Fact Checker

Fact Checker: John Delaney not quite right on effect of Trans-Pacific trade deal

Grace: C

Democratic presidential candidate John Delaney speaks Aug. 9 at the Iowa State Fair in Des Moines. (Brian Snyder/Reuters)
Democratic presidential candidate John Delaney speaks Aug. 9 at the Iowa State Fair in Des Moines. (Brian Snyder/Reuters)

Introduction

“If we were in (the Trans-Pacific Partnership) today ... every acre of land in Iowa would be worth more money because every crop price would be higher.”

Source of claim

Former Maryland U.S. Rep. John Delaney, a Democratic presidential candidate, made these comments Aug. 9 at the Des Moines Register’s Political Soapbox during the Iowa State Fair.

Analysis

Delaney’s statement about the Trans-Pacific Partnership was made as a condemnation of President Donald Trump’s decision to pull the United States from the agreement in January 2017.

The United States never entered the Obama-era international trade agreement made with 11 countries in the Asia-Pacific region. Therefore, the sourcing of Delaney’s claims provided by his campaign are based on economic projections. We’ll examine these projections and check Delaney’s statement based on that review.

Officials from the Delaney campaign cited a report published by the American Farm Bureau Federation in 2014. The report estimated direct U.S. agricultural exports would increase by $5.3 billion per year under full implementation of the agreement, which would eliminate or minimize agricultural tariffs.

The Office of the United States Trade Representative concurred with this analysis, adding the agreement would allow farmers to better compete “in some of the fastest growing markets in the world.”

A 2014 report from the economic research arm of the U.S. Department of Agriculture projected less of an increase, however. It estimates the elimination of agricultural tariffs among the partnership countries would increase the value of U.S. agricultural exports by $2.8 billion by 2025.

The American Farm Bureau Federation report shows Iowa was projected to see a $389.4 million increase of net exports, particularly in soybeans and pork, because it would eliminate competition among those other countries’ markets.

However, not every crop price would increase, according to analysts. The American Farm Bureau Federation stated the net trade of corn would decline by $91.1 million nationwide under the agreement. In Iowa, the federation found Iowa’s net trade of corn would decline by $15.9 million a year.

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The United States already has a strong grip on the corn market, but the Trans-Pacific Partnership would enable other countries to compete, said Chad Hart, Iowa State University associate professor of agricultural and natural resource economics.

Although the value on most agricultural exports would increase, it’s not guaranteed a farmer’s land value also would rise under this trade agreement, Hart said.

What matters is net income, he said, which can reflect high yield and high product demand.

Researchers in the 2018 Iowa State University Land Value Survey agreed, stating it’s useful to understand how net income and interest rates will change in order to measure land value.

The American Farm Bureau Federation report cited by the Delaney campaign projected annual net farm income nationwide would increase $4.4 billion a year under the Trans-Pacific Partnership.

The 2018 Land Value Survey found trade disruptions, including international tariffs on agricultural exports, did have a hand in the 0.8 percent land value decline from 2017 to 2018. In 2018, the average value of land in Iowa was a little over $7,000 per acre.

However, the ISU survey said lower commodity prices and higher interest rates played a larger role in the decline.

A study published this year — and funded by the Farm Foundation — by economists from Purdue University did find that with growing output and increasing demand for land, U.S. farmland would see a slight increase in value. According to the report, the sector that includes soybeans would see a 0.7 percent increase. “Other agriculture” was projected to increase by 1.3 percent. It did not project state-specific land values.

Conclusion

Several studies showed the elimination of tariffs under the international trade agreement would increase the overall value of agricultural goods from the United States. However, the same studies have shown corn — one of Iowa’s main exports — would see a decline in net value under this trade agreement. Therefore, Delaney’s statement that “every crop price would be higher” is not factual.

In addition, there’s less research on whether the Trans-Pacific Partnership would positively impact farmland values.

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The research that does exist presented tentative support for the connection between increased export value and increased land value. An analysis showed increased demand for products could raise land value, and an Iowa farmland survey showed trade disruptions did influence value.

An argument also can be made that higher land value could be reflected in net farm income, which would increase under the Trans-Pacific Partnership. However, one Iowa-based economist said the increased exports wouldn’t necessarily return to farms as increased land value.

For the most part, Delaney’s claim on increased crop prices was supported by research, but there’s less evidence that increased export value would lead to increased farmland value. Because of this, we will give his claim a C.

Criteria

The Fact Checker team checks statements made by an Iowa political candidate/officeholder or a national candidate/officeholder about Iowa, or in ads that appear in our market. Claims must be independently verifiable.

We give statements grades from A to F based on accuracy and context.

If you spot a claim you think needs checking, email us at factchecker@thegazette.com.

This Fact Checker was researched and written by Michaela Ramm of The Gazette.

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