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February 2012 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.

Citizen Diplomacy: Agriculture Brings People Together

Feb 23, 2012

 By Mary Boote


American farmers need China.


We need access to Chinese markets so we can sell our crops to Chinese customers--something we’re now doing at record levels, in fact.


And here’s the really good news: China needs us too.


While politicians in Washington and on the campaign trail have made a sport of bashing Beijing, citizen diplomacy here in the heartland shows us that China is best understood not as a geopolitical rival but as an economic partner.


Our relations should grow warmer, not colder--and last week they took a step in the right direction.


Chinese Vice President Xi Jinping--slated to become his country’s next President--toured the United States, with stops in Washington, D.C., and Los Angeles.


In between these coastal visits, he spent a couple of days in Iowa, attending a dinner in his honor at the state capitol in Des Moines. We ate a traditional Iowa meal, including sweet-corn cheesecake for dessert, and sipped green tea instead of coffee.


The next day, Vice President Xi visited the farm of Rick and Martha Kimberley, not far from Des Moines, near the small town of Maxwell, Iowa. "I hope that everything you plant this spring will have a good outcome at harvest," he said.


As it happens, China has a stake in the Kimberley’s harvest. Last year, it bought $20 billion in agricultural products from the United States, half of it in soybeans and much of the rest in corn and pork. China buys more American soybean exports than any other country--about 60 percent of what we shipped abroad last year.


Much is made of the U.S. trade deficit with China. In agriculture, however, we enjoy a trade surplus.


This success translates directly into jobs. The Department of Agriculture estimates that farm exports to China support 160,000 workers in the United States.


Our two countries certainly have differences. We battle over how China values its currency. We don’t always see eye to eye on national security. China must improve its human-rights record and begin to observe intellectual-property rights.


Many politicians prefer to view China as a threat. In his recent State of the Union address, President Obama grumbled about "unfair trading practices." In a Wall Street Journal op-ed last week, Republican presidential candidate Mitt Romney issued his own complaint: "A trade war with China is the last thing that I want, but I cannot tolerate our current trade surrender." And on February 20, in a Detroit News op-ed, Republican candidate Rick Santorum criticized China’s trade policies, suggesting that he would eliminate taxes on manufacturing activity for ‘homegrown’ industries.


Perhaps they should pay closer attention to what just happened in Iowa. Xi put the state on his itinerary partly because he hoped to show how much he values U.S. agriculture. He also wanted to take a trip down memory lane. In 1985, when he was a minor government official, he stayed for two nights on a farm in Muscatine, Iowa, by the border with Illinois.


Economic interdependence, combined with Xi’s evident fondness for Iowa, bodes well for future relations between the United States and China.


They’ll keep buying and we’ll keep selling, in a mutually beneficial relationship.


If the voices of China’s critics grow too loud, however, we risk everything. Threatening crackdowns on "unfair trading practices", eliminating taxes to protect "homegrown industries" and speaking openly of "a trade war" could hurt American business – including farmers.


Last year, China imported 1.75 million tons of corn, and 96 percent of it came from the United States. Some experts think China will import as many as 9 million tons of corn annually in the near future--an astounding opportunity for American farmers.


Yet there’s no guarantee that we’ll enjoy as much of it as we should. On the day that Xi was in Iowa, a Chinese delegation in Buenos Aires signed an agreement that will provide Argentine corn farmers with the kind of access to Chinese markets that Americans now have.


Clearly, if we say that we don’t want China’s business, China will find a country that does.


All around the globe, agriculture brings people together--and there’s no reason why it shouldn’t also help unite the world’s most prosperous nation with the world’s most populous nation.


Mary Boote serves as Executive Director for Truth About Trade & Technology www.truthabouttrade.org

