The Real Way to Win Iowa and Places Like It
There are plenty of innovative policies to revive rural areas—and trade wars aren’t among them.
The so-called rural vote has left an indelible mark on recent elections. U.S. President Donald Trump has small towns and communities in swing states such as Iowa, Michigan, and Wisconsin to thank for handing him the presidency in 2016. And in elections in the United Kingdom in December, Prime Minister Boris Johnson’s party won a landslide victory by spectacularly breaking through the “red wall” of traditionally left-leaning, deindustrialized small towns in northern England.
In both countries, in other words, long-neglected electorates outside big urban areas have woken up to their political power, and they are expecting their leaders to deliver a more prosperous future.
For the United States’ 60 million rural citizens—those living on farms, in hamlets, and in small towns—that hoped-for future still seems far away. Employment is struggling to reach the quality seen before the financial crisis: manufacturing jobs have ebbed away to foreign competition and automation, traditional extractive industries such as coal are on the wane, and farmers have seen their profits cut in half since 2013. Once city problems, these days rural areas are more likely to be bedeviled by crime and drugs. Perhaps not surprisingly, young people are moving out in droves—the median age in rural communities is 43, seven years older than in cities. In the United Kingdom, provincial areas face a similar economic plight.
Trump and Johnson may have come to power on platforms that won over rural voters by eschewing globalization, but it is unclear that their attempts to redraw the rules of trade and international relationships deliver enough benefits to their king-making rural constituents. Rather, if they want to take the welfare of rural regions seriously, they may need to rethink their entire set of development policies for rural regions.
After two years of trade trench warfare, the new United States-Mexico-Canada Agreement (USMCA), which is likely to replace the North American Free Trade Agreement this year, and the recently announced “phase one” U.S.-China trade agreement can claim only mixed prospects for rural America.
The USMCA includes a concession from Canada to expand access for U.S. producers to up to 3.6 percent of Canada’s dairy market. Canada’s supply management body (which covers dairy, poultry, and eggs) will also end its controversial Class 7 pricing system, which keeps prices artificially low to deter foreign competition. The USMCA also includes new North American local content rules for the auto industry. By 2023, 40 to 45 percent of the parts of vehicles built in the free trade zone must be produced by workers being paid at least $16 an hour—a policy aimed at preventing more production jobs from leaving the United States for Mexico.
In theory, both measures should benefit rural Americans. But it’s unclear whether they actually will. For example, the local content rules are likely to raise costs for U.S. auto manufacturers, which could encourage greater automation or continue to drive production outside North America to places such as Europe and Asia. In a similar vein, BofA Securities (previously Bank of America Merrill Lynch) predicts that the agreement will only increase U.S. dairy exports to Canada by around $70 million compared with what they would have been under the Trans-Pacific Partnership—a drop in the proverbial milk bucket. And according to Mary E. Burfisher, Frederic Lambert, and Troy D. Matheson of the International Monetary Fund, the USMCA will have a net neutral effect on the United States’ economy. The biggest benefit may simply be that it quells the uncertainties thrown up by months of trade disputes.
In the U.S.-Chinese trade negotiations, China has recently agreed to an annual purchase of $200 billion in U.S. goods, of which $40 billion will be agricultural products—much higher than the $19.5 billion at the beginning of Trump’s presidency. Notwithstanding the headline-grabbing figures, however, most observers believe that the agreement will, at best, make up for the economic damage already done to the U.S. economy by the trade war.
The case of the United Kingdom is much clearer: Most economists agree that there is little economic upside, at least in the short to medium term, to leaving the European Union’s single market and customs union. Unless Johnson pivots toward a softer Brexit, trade restrictions will rise for Britain’s agricultural and manufacturing industries, which are typically found in more rural areas. The mere prospect of Brexit has already caused investment in the automotive industry to plunge by 80 percent since the initial referendum. And although Johnson is championing potential new trade deals with China, India, and the United States, analysts predict that they are unlikely to make up for the loss of easy access to the EU market—especially given the United Kingdom’s weakened negotiating power outside the broader European bloc.
“Fixing trade” alone was never going to address the real issues which have held back rural and deindustrialized parts of the United States and United Kingdom. What these regions really need is a development strategy that builds new industries based on their unique strengths: They are natural carbon sinks, have abundant sources of renewable energy and biomaterials, and boast the potential for a higher quality of life away from the pressures of densifying cities.
First, in a world lurching toward more sustainable economies, rural areas sit on vast carbon sinks in the form of agricultural land and forests. Scientists estimate that modern farming practices—heavy on tilling and the use of chemical fertilizers and pesticides—have led to the depletion of soil carbon from an average of 3 percent to 1 percent. But new regenerative farming methods can restore soil carbon to previous levels while also achieving high yields and profitability. Some of the latest technologies involve biostimulants to enhance soil carbon capture and field sensors to measure carbon in the soil. If applied to all farmland globally, regenerative farming has the potential to sequester all carbon emissions released since the beginning of the Industrial Revolution.
Second, as growth in the shale gas industry tapers due to environmental challenges, rural areas could pivot to sustainable energy and biomanufacturing for job growth. Beyond wind and solar—which are driving an employment explosion in the Great Plains states, Texas, and California —another promising area is bioenergy with carbon capture and storage. BECCS, as it is called, involves burning biomass to generate heat and power and injecting the carbon dioxide released into rocky formations deep underground, such as the saltwater aquifers of the Midwest. Emerging biomanufacturing industries such as bioplastics, biofuels for transport, and cross-laminated timber as an alternative to concrete also promise to create millions of jobs.
Third, outdoor recreation, tourism, and health and wellness are three job-intensive sectors that could find a natural place in rural areas. Greater development of these sectors would liven up downtown areas with bars, restaurants, and a cultural scene that draws in younger people, reversing the damaging depopulation these areas have suffered.
To capture these opportunities, national governments should encourage systematic investment in rural regions. Infrastructure spending on transportation links and fiber optics to connect rural enterprises to consumers and businesses in urban areas is essential. In addition, designating more rural areas as opportunity zones—which comes with the oversight needed to ensure that tax-exempt investments under this scheme benefit local residents—may also help attract capital to revive flagging communities.
Increased support for the formation of carbon markets would also help carbon sink industries—including regenerative agriculture—take off in rural areas. More states could follow California’s lead in creating a cap-and-trade system that requires big polluters to purchase carbon credits to offset their emissions. These might eventually evolve into a national standard that would connect polluting industries to carbon sinks in rural areas.
Carbon markets and other initiatives to revive rural areas could create new asset classes that would attract investment from both foreign and domestic sources, bringing widespread prosperity to rural voters. For now, of course, it seems that local development strategies in both countries will take a back seat to fixations on global trade and foreign policy. The question, though, is how rural voters will respond if the leaders they elected fail to produce the tangible benefits they promised.