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July 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.

Strategic Commodities

Jul 25, 2008
Americans used to behave as though offshore drilling was a painful dental procedure: They wanted to avoid it at all costs.
 
In Washington, lawmakers were so eager to ban it that they banned it twice. First Congress outlawed most of it, in 1981. Then the first President Bush outlawed it again, in 1990.
 
But the soaring price of energy is now driving everyone to, ahem, extraction.
 
Last week, our current president lifted the executive ban that his father had put in place. Senator John McCain recently announced that he supports offshore oil and gas exploration as well--a change of heart for him. Polls show that most Americans now support the repeal of federal bans, too.
 
These shifting views are the result of rising gas prices and environmentally safer technologies. The cost of fuel has never been higher and the risk of off-shore exploration has never been lower.
 
Farmers have a stake in this debate, and not just because they need to fill up their gas-guzzling combines and tractors. They’re also enormous consumers of natural gas—for energy and the production of fertilizer.
 
Like so much else, the price of fertilizer has shot up in recent months for a number of reasons, including increased global demand. Keeping the cost reasonable is in the interests of everybody, from the farmers who spread fertilizer on their fields to increase yields to the consumers who purchase what they grow.
 
Fuel, natural gas and food are strategic commodities, and so is fertilizer.
 
Earlier this month, the G8--the world’s eight wealthiest countries--met in Japan. “We are deeply concerned that the steep rise in global food prices coupled with availability problems in a number of developing countries is threatening global food security,” they said in a joint statement. They called for aid to famished people as well as for increased production.
 
It will be difficult to increase food production if the affordability and accessibility of fertilizer becomes a challenge. Farmers will have to spend more of their resources just to maintain their current production levels. And that’s not good enough: We need to break food production records every year just to keep pace with the demands of a growing global population.
 
Without fertilizer, food production around the world would drop by at least 40 percent and possibly more. The terrible result would be rampant malnourishment and mass starvation--a horrific dead zone, if you catch my drift.
 
Pulling natural gas from the bottom of the sea won’t work as a panacea, but it will begin to address a problem of added demand that’s having a big impact on burgeoning food prices.
 
Although estimates vary, federal geologists think that the U.S. continental shelf may hold 10 billion barrels of oil and 16 trillion cubic feet of natural gas in areas where exploration currently is banned. When these resources come on the market, they’ll do nothing but help the cost of energy, fertilizer, and food.
 
More research is needed as well. Dozens of projects are now underway to help us maximize the advantages of fertilizer. Different types of crops and soil have different needs. Farmers must know how much fertilizer to apply, when to put it down, and precisely what kind of mix to use. On our farm we do a complete scientific lab analysis of our soils every year and determine what nutrients are needed for a balanced exact fertilizer application program for the intended crop to be grown. At the same time, seed companies are working to develop crops that make the most efficient use of nitrogen.
 
Scientists always have known that fertilizer’s main benefit involves yield. But that may not be the only benefit. The fertilizer industry recently helped endow a professorship at Oklahoma State University.
 
“It is our hope that this professorship will encourage the expansion of an untapped and important area in academic research,” said Harriet Wegmeyer of the Nutrients for Life Foundation. “If, as predicted, a correlation between fertilizer and healthier foods is established, imagine the impact. An increasingly health-conscious public will finally regard fertilizers for what they truly are ... nutritious--for both plants and, in turn, people.”
 
To have enough fertilizer, though, we need enough natural gas. To have enough natural gas, we need offshore production.
 
Maybe we really do need to think about this issue in terms of dentistry. As with a bad toothache that won’t go away, we should let the drilling start as soon as possible.
 
Terry Wanzek grows corn, soybeans, and wheat on his family farm in North Dakota.  
Mr. Wanzek serves as a North Dakota Senator and board member of Truth About Trade and Technology (www.truthabouttrade.org)
 
 
 
 

Consensus

Jul 18, 2008
As trade ministers gather in Geneva next week to continue the World Trade Organization’s Doha round, they may want to reflect on another meeting that recently took place in Copenhagen. It should remind them of the huge importance of their work--and of a remarkable opportunity that they should seize immediately.
 
Under the auspices of the Copenhagen Business School in Denmark, an expert panel of eight economists, including five Nobel laureates, debated how the countries of the world might do the most good for the most people at the lowest cost.
 
Then they did something that doesn’t happen nearly enough: They came to an agreement. It’s called the Copenhagen Consensus.
 
Their top recommendation: Provide supplements of vitamin A and zinc for malnourished children.
 
Their no. 2 recommendation: Finish the Doha round.
 
Here’s a partial list of the ideas that the Copenhagen Consensus ranked as less pressing than the Doha round: lowering the price of schooling, preventing and treating malaria, combating the spread of HIV, improving rural water supplies, and fighting global warming.
 