Powered By Biotechnology

Feb 16, 2012

 By Reg Clause:  Jefferson, Iowa

Imagine a consumer food product with an edgy image trying to call the bluff of anti-biotech activists.
What if Mountain Dew advertised not just cleverly-named flavors on its colorful cans--Baja Blast, Code Red, LiveWire, Voltage, etc.--but also that its drinks are "powered by biotechnology"?
They already are, in fact. One of the chief ingredients of Mountain Dew is high-fructose corn syrup. That’s a fancy way of saying "sugar derived from corn."
Because the vast majority of corn and soybeans harvested in the United States are genetically modified, Americans put biotech food into their bellies every day. If they aren’t sipping it in their sodas, they’re chewing chips made with it or enjoying meat that comes from livestock raised on it.
Most of the products stocked on America’s grocery-store shelves can make a plausible claim that they’re "powered by biotechnology."
So perhaps they should, if only to show up the professional protestors who want to slap warning labels on every food item that relies on modern methods of agricultural production. These activists seem to think that Americans don’t know what they’re eating--and that they’d recoil in horror if they realized that farmers use genetically improved technologies on a daily basis.
But the more important thing is to show American consumers the respect they deserve.  While it’s almost certainly true that most Americans couldn’t explain the finer points of recombinant DNA, they do trust their food. They know it’s safe and abundant and that it comes from farmers who put what they grow on their own dinner tables.
Do we really think consumers won’t rearrange their dietary habits if food companies are fully candid on the label about biotech?  It’s what we don’t know that worries us most. Does such a label reveal something scary or remove a reason to wonder?
Yet the anti-technology idealists who hate biotechnology believe that mandatory labels are a smart political strategy--and they’re trying to put the issue in front of voters.  They want to cast the resistance to labeling in a sinister way.
They’ve turned to politics out of desperation as a "Plan B", having lost at the regulatory level. The Food and Drug Administration has refused to require the labels they crave, for the perfectly good reason that GM foods pose no special concern to consumers. From the standpoint of human health, they’re the same as foods that don’t include GM ingredients.
The FDA is hardly alone in reaching this conclusion. It’s joined by the American Dietetic Association, the American Medical Association, the Research Council of the National Academies of Science, and the United Nations Food & Agriculture Organization. They’ve all studied biotech foods and have determined that they’re perfectly safe for people to eat.
In California, activists are hoping voters will reach a different conclusion--or, to put it more precisely, they’re hoping they can persuade voters to arrive at a different conclusion. They intend to put an initiative on the November ballot. If it qualifies and voters approve it, the state would require food labels to announce the presence of GMO ingredients.
If this happens, details will matter. A mandatory label could require a simple line, such as "This product may contain GM ingredients." Or it could demand a biohazard symbol, which of course would be absurd.
What the activists really want is a national policy--a federal requirement to label GM food--and most likely they want it to look like a warning label.
They’re attracting high-powered allies. Just last month, Gary Hirshberg, the CEO of the organic yogurt company Stonyfield, announced that he’s stepping down from his job and will spend his time pushing for the mandatory labeling of GM foods.
A lot of the money for these efforts in California and at the federal level will come from the organic-food industry, which believes it can achieve a market advantage if non-organic products have to wear a label that will raise unnecessary questions in the mind of consumers.
How about we all stop playing these silly games and contributing to the confusion and potential mistrust of consumers for technical progress on food safety and quality.  Consider labeling, control the details and move ahead proudly on behalf of our customers.
Reg Clause owns a 4th generation family farm near his home in Jefferson, Iowa.  His next generation grows corn, soybeans and cattle and the 6th generation is there too.  Reg volunteers as a board member for Truth About Trade & Technology.

Numbers Matter

Feb 09, 2012

The US Must Increase Export Volume AND Dollar Value

By Bill Horan, Rockwell City, Iowa
They say that numbers don’t lie. To know the whole truth, however, you need the right numbers.
That’s why we should treat President Obama’s latest boasts about exports with skepticism.
"Two years ago, I set a goal of doubling U.S. exports over five years," said President Obama in his State of the Union address last month. "With the bipartisan trade agreements we signed into law, we’re on track to meet that goal ahead of schedule."
In two senses, he’s correct. In a third sense--a very important one--he’s misleading.
Let’s start by giving the president credit where he deserves it. President Obama rightly praised those three bipartisan trade agreements, approved by Congress in the fall. The deals with Colombia, Panama, and South Korea will create new export opportunities for American farmers and manufacturers. That means more jobs here in the United States.
If President Obama can add to this positive momentum by completing the Trans-Pacific Partnership--a multilateral agreement involving the United States and Pacific Rim nations, possibly including the big prize of Japan--then he will go down in history as a champion of free trade. He’ll also make it easier for Americans to boost exports not just during the five-year timeframe of his promise, but for a long time into the future.
The dollar value of U.S. exports also is rising--and for this, the administration deserves praise as well.
But let’s not trick ourselves into thinking this is a world-beating achievement. President Obama made his pledge in 2010, meaning that when he promised to double exports, he was looking at numbers from 2009. That’s his baseline.
The President enjoys a big advantage by starting with those 2009 figures. Due to the global recession, U.S. exports dipped in 2009. They were worth $2.09 trillion, less than they were worth in both 2007 ($2.14 trillion) and 2008 ($2.38 trillion). So a portion of any increase above the 2009 figure was simply a recovery.
Perhaps this is nothing to take for granted. No iron law says the value of exports must rise all the time, no matter what. Yet a certain amount of the progress we’ve seen since that State of the Union pledge has involved a return to normality, not the breaking of new ground. We must understand this fact clearly.
As it happens, the value of exports in 2010 was about the same as in 2008.  So 2009 was an abnormally bad year that defied a general upward trend--and an unusually good starting point for the President to make a promise. Between 2009 and 2010, exports jumped about 16 percent. They’ll jump again in 2011, thanks in some measure to a record-setting year for farm exports. (This year may be different: Secretary of Agriculture Tom Vilsack recently warned that farm exports in 2012 probably won’t match the mark they set in 2011.)
We don’t have complete data for last year yet, but it looks like the rise in the value of exports between 2009 and 2011 will approach 40 percent. So, despite all of these caveats, President Obama has every right to say he’s "on track" to meeting his promise of two years ago.
There’s just one problem: The Obama administration is using the wrong measurement.
The dollar value of exports is important and we should applaud its rise. But even more critical is the volume of exports--the amount of raw stuff that we’re selling to customers in other countries. This is what really counts.
On this measure, unfortunately, we aren’t keeping pace. Agriculture has boomed in value. Between the crop years ending in August 2009 and August 2011, however, the volume of our corn exports actually declined.  In 2009, the U.S. exported over 47 million metric tons (MMT)) of corn, with a value of $9.3 billion all over the world. In 2011, the dollar value of corn exports rose to $12.9 billion but we sold just over 45 MMT. By the time we finish 2012, estimates suggest that the volume of corn we sold to our overseas customers will have decreased by 14 percent since 2009. 
We still lack adequate data from other industries to draw firm conclusions about the real health of our exports, but initial signs suggest that we’re nowhere near doubling our volume by 2015.
Dollar value is a reflection of many factors, including fluctuations in commodity markets and inflation. Volume is simply a better indicator of true economic health.
President Obama wants us to think our exports are doing fine--but the truth is that we can and must do better.
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 for Truth About Trade & Technology www.truthabouttrade.org

