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The Truth about Trade

RSS By: Dean Kleckner, AgWeb.com

Dean is Chairman Emeritus of 'Truth About Trade & Technology, a nonprofit advocacy group led by a volunteer board of American farmers.

Time To Move Our Country Off the Export Cliff

Dec 20, 2012

 By Bill Horan:  Rockwell City, Iowa

 

You shouldn’t compare apples and oranges. Everyone knows that.

So does is makes sense to measure apple exports by counting oranges? Of course not. And yet this is precisely how the United States measures and is reporting its progress in trade policy.

That’s because we compute the value of our trade in dollars, when the most important measurement should be volume; the actual amount of products we sell to others.

Fixing our calculations will serve our long-term interests in trade, and possibly even help us avoid the fiscal cliffs in our future.

The United States hasn’t enjoyed very many economic success stories recently. Joblessness remains high, growth is stagnant, and now our President and Congress are engaged in a high-stakes game of political chicken over taxes and spending.

Amid all the gloom, farm exports have been a bright spot. The Department of Agriculture recently predicted that they would reach $145 billion this year, which is more than $9 billion above last year’s total. Even more impressive is the fact that it’s an all-time record.

So that’s good news. Except that even here, looks can be deceiving. In October, U.S. exports plummeted, not just in agriculture but across every major category of trade. They declined by 3.6 percent in the largest month-to-month drop since January 2009. 

That month was significant because it marked the beginning of President Obama’s administration. A year later, as he and the rest of us struggled through America’s ongoing slump, he made an important promise in his State of the Union address: In five years, he said, U.S. exports would double.

This pledge involved an interesting measurement "trick": For a baseline, he chose a year in which exports had hit rock bottom, following the global economic downturn. The regular turnings of the business cycle all but guaranteed a rebound. For a couple of years, it looked like President Obama might make good on his export pledge.  A goal that all of us want him to achieve.

This year, however, trade leveled off. We’ll be lucky if it comes anywhere close to doubling by 2015.

To complicate matters, we’re measuring in dollars rather than by volume. Dollars are a good way to evaluate exports, but not the best way. Currency valuations can mask the true story. For a better sense of our export health, we have to examine export volume. 

And here, the data are more troubling. The total volume of farm exports will be about 108 million metric tons this year. This is well below recent levels. The drought explains some of this but not all of it. Even with corn exports falling by almost half, we’re still shipping out fewer major commodities. We certainly aren’t on track to double anything.

One of the best ways to improve export volume is through policy: rules at home that allow farmers and businesses to thrive, and trade agreements with partners that allow goods and services to move free from artificial barriers. Success requires sensible regulations that protect consumers rather than onerous ones that hobble economic activity, plus an aggressive agenda of trade diplomacy.

These are long-term strategies. Adopting them now won’t save us from the oncoming fiscal cliff—it’s too late for that—but it will help our economy in the future.

A central dispute between the White House and Congress in their fiscal-cliff standoff involves spending. President Obama would like a new round of stimulus spending, even though it would add to the federal debt.

Properly understood, exports can serve the same purpose—but without the debt. Rather than creating programs and sending the bill to taxpayers, officials should push for new trade agreements that allow Americans to export goods and services abroad. They approved deals last year with Colombia, Panama, and South Korea, but only after letting them languish for years. So far, the Obama administration has talked about expanding trade opportunities but it has not negotiated a single trade pact on its own.

More trade will create jobs and economic growth at no cost to the public treasury—especially if we strive to boost not just our sales value but also our sales volume.

Bill Horan grows corn, soybeans and other grains with his brother on a family farm based in North Central Iowa.  Bill volunteers as a board member and serves as Chairman for Truth About Trade & Technology (www.truthabouttrade.org).

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