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Take advantage of growth, guard against risk with new U.S. regime: Frum

Political commentator David Frum says there’s good, bad and potentially ugly for Canadian farmers in the United States’ new and unpredictable Trump administration.

Frum, a senior editor at The Atlantic magazine and, more recently, an owner of Ontario farmland, told the Grain Farmers of Ontario March Classic in London recently that global markets have been poor at pricing in political risk, so farmers should take steps to manage their risk themselves.

The good for the economy includes a likely end to tepid economic growth in the U.S. over the past 15 years, said Frum.

“There is a big tax cut on the way in the U.S. It will have two powerful and positive effects,” including putting more money in people’s pockets and creating government deficits.

Deficits are also stimulating to the economy, said Frum, who recently took possession of a piece of Prince Edward County farmland through a family succession process.

Stimulus should lead to more demand for products, including food from Canada. That fiscal stimulus will be thrown into an economy that is already growing and creating more consumer confidence.

The Trump administration has already limited some of the regulations of the Dodd-Frank Act and as a result, consumer lending will be made easier.

“There will also be a lot less petty, harassing regulation, especially in agriculture,” he said.

The Waters of the United States regulations was one of the worst offenders, said Frum, as the U.S. Environmental Protection Agency was claiming authority over areas where water ran for limited periods of time each year.

“The foot of government will be less on their neck and that will be a positive thing,” he said. “Regulatory changes in the U.S. will have knock-on effects here too.”

He expects 2017 to be a bullish year and 2018 likely will be so too.

The bad

However, there are other concerns with the U.S. administration that we haven’t seen from previous presidents.

Not only is the Trump administration protectionist, it will be manifested in “petty and capricious protectionism, through regulation, not through law,” said Frum.

He doesn’t expect that the administration will have the capacity to renegotiate the North American Free Trade Agreement (NAFTA) anytime soon. But he expects to see petty harassment, including harassment of travellers.

Trump’s travel ban, now on six countries, isn’t just affecting residents of those countries, but also the large diasporas of those countries. Foreign applications to U.S. universities are already down 40,000 year over year, Frum said, and businesspeople and professionals with conferences and holdings in the U.S. are limiting their travel.

A rise in interest rates driven by consumer spending and greater deficits in the U.S. could mean a rising U.S. dollar, which could help Canadian exports. It could also inflame protectionist sentiment in the administration, which has yet to find much problem with Canada.

Frum’s other concerns include the way the Trump family is acting and the deals they are completing to their benefit, along with cash infusions they are taking from foreign entities.

“The presidential family is behaving in a way the presidential family has never behaved before,” he said.

He worries about the decline in public integrity, the tradition of a lack of corruption.

“It is a precious, precious thing and once it is damaged it is hard to change it. It starts from the top.”

The ugly

Frum said his concerns about potential ugly implications of the Trump presidency include areas harder to predict.

He’s chiefly concerned with the unpredictability and renegade tendencies of the Trump administration.

There are members of the White House who can’t even get security clearance because of their previous relationships and transgressions.

“There’s a real instinct for conflict and a bad instinct for bringing friends along.”

Trump has also hit back at critical allies Germany, Britain and Australia. “There’s a potential for a conflict that the U.S. could get bogged down in and is in alone.”

However, Frum said, there are numerous ways that Trump could be sidelined in his tone and agenda, including by Congress, by the fact that government is paralyzed due to a lack of the many appointees needed to make it work, or by the potential Trump could find other interests that are less dangerous.

The challenge for businesses is that no one knows, and unlike previous administrations, no one can predict outcomes from this administration. Managing that risk will be up to businesses themselves.

— John Greig is a field editor for Glacier FarmMedia based at Ailsa Craig, Ont. Follow him at @jgreig on Twitter.

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