Attendees at the 2012 Farm Journal Forum, hosted with Informa Economics yesterday, heard from Thomas C. Dorr, president and CEO of Thomas C. Dorr & Associates whose previous experience includes time as President and CEO of U.S. Grains Coucil. His expertise and enthusiasm about his topic -- the election's impact on international trade and regulatory agenda for agriculture -- was apparent.
The bottom line, according to Dorr, is that challenges in trade and regulation are political in nature rather than technical. The 2012 elections were not fought out on ag issues or trade and very few races did more than graze over the issue, according to Dorr. Thus, the elections provided no mandate regarding trade or ag issues.
Generally speaking, he indicated that if you're of the school of thought that more regulation and oversight is needed regarding your operations, you'll likely be delighted with Obama administrative decisions. If not, you are unlikely to be thrilled with the administration. One issue that the two parties can agree on, however, is a commitment to expanding ag, according to Dorr, as this is one of the few bright spots in the economy and jobs market. But he says that a focus on growing jobs in regards to this has been lacking.
But Dorr continues, "Since the election, the fear of the fiscal cliff has shifted the debate to how to increase tax rates or revenue, depending upon how you define it, and, subsequently, grow government. Again, the importance and value of trade to the growth of the economy and the ability to grow jobs does not appear to be on anyone's major public agenda list. And yet, I would, as we proceed, suggest that this oversight, at least in regard to agriculture, may be as much our responsibility as that of those we have elected."
Dorr says we have yet to develop an appreciation of the growing global middle class and the "exciting," "robust" and "imposing" food and ag export opportunities this group represents. He says there is "no way we can access these opportunities without aggressively engaging in trade and trade policy. And frankly, it's just difficult not to justify that involvement."
As evidence of this he points out that 95% of the world population lives outside of the U.S. and that logistic and technology changes have and are taking place, which he says "completely restructure the cost of exporting and importing value-added, high-quality food stuff."
As an example, he pointed at that new Panama Canal channel and accompanying Borinquen Dam will be open in late 2014/early 2015. He says they are presently in the process of building "post-Panamax vessels" that are able to hold 16,000 containers per vessel. Today the current maximum capacity per vessel is 4,700 containers per vessel.
He says we have to recognize that from 1990 to 2009, more than 1 billion people have migrated into the global middle class (defined as purchasing power parity over $20,000 per household), and by 2020, another 1 billion will make a similar transition into the middle class. The bottom line is that this group's food needs and expenditures on them are exploding and are slated to continue to do so.
Dorr says a final point justifying an aggressive approach to trade policy is a report from the Boston Consulting Group that points out that by 2020, nearly 220 million Chinese will move into the affluent social class (any individual with an income ranging from $20,000 to $1 million annually). Dorr points out that is a sector nearly as large as the United States that equates to a minimum household income of $38,000.
But Dorr continued that despite all of this, there has been little serious debate about these growing economies and how we can grow our ag economy through trade. He says that while the present administration has paid "great lip service to doubling U.S. exports of all U.S. good by 2015," actual progress has been lacking.
But to do that says a "commitment to developing transparent, defensible and consistent trade policies" is needed and that this will require "significant political support, along with a depth of commitment and an understanding regarding the value of trade."
He says in recent years, agriculture itself "has not conveyed this commitment nor sense appreciation of the long-term value, benefit and necessity to our industry, even though we've seen this incredible growth in exports of ag growth." Rather, Dorr attributes the recent major gains in the prices of grain and oilseed products to the aforementioned expanding global middle class, especially in East and Southeast Asia.
Dorr points out that the Obama administration was slow to pass the Panamanian, South Korean and Columbian free trade agreements until after the 2010 elections. But he also points out that the ag community was also slow or even reluctant to push for their passage.
Dorr says a strategy for success is to focus on the "big picture," something all involved have generally failed to do. If we're going to participate in this exciting growing trade opportunity, we must "step back, regroup, rethink and reposition ourselves with respect to the importance as well as the value of food and agricultural trade," Dorr explained.