Each of these is a worthy goal. With finite resources, however, we can’t pursue them all--at least not well. So we need to prioritize, and to figure out which goals deliver the biggest bang for the buck, the euro, and the yen.
 
It turns out that the Doha round represents one of the best opportunities available for improving humanity’s lot. At least that’s what some of the smartest people on the planet say.
 
Why does the Doha round matter so much? A successful pact would boost global income by $3 trillion per year, with $2.5 trillion of it going to the developing world, according to one analysis.
 
A press release for the Copenhagen Consensus described the rationale this way: “a comprehensive conclusion to the Doha development agenda would yield such exceptionally large benefits in relation to comparatively modest adjustment costs, both for the world as a whole and for the developing countries, that this solution was ranked second.”
 
The logic is simple. When trade barriers fall, people keep more of their own money rather than forking it over to the grasping hands of tariff collectors. That gives them extra cash to spend on food, education and health (perhaps including Vitamin A and zinc for their children). When people make these types of investments in themselves and their future, they can lift up a nation.
 
One of the objectives of the Doha round is to lower agricultural tariffs. These are essentially taxes on food, and they have the effect of pushing food prices higher. This is in addition to all of the other factors that are driving them up, such as the skyrocketing cost of fuel, loose monetary policies, and unpredictable weather patterns.
 
The economists involved with the Copenhagen Consensus aren’t alone in believing that the Doha round is crucial. Last week in the United States, the Democratic Leadership Council said that reaching a conclusion should be the “main effort” in the next president’s trade and financial strategy. A good first step would be for Congress to approve presidential Trade Promotion Authority--perhaps both John McCain and Barack Obama should say they support this idea, no matter who is elected in November.
 
The WTO talks have dragged on for seven years, with no result except a sorry tale of missed deadlines and lost opportunities. Pascal Lamy, the WTO’s director-general, recently warned that “the coming weeks represent the moment of truth for the Doha Round.” It would be a shame if the latest chance to conclude these negotiations were to slip away.
 
“It’s not very often you get five Nobel laureates being locked up in the same room for four days talking about the biggest world issues,” said Bjorn Lomborg, organizer of the Copenhagen Consensus. “I hope that the dedication they’ve put into compiling this unique overview of the best spending options to improve the world will resonate with decision-makers all over the world.”
 
The WTO meetings convene on Monday. We’ll see if they’re listening.
 
Dean Kleckner, an Iowa farmer, chairs Truth About Trade and Technology www.truthabouttrade.org
 
 

An Inconvenient Truth

Jul 11, 2008
I enjoy a good summer movie. Last week’s breaking news from Colombia could have been a spell-binding scene: Deep in the jungles of South America, military spies tricked a band of guerillas into forfeiting a group of prized hostages, who were then hustled to their freedom in a helicopter. The next day, a mother hugged her children for the first time in six years.
 
“It was an ending happier than any Hollywood director would dare to dream up,” commented The Economist. But this one was real: After years of trying and intensive planning, the Colombian government had freed 15 hostages, including three Americans, from longtime captivity among left-wing revolutionaries.
 
The rescue mission comes at a time when protectionists in the United States have been accusing Colombia of human-rights abuses because they don’t want Congress to approve a free-trade agreement. What will they say now that Colombians have risked their lives on behalf of American citizens?
 
They’ll probably ignore it--they’re experts at ignoring inconvenient truths. But the rest of us should take stock.
 
Most of the pubic attention has focused on Ingrid Betancourt, a onetime Colombian presidential candidate who was captured by a rebel group known as FARC in 2002. She grew up in France, and for six years that nation has followed her ordeal and the plight of her children.
 
The three Americans are Marc Gonsalves, Thomas Howes, and Keith Stansell. They didn’t receive nearly as much attention, in part because they weren’t as well known. More than five years ago, their drug surveillance plane went down in the wilderness. They survived the crash, but FARC took them hostage--eager to use them as pawns in its war of terror against a democratic government.
 
Over the weekend, the Americans released a joint statement: “We want to offer our heartfelt thanks to the Government and the Armed Forces of Colombia. The operation they conducted to rescue us was one for the history books--something we will never forget for the rest of our lives. Colombia is a great nation with a great people, and the struggle they have endured with the FARC for more than 40 years is a shining testament to their great spirit: like the loved ones here with us now, they never gave up in the belief that human kindness and decency would ultimately prevail.”
 
The rescue effort is a triumph for human rights: Today, 15 people who had suffered in jungle prisons have their freedom.
 
The sad irony is that the protectionist groups would like us to believe that Colombia is bitterly hostile to human rights--and therefore shouldn’t be rewarded with passage of the Colombia Free Trade Agreement.
 
Personally, I do not believe Congress should pass any free-trade agreement simply as a “thank-you” note to another country. These deals deserve approval only if they can stand on their own merits.
 