Take the President's China Trade Enforcement Unit Back to the Drawing Board

Feb 02, 2012

 By Dean Kleckner

"I will go anywhere in the world to open new markets for American products," said President Obama last week, in his State of the Union address.
He also indicated that he’s willing to risk a trade war with China, possibly leading to a result that’s the exact opposite of his stated goal: the swift closure of new markets for U.S. goods and services.
President Obama entered the White House three years ago as a protectionist candidate who spoke of withdrawing from the North American Free Trade Agreement. Once in office, he felt the burden of responsible governance and reversed course, promising to double exports in five years and embracing the free-trade agreements negotiated by his predecessor.
Last week, however, the president switched back to campaign mode. He defended his record on trade, but also went on the offensive against China, announcing the creation of a "Trade Enforcement Unit" that will investigate "unfair trading practices", search for "counterfeit or unsafe goods," and file formal complaints, presumably with the World Trade Organization.
The populist rhetoric was pitched at a public that’s always a little nervous about free trade. A few months ago, polls suggested that Americans were split on the merits of the free-trade agreements with Colombia, Panama, and South Korea as well as proposals to slap special tariffs on Chinese imports.
President Obama’s speech also served the political purpose of keeping stride with Mitt Romney, the GOP presidential candidate who goes out of his way to bash China.
Sticking up for China isn’t easy, of course. Its approach to intellectual property rights is akin to organized banditry. This problem grabbed the attention of every American who uses the Internet on January 18, when Wikipedia went dark and Google redacted its logo to protest legislation aimed at protecting copyright holders. China also keeps its currency at artificially low levels, giving its exports an advantage in global markets.
These are genuine problems. But a trade war won’t solve them. It would raise prices on consumers, hurt export opportunities for businesses, and fail to achieve its main objectives. None of this would help the struggling U.S. economy.
Consider the administration’s special tariff on low-priced tires from China. If the United States initiates a trade war against Beijing, historians may point to this skirmish as the opening salvo in a wider conflict.
In his State of the Union address, President Obama praised his policy, adopted in 2009, of slapping special duties on cheap tires from China. "Over a thousand Americans are working today because we stopped a surge in Chinese tires," said the president.
That’s simply not true. As a report in the Wall Street Journal recently showed, this bit of targeted protectionism probably didn’t save a single American job. Manufacturing simply moved from China to Indonesia, Mexico, and Thailand. "So far as saving American jobs, it just isn’t working," said a spokesman for the 6,000-member Tire Industry Association.
Meanwhile, China retaliated with its own tariffs on American chicken exports, doubling the prices of some products and shrinking the U.S. share of China’s chicken market. The move was so damaging that Ambassador Ron Kirk, the U.S. Trade Representative, complained that China was "threatening American jobs."
The Obama administration can’t have it both ways, claiming to save jobs when it pursues protectionism and griping about threatened jobs when competitors strike back.
This illustrates the weird logic of trade wars. A dispute that the Obama administration thought would involve only a sub-sector of the tire trade suddenly hurt American agriculture. Trade wars have a terrible tendency to spread through unrelated industries like a deadly contagion, until they infect the whole economy.
There are better ways to confront Chinese malfeasance. Congress should try to write a law that protects intellectual property rights but doesn’t make Internet companies go hysterical. Encouraging China to let the value of its currency rise may be even trickier, but old-fashioned diplomacy is a better option than brass-knuckled protectionism.
President Obama says he’ll "go anywhere" to help sell American products. When it comes to his "Trade Enforcement Unit," he should go back to the drawing board.
Dean Kleckner chairs Truth About Trade & Technology (www.truthabouttrade.org)
Note: a version of this column first appeared this week in The Washington Times.
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