President Carter imposed the 1980 Soviet grain embargo to punish the Soviet Union for its invasion of Afghanistan, an inexact analogue for the Sino-U.S. trade war that started in April. All the same, an analysis of the embargo suggests the greatest damage to the U.S. farm sector may be a diminished role in the world market over the long run rather than a short-term loss of exports, write four university economists.
Exports of U.S. corn and wheat never really regained the tonnage volumes tallied in the heyday before Carter’s partial embargo; he suspended shipments above the 8 million tonnes guaranteed under a 1975 agreement. And the U.S. share of the world market declined in the four decades afterward, say Carl Zulauf of Ohio State University and Jonathan Coppess, Nick Paulsen and Gary Schnittkey of the University of Illinois.
“It is not unreasonable to think that U.S. trade actions could impact the thinking of importers when it comes to sourcing food,” write the economists at farmdoc Daily, using words that echo farm group arguments that the United States must be a reliable supplier.
In the near term, there may be a reshuffling of ag exports. If China buys Brazilian soybeans, U.S. soybeans will flow to former customers of Brazil, blunting the immediate impact of Chinese tariffs. One effect, as the economists note, is that higher prices for non-U.S. soybeans will encourage production in other countries while U.S. prices suffer.
“In short, it is the long-term consequences of current U.S. trade policy for U.S. ag exports that bear watching and will likely be the most important ag trade storyline coming out of the current trade war,” say the ecomomists.