The good news is that the Colombia FTA does that – it makes economic common sense. The current one-way market access that favors Colombia will be changed, opening a market of nearly 50 million people to a wide-range of American-produced goods and services. Immediately, we would gain full access to Colombia for the sale of high-quality beef, wheat, cotton, soybeans; fruit such as apples, cherries, peaches, and pears; and processed food products like frozen French fries and cookies. Other barriers would fall as well with no agricultural products excluded from tariff reduction.
 
A decade ago, Colombia was a deeply troubled nation, torn by violence and rebellion. In 2000, however, President Clinton and a Republican-controlled Congress worked on a bipartisan basis to help the Colombians fight drug traffickers and revolutionaries, who were often the same people. That support, combined with the election of Alvaro Uribe as president in 2002, has made a huge difference: homicides, terrorist attacks, and kidnappings have dropped significantly.
 
So has violence against trade unionists--the ostensible concern of some of the more vocal opponents of the trade accord. Statistics vary, but the murder of trade unionists has fallen by at least 79 percent and possibly more. Today, trade unionists are actually less likely to be murdered than ordinary Colombian citizens, according to the New York Times.
 
So the truth is, the heroic hostage rescue is a success story within a success story. It’s time for Congress to approve the Colombia Free Trade Agreement.
 
Mary Boote serves as Executive Director of Truth About Trade & Technology.
 
 
 

Containing Cost

Jul 03, 2008
Barges get a bum rap. They aren’t flashy like NASCAR vehicles. They aren’t popular with kids like bulldozers and fire trucks. They certainly don’t go on interplanetary voyages like NASA probes.
 
The word is actually a bit of an insult. When we talk about people who “barge” right into the middle of something, we mean that they’ve moved clumsily and perhaps even ungraciously.
 
With $140 per barrel crude oil (today), when it comes to transporting material from point to point, nothing beats a barge loaded with containers.
 
Consider a few figures. A semi-trailer truck can move a ton of freight about 59 miles on a gallon of diesel. Railroads are a popular alternative because they’re much more efficient: With a single gallon of fuel, they can carry a ton of freight 386 miles.
 
Yet neither one can approach the incredible fuel efficiency of barges. By burning a gallon of fuel, they can ship a ton of freight 522 miles. That’s roughly the distance from Des Moines to Detroit.
 
The problem with barges is that they aren’t flexible. Trucks can drive on highways and make deliveries right to your doorstep. Trains glide along railroads that crisscross the country. Barges must keep to rivers and canals.
 
When heavy rainfall causes the Mississippi River and its tributaries to flood, the result can be a mess of frustrating bottlenecks. An executive at one company that depends on barges to move goods down the river recently told the Wall Street Journal that the current delays are costing him $1 million per day.
 
For farmers in the Midwest, barges are a primary means of shipping what we grow to consumers in the United States as well as around the world. In time, the floodwaters will recede and the holdups will disappear.
 
An even greater problem involves the scarcity of containers. Two or three years ago, we had a surplus of containers--so many that people were scratching their heads and trying to figure out what to do with all of the empty ones.
 
The latest figures from the Federal Maritime Administration bear out what a lot of us have been concerned about more recently: The number of empty containers available for cargoes such as corn, wheat, soybeans and DDG’s (distiller dry grains; a co-product of ethanol production) shrank dramatically last year. The problem has only gotten worse this year, as Americans export more and more goods abroad.
 
According to some reports, exporters can wait three to six weeks for containers to become available. In the meantime, they have to pay storage costs, which only add to the price of transportation--especially when a popular export item, such as meat, requires cold-storage facilities.
 
The Agricultural Transportation Coalition estimates that if more containers had been available, farm exports might have been 20 to 30 percent higher over the last six months. The international food crisis would have been slightly milder as well.
 
When the demand for containers was low, shipping costs were low. Now that the demand is high again, shipping costs have gone up and containers are harder to source. Eventually, the market will address the container shortage and we’ll get the supplies when and where we need them.
 
But it will take time. A public-policy solution may help the problem, especially in the future: Some exporters believe Congress should repeal shipping laws that give antitrust immunity to ocean carriers. Currently, these carriers can fix transportation rates--a practice that insulates them to market signals that might otherwise inspire a quicker response to shortages.
 
In addition, we need to update our transportation infrastructure system. It’s the backbone of a vibrant U.S. economic system and the ‘road’ that connects us to the rest of the world. Locks and dams, railroads, roads and ports are all outdated and in need of renovation and expansion. This is going to require some serious and strategic investment.
 
What amazes me is that, through all of this, when left alone, trade, trade agreements  and the laws of economics work. And when they do, we all benefit.
 
Tim Burrack raises corn and soybeans in partnership with his brother on their NE Iowa family farm. Tim is a Board Member of Truth About Trade and Technology. (www.truthabouttrade.org)
 
 
 
 
 
 
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