I am finally getting back to doing posts about the SD Governor’s Agricultural Summit 2015 held in Deadwood on July 9th and 10th. This post will focus on Session 2 of the summit, which was titled “Trade Opportunities For South Dakota Agriculture”.
There were three panelists that participated in this session:
- Dr Dermot Hayes, Iowa State University
- Director Greg Ibach, Nebraska Department of Agriculture
- Senator John Thune, US Senator for South Dakota
The presentation can be viewed in the following YouTube video. Session 2 begins at 2:18:00 and ends at 3:25:00.
In this post I will report on some areas I found interesting. Then I might add my opinions here and there.
Dr Dermot Hayes presentation:
Hayes noted that North America is unusual in the world because percentage-wise it has a vast majority of the good crop land without a lot of people. He noted that Asia in particular has the opposite. In Asia there is very little good crop land available in proportion to how big the population is. This problem in Asia will continue to get worse as the population grows and as cities continue to grow. The areas that make good cropland also happen to be where the large cities exist and are expanding.
Hayes noted that the land needed to feed those in Asia is available here in the US. He seemed to convey that the ideal situation for trade would be to find a solution to allow Asia, especially China, to access our markets and for our producers to sell in Asian markets without trade policies getting in the way. Hayes did lose me a bit when talking about this topic because he almost made it seem that people in China were entitled to access from land in North America. I do believe the free market is the best way to allow people in China to access goods produced in the US, especially in Ag. Yet it makes me nervous when economists start talking as if some sort of intervention is needed for the markets to connect.
Hayes did say that over the last twelve years China has started to import certain land-intensive crops such as soybeans. There are still barriers to importing other crops such as corn. China has also become a huge importer of beef and pork. That of course is of great interest to ag producers in the Midwest.
Going forward Hayes says there is change coming in China. New leadership in China is open to free market principles and implementing pro-market reforms. Of course he notes there are still political and military barriers to these reforms. I hope Hayes is right, but I don’t feel China or the US will give up many of its protectionist trade policies that go against free market principles.
Greg Ibach presentation:
Ibach said that Nebraska is marketing itself overseas to help grow their agricultural sector. The state is working hard to make Nebraska a brand that other countries want for ag products.
When talking about eliminating trade barriers, Ibach noted that tariffs need to be eliminated. When a country adds tariffs to the products we export to them it can often raise the price of that product to a rate that can’t compete. Eliminating tariffs is one part of free trade agreements I actually agree with (too bad free trade agreements tend to have other forms of protectionism in them).
Going on Ibach noted that sanitary and phytosanitary restrictions can create barriers. He said that sanitary restrictions are not generally the problem, because they protect herds and plant life. But phytosanitary restrictions allow countries to create standards that go against scientific standards, especially when it comes to technologies used in ag. I wish he had expanded on this part of this presentation to talk about GMO’s.
Ibach the spoke briefly about trade agreements. He said the Trans-Pacific Partnership (TPP) has “become the model for future agreements”. Personally I hope he is wrong. I have blogged about TPP quite a bit and I hope Ibach is wrong. From my standpoint the US should not be expanding secret trade deals that can’t even be read by the American people. But I’ll stop there and leave that as a topic for a follow-up post.
Going on about TPP, Ibach believes it will open Asian markets. Further he said it sends a message to China that their markets will have to open up. Of course I would note this is already happening without TPP…
Ibach also spoke about the Transatlantic Trade and Investment Partnership (TTIP). He noted this agreement will be harder to get passed because of the number of protectionist barriers that exist to keep products out of Europe. Over time Ibach notes that Europe has gone from being a competitor in the market to a net importer. He also briefly mentioned Europe needs to be more open to bio-technologies (I really wanted him to expand on that!).
Looking at the future Ibach believes the US needs to work to get more trade agreements. In his conclusion he noted that the ag industry in the US has to find its place within the global market. He believes the US can compete both in low-cost and high value markets.
Senator John Thune presentation:
Thune noted that things in DC are “warming” and that a few things are actually getting done. He said committees are working again and that bills and amendments are being taken up on the Senate floor. One of those items was Trade Promotion Authority (TPA). Thune says that without TPA it would be hard to get any trade agreements passed. TPA, according to Thune, provides a direction for trade negotiators and expedites the negotiations. In particular he highlighted the need for TPA in regards to TPP and TTIP.
Thune believes both TPP and TTIP are important to open up trade in the ag industry and that neither would pass without TPA. He noted that going back to the 1930’s that only one trade agreement had been passed without some sort of expedited authority like TPA. While talking about TPA Thune noted that he was not doing this to support Obama. Thune said Obama is only going to be around for another 18 months, and that TPA will be there for 6 years. So, Thune wanted to make sure that whoever replaces Obama will also be able to handle trade agreements. He went on to say that in order to be at the table for trade agreements that TPA is necessary. I disagree, but that again is a post for a different day.
Thune hoped TPP could be done soon (I am very late in doing this post, TPP is now finalized and waiting for a vote). He had some concerns about TPP, such as tariffs on dairy in Canada. I wish Thune had gone into that talking point deeper. He really didn’t say what he thought would happen with that.
Thune than talked about the importance of TPA being that it will allow and up/down vote without having to amend. Personally I think that is the problem with TPA. It is a method that says either agree to the whole agreement, or don’t. Basically TPA allows trade negotiators to set policy that cannot be changed by Congress. I would think a conservative Senator would worry about that aspect.
It is the economic impact of exports that Thune states as his reason for supporting these trade agreements. He noted that record exports occurred in the ag industry last year. The tariffs in the countries we are exporting to are holding back exports from being what they should be. By entering these trade agreements Thune believes some of these tariffs will be overcome.
Thune ended his talk about TPA by saying it was important for national security. He believes that economic dependence prevents attacks. Since everyone around the world wants products made in the USA they would not want to attack us and risk losing that trade. Personally I think Thune was grasping for any sort of war hawk talking point he could bring to the trade debate….
There was one Q&A question for Thune before he had to leave. He was asked about the EPA and what he thought about the Chesapeake Bay victory for the EPA. Thune said the regulator overreach of the EPA is holding back the economy and keeping jobs down. He doesn’t think there will be any relief from regulations as long as Obama is President. Instead of through Congress, Thune said the courts can be used to slow down the EPA enough until the current White House administration is replaced. I noticed that Thune didn’t talk about Chesapeake Bay at all. Too bad, I thought it was a good question and would have like to hear Thune actually get specific about Chesapeake Bay.
That was really the only QA question I had any interest in.
Overall I was not a fan of this portion of the Ag Summit. At