The changing US political tide

It was pretty difficult to miss the news last week that President Barack Obama’s Democratic Party copped a hiding in the US mid-term federal elections. What is less apparent from the dramatic turnaround in fortunes is what the development means for readers of The Weekly Times – specifically how it might affect trade in food and agricultural products.

The reaction of US voters to their unhappy lot has been swift and unforgiving, returning majority support to Republicans whom they deserted in droves just two short years ago after George W Bush exited. As we see time and time again, when people are hurting, they kick the incumbents.

The US economy is still drifting in the doldrums, despite some better news last week that retail sales were starting to show some life and that consumers now feel about as happy as they did before the GFC gutted the values of their homes. Sure Obama didn’t take the US into the gloom, but there are clearly a lot of people in his country that think that by now he should’ve done something more decisive about getting the nation back to work (and house prices back into forward gear) other than make inspiring speeches. Where new spending has been applied, it hasn’t been effective in pulling along investment and employment. The Obama rhetoric about the “challenges we face” has worn thin and it is now the time for his machinery to get things done. Maybe his “moving forward” slogan was a turn-off too?

Of course now that his party have lost control of the lower House of Reps and seen their Senate majority clipped, doing things will be much harder. He had a hard enough time convincing his own party to change, but he’ll battle the other side of politics that wants him out of office in 2012.

Some would say it really won’t matter what happened in US politics, as the world is headed for another tight shortage in food supply and therefore selling prices for agricultural commodities should keep rising.

But will this result help with the freeing up of trade if a global food crisis is averted this time around? There hasn’t been any progress on global free trade agendas in the past 4 years since the shift control in US politics towards the Democrats in 2006. Democrats thwarted Bush pushing for any progress on an effective and meaningful WTO trade deal.

The Republicans are typically more liberal in their views on trade, but that doesn’t mean much given the increasing factionalism within the US system. The ardent conservative movement – the Tea Party - which has gained momentum in this election campaign has more of a protectionist ring about it than anything, although meaningful policies to turn around the nation have been had to discern amongst the media fear-mongering. The gut-feel is that the new disciplines of American values will be trying to find and protect US jobs at home rather than find ways of trading fairly with the world.

The other factor in the trade equation is the heady value of our currency, to which a lethargic US financial system and a lifeless economy have contributed, but not solely to blame. We have higher interest rates, a hungry China and fears of inflation to that for that.