Koehler said.
"The EU and Japan are very similar economies. They have similar regulations governing a lot of things like the rights of workers, protecting the environment,” Koehler said. “The TPP was including countries where slave labor was still allowed.”
The TPP nations were Brunei, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, Japan, Canada, Australia, and the United States.
U.S. Sen. Steve Daines, R-Mont., told Lee Montana newspapers in May that the inability of lesser-developed countries to meet trade terms easily met by the United States and Japan suggested that a bilateral agreement would be more relevant.