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September 2008 Archive for 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.

Exports Fuel the Economy

Sep 26, 2008
Worried about a recession? So are a lot of Americans. Each day seems to bring bad economic news, as financial firms fumble, unemployment numbers hit a five-year high, the cost of food keeps rising, and gas prices continue to frustrate everybody but Middle Eastern oil sheikhs.
 
Thank goodness for exports--because without the ability to sell American-made products abroad, we really would be in a recession right now.
 
Technically, a recession occurs when our economy has suffered two or more quarters of negative growth. In the second quarter of this year, the rate of growth was 3.3 percent. Record levels of exports made this modest gain possible because they rose by more than 13 percent.
 
“International trade has saved the day,” writes C. Fred Bergsten of the Peterson Institute. “We would have been in recession throughout this period had we relied wholly on internal economic forces.”
 
Let me drive home the point: Protectionism doesn’t work. If the United States had sealed its borders to the goods and services that now routinely cross them, our economy would be shrinking rather than expanding. We would be trapped in an honest-to-goodness recession.
 
It makes sense to sell what we make and grow to people in other countries who want those products. After all, more than 95 percent of the planet’s population lives elsewhere. That’s a huge market, and one we scarcely can afford to ignore. What’s more, the jobs attached to exports tend to pay more than those that aren’t.
 
In the U.S. beef industry--the area I work in--exports have surpassed imports for the first time since an isolated case of mad-cow disease turned up in the United States five years ago. Our sales to Mexico, Canada, Japan, Taiwan, and South Korea are surging in both volume and value. This trend is healthy for me and my associates.
 
I’m far from alone. The booming export economy isn’t limited to beef or even to agriculture. Foreign sales of some manufactured goods are so strong that producers can’t locate enough shipping containers to move them overseas.
 
Over the next few months, there’s no telling what will happen to our economy. Perhaps it will rebound. Or maybe our challenges will grow more severe. One thing is certain: Our public officials should do everything in their power to keep America from falling into a real recession.
 
The solution is obvious: We should play to our strong suit and fight for even more exports. One of the best ways to secure them is to sign trade agreements that lower tariffs and other artificial barriers. Congress should approve languishing trade deals with Colombia, Panama, and South Korea and it should encourage the negotiation of even more. Renewal of Trade Promotion Authority is critical. In fact, TPA should be made permanent.
 
This approach will benefit Americans in two ways. First, it will open foreign markets to more of our goods and services. That means more exports. When market access is fair, Americans can compete with anybody in the world.
 
Second, it will allow us to take advantage of a unique opportunity right now. Although the value of the dollar has increased recently, it remains weak compared to where it was just a few years ago. This means that for customers abroad, U.S. exports are more affordable than ever.
 
So now is an ideal time to increase our market share in foreign countries. When the value of the dollar recovers, as it almost certainly will, these buyers will have developed loyalties to our goods and services. They’ll come to appreciate the quality of American products and will keep on purchasing them.
 
This is the battle I’m fighting right now in Asia, where U.S. beef is trying to re-establish itself following an ill-conceived moratorium. We’re doing well against our competitors in Australia and New Zealand, but we need to do even better. A lot of the responsibility for this falls on the shoulders of producers like me, as it should. But only Washington can initiate the government-to-government contacts that lead to lower tariffs and level playing fields.
 
We’re not in recession now because of exports, and we need to make sure that exports continue to fuel our economy, no matter what the future holds for it.
 
Carol Keiser owns and manages cattle feeding operations in Kansas, Nebraska and Western Illinois. Mrs. Keiser is a Truth About Trade & Technology board member. (www.truthabouttrade.org)
 
 
 
 
 

Self-Inflicted Protectionism

Sep 19, 2008
Senators John McCain and Barack Obama promise change. “We’re going to change Washington,” pledged McCain at the Republican convention. Obama’s old bumper-sticker slogan was “Change we can believe in.” His new one is “Vote for change.”
 
It reminds me of a joke: Change is inevitable, except from a vending machine.
 
The rhetoric of change is popular right now because so many Americans believe their country needs to alter its course. In an Associated Press poll last week, 70 percent said they thought the country was heading in the “wrong direction.”
 
It’s as if they’re worried the U.S. economy is a gigantic vending machine that’s ripping them off. The financial system is in turmoil, as Lehman Brothers declares bankruptcy, Merrill Lynch sells itself and the Federal Reserve steps in and takes over AIG to stave off another failure. The effects of the mortgage crisis continue to ripple through the market. The cost of just about everything, from food to health care, keeps going up, up, up.
 
A few days ago, an editorial in a New Hampshire newspaper said that this year’s presidential contest is “the most important election in American history since 1932, when the country was just beginning to deal with the full economic catastrophe of the Great Depression.”
 
Wow. That’s quite a claim. Just to be on the safe side, perhaps we should demand that the candidates agree on something a little more specific than the need for change: They should agree to avoid the political blunders that contributed to the coming of the Great Depression.
 
Economists still debate the exact cause of the Great Depression, a global slump that began with a stock-market crash in 1929 and lasted about a decade, until the start of the Second World War. Yet virtually all of them think that the Smoot-Hawley Tariff Act of 1930 played a major role in the Great Depression’s terrible severity.
 
What was so bad about Smoot-Hawley? It was a mischievous piece of protectionism, approved in the belief that the U.S. economy would prosper if it was cut off from the rest of the world.
 
That’s one kind of change we definitely should avoid right now.
 
Several economists have calculated that by raising tariffs on foreign-made products, Smoot-Hawley shrank America’s GNP by 5 percent--an enormous blow. By comparison, points out historian Larry Schweikart, the terrorist attacks of 9/11 damaged GNP by 3 percent and Hurricane Katrina sapped half a percentage point of GNP.
 
Unlike 9/11 and Katrina, Smoot-Hawley was a self-inflicted wound. It was an act of Congress, authored by a pair of Republicans--Sen. Reed Smoot of Utah and Rep. Willis C. Hawley of Oregon--and signed by President Herbert Hoover, another Republican.
 
Democrats certainly haven’t forgotten this GOP catastrophe. In 1993, during the debate over NAFTA, Vice President Gore appeared on Larry King Live. He hauled out a framed photo of Smoot and Hawley and presented it to his sparring partner, Ross Perot. “They sounded reasonable at the time,” said Gore. “A lot of people believed them.”
 
And what a mistake that was. Countries around the world retaliated with their own protectionism. In the aftermath, global trade fell by about two-thirds and the Great Depression dragged on.
 
Gore might be wise to dig out that old photo and show it not only to his Republican rivals, but also to members of his own party. Earlier this year, Obama discussed the possibility of renegotiating NAFTA. Now he seems to have retreated from this brash talk, though it’s hard to know for certain. The Democratic convention was chock full of union bosses who have savaged beneficial free-trade agreements with Colombia, Panama, and South Korea.
 
If voters truly want change, then the next president should embrace a trade agenda that seeks to open markets for American products, rather than repeats the disastrous mistakes of Smoot and Hawley. We need to approve those languishing trade deals. We need to revive Trade Promotion Authority, so that our government can negotiate more pacts that help consumers and business alike. We also need to jump start the world trade talks--a tall order, but one that nevertheless should be a presidential objective over the next four years.
 
Let’s keep the rotten legacy of Smoot and Hawley where it belongs: in the history books.
 
Dean Kleckner, an Iowa farmer, chairs Truth About Trade & Technology. www.truthabouttrade.org
 

Where do they Stand on feeding the world?

Sep 16, 2008
The presidential debates get underway in just two weeks, when Senators John McCain and Barack Obama square off at the University of Mississippi. They’ll meet two more times, for a total of four and a half hours of give and take.
 
Here’s a question that somebody needs to pose: What role should biotechnology play in addressing the global food crisis?
 
Believe me, there are a lot of questions that I’d love to ask these guys. What would your administration do to open new export markets for U.S. agricultural products? What role should farmers play in creating alternative forms of energy? When can I spend a night in the Lincoln Bedroom? ( I and others toured it with Barbara Bush)
 
Unfortunately, the odds of their meeting around my kitchen table to discuss these matters are about as great as my receiving an invitation to a state dinner at the White House.
 
Yet Americans deserve to hear what McCain and Obama think about biotechnology and food.
 
Poll after poll indicates that although voters have many concerns--war, terrorism, social policies--pocketbook issues trump them all. Nothing else even comes close. A couple of weeks ago, a USA Today survey found that 43 percent of adults said “the economy” was the topic that mattered most. The “situation in Iraq” came in a distant second, with just 15 percent.
 
That’s why we can expect the two candidates to spend a lot of time discussing taxes, spending, jobs, trade, gas prices, and so on.
 
But they should also address the cost of food, an emerging issue whose pinch is just starting to make itself felt here at home. For a variety of complicated reasons, commodity prices are on the rise and consumers are going to foot the bill. Many of them already have noticed that a gallon of milk now costs about as much as a gallon of gas.
 
Rising demand around the world accounts for much of the price hike. More people continue to want better food--a remarkable challenge for food producers, but also a great opportunity for them to adopt cutting-edge technologies.
 
Because population and prosperity continue to grow around the world, we aren’t going to fix the demand side of the food equation. Nor should we want to: It would require a population crash, a global depression, or both.
 
Instead, we need to boost our supply. That’s where biotechnology comes in--and why the next president must take affirmative steps to guarantee that farmers both at home and abroad have access to it.
 
The genetic modification of crops has boosted yields everywhere it’s been tried. Research promises to do even more, adding new traits such as drought tolerance that will continue to enhance crop production.
 
Some researchers say they can double the yield of corn, soybeans, and cotton by 2030. The next U.S. president should emphasize the importance of this goal, and also encourage the spread of biotechnology so that it touches farmers in developing countries.
 
The United States can continue to give away billions in foreign aid, but it would be much wiser to help small resource farmers help themselves through access to biotechnology. It would make a huge impact on their quality of life.
 
Their hurdles aren’t scientific but political. European objections to biotech food are as stringent as they are ridiculous. It will take a skillful diplomacy to solve this problem--but the next president shouldn’t shy away from it.
 
I’ve scoured the Internet to learn what McCain and Obama have said about biotech food. A website called Sciencedebate2008.com has this statement from Obama: “Advances in the genetic engineering of plants have provided enormous benefits to American farmers. I believe that we can continue to modify plants safely with new genetic methods, abetted by stringent tests for environmental and health effects and by stronger regulatory oversight guided by the best available scientific advice.”
 
That’s a good start, though it reads a bit like a statement prepared by staff. I’d prefer to hear these words in Obama’s own voice. And I’d like to hear McCain say something similar.
 
Now that I’ve said my piece about food and biotechnology, it’s up to the debate moderators to make sure the candidates say theirs.
 
Over to you, Tom Brokaw, Jim Lehrer, and Bob Schieffer.
 
Dean Kleckner, an Iowa farmer, chairs Truth About Trade & Technology. www.truthabouttrade.org
 
 
 
 

Drive a ‘Steak’ Through the Heart of Protectionism

Sep 05, 2008
Americans weren’t the only ones who attended the political conventions over the last two weeks--a handful of South Korean lawmakers also traveled to Denver and the Twin Cities to watch the Democrats and Republicans nominate their presidential candidates.
 
The flight from Seoul is long, but a South Korean official called the conventions “a good networking opportunity,” according to the Yonhap News Service.
 
I hope the Koreans had a chance to network over a few tender steaks. It will have given them a taste of what they’ve been missing.
 
Until recently, Americans couldn’t sell beef in South Korea. That was the fault of the Koreans, who imposed a short-sighted and ill-conceived ban on our products. Now that the ban is lifted, however, we still can’t sell the Koreans as much as we’re capable of producing or they’re capable of buying. And that’s the fault of our representatives in Washington.
 
It’s time to drive a ‘steak’ through the heart of protectionism.
 
About five years ago, South Korea was the world’s third-largest buyer of US beef. Then sales were cut off, following a scare over mad-cow disease. Only in recent months have our producers regained access to South Korean consumers.
 
The good news is that we quickly captured about one-fifth of the South Korean market. The bad news is that while we were away, the Australians and New Zealanders swooped in to provide South Koreans with the meat they no longer could buy from Americans. Now we’re going to have to fight to win back the market share we never should have lost in the first place.
 
It would be a lot easier if Congress were simply to approve the US-Korea Free Trade Agreement, which our government finished negotiating last year. It can’t go into effect without the approval of Congress, and so far protectionists in Congress haven’t even bothered to schedule a vote.
 
The benefits for US beef are obvious. Over a 15-year period, the deal would wipe out tariffs that currently range up to 40 percent. Other meat producers would profit as well, with duties on pork and poultry put on a timetable for elimination.
 
Farmers would see their sales to South Korea surge, too. Everything from wheat and corn to wine and grape juice would have immediate, tariff-free access to South Korea. The American Farm Bureau Federation estimates that once the pact is fully implemented, sales of agricultural products will go up by $1.6 billion annually.
 
Exports create good jobs for US workers. They also reduce our country’s trade deficit. You would think that American lawmakers would do everything in their power to pursue these important goals.
 
The Central American Free Trade Agreement provides a good example of what can happen. Since it went into effect, the value of beef exports to the Dominican Republic has jumped by 40 percent. This year alone, pork exports have tripled.
 
The South Korean market is especially attractive. Its roughly 50 million people have a serious purchasing power that will only grow as their economy continues to mature. They’re also drawn to particular kinds of beef cuts that don’t sell very well in the United States.
 
Whereas many Americans like nothing more than a nutritious choice steak, South Koreans prefer to shred their beef and serve it with rice dishes. So our biggest export items include bone-in short ribs and chuck rolls. This unique demand increases the overall value of what we produce because these cuts are tougher to sell here at home.
 
A trade deal with South Korean would help us pry open a beef market that never should have been closed and do it faster. After all, the mad-cow scare of five years ago wasn’t confined to Korea. Other countries had concerns as well. But Canada and Mexico--two extremely important export markets for us--didn’t behave as rashly as South Korea, in large part because they’re our NAFTA partners.
 
We were able to address their concerns quickly and efficiently. A similar relationship with South Korea might have saved millions of dollars in sales and the American jobs attached to them.
 
Candidates running for federal office this year should pledge themselves to passing the free-trade agreement with South Korea.
 
Carol Keiser owns and manages cattle feeding operations in Kansas, Nebraska and Western Illinois. Mrs. Keiser is a Truth About Trade & Technology board member. (www.truthabouttrade.org)
 
 
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