Agriculture's continued prosperity may hinge on gaining greater access to more foreign markets.
Make no mistake: A rising tide of international opportunities, supported by a burgeoning middle class round the world, has lifted production agriculture’s boat during the last five years or more. But according to several speakers at last month’s Farm Journal Forum this tide could just as easily go out without a concerted push from federal policy makers and agricultural interests.
"The importance of trade to growth of the economy, and the ability to grow jobs, does not appear to be on anyone’s major public agenda list," contended Thomas C. Dorr, president of Thomas C. Dorr and Associates. "I would suggest this oversight…may be as much our responsibility as those we have elected."
Dorr noted that from 1990 to 2009, after the fall of the Iron Curtain, more than 1 billion people have moved into the global middle class, with an annual purchasing power of about $20,000. Moreover, he said, another 1 billion people will reach this milestone around the world by the end of the current decade. The growth of this cohort fuels demand for more meat, fresh vegetables and processed food.
But it can also be argued that rising international demand for U.S. farm products pushes up domestic prices. That was one of the economic forces behind corn prices that rose to more than $8 a bushel last summer. Prices have fallen to around $7 a bushel in recent days after high prices led to the cancellation of some major foreign sales.
Dorr, the former president of the U.S. Grain Council who worked for USDA under President George W. Bush, chided the Obama administration for paying "lip service" to its goal of doubling U.S. exports of all goods by 2015. But he also took issue with an agriculture industry that hasn’t "conveyed its commitment" to exports. He singled out the meat, dairy, and poultry industries for "lashing out" at recent increases in feed prices, even as they "work hard" to expand their international presence.
Dorr contends that both the Obama administration and industry were slow to push for passage of fair trade agreements with South Korea and Columbia in 2011. The Obama administration, he said, "did not get serious until after the 2010 election. But, I would caution to point out that agriculture was slow at best, and reluctant at worst, to push aggressively for their passage. Again, this related to perception about how passage of the FTAs would impact U.S. job growth."
Recent data contradict Dorr’s contention that the Obama Administration isn’t committed to agriculture exports. Ag exports have grown by roughly 50% during the last four years, from $96.3 billion in 2009 to a projected level of $145 billion in fiscal year 2013, according to the USDA's Economic Research Service. The United States ran a $32.4 billion agricultural trade surplus in fiscal 2012.
Agricultural Secretary Tom Vilsack, speaking later at the same meeting, highlighted the administration’s trade accomplishments, noting that the U.S. Senate had passed a Russia export bill that very day. Obama signed the bill into law several days later. The law normalizes trade relations with Russia, which three months ago joined the World Trade Organization.
"It’s a victory for all of us who are interested in free and unfettered trade," Vilsack said. "It will give us the opportunity and capacity to significantly expand trade opportunities in Russia, and to do it in a way that will compel Russians to play by an appropriate set of rules."
Vilsack attempted to rally support for the Trans Pacific Partnership, a joint free trade agreement between more than a dozen countries, including Singapore, Vietnam and Malaysia. Vilsack said the agreement, which is still being negotiated, has "tremendous potential if put together properly. Seventy five percent of our international trade is coming from that Asia-Pacific Rim area."
Vilsack is also keeping an eye on discussions about a European Union free-trade agreement. Europe’s Parliament in October approved a resolution to open talks with the United States about a free-trade agreement. Vilsack said that some agriculture and technology issues need to be worked out before "we could be totally convinced that an EU trade agreement is going to be, in fact, free trade."
"You need trade liberalization," Jim Wiesemeyer, senior vice president with Informa Economics, told Forum attendees. "It won’t guarantee you growth. But you are not going to have [growth] without it." Wiesemeyer expects foreign trade to keep U.S. farm profits strong in years ahead, though he registered concern about this country's deteriorating transportation infrastructure, which may make it difficult to meet foreign demand.
Dorr wasn’t as optimistic about a fractious industry’s willingness to commit to feeding the rest of the world.
"Are we willing to address these issues?" Dorr asked. "Are we willing to commit…resources to the development of this new world trade order? Or, in the final analysis are we going to elevate an old playbook designed to protect legacy systems as opposed to elevating our traditional American genius for innovation and entrepreneurship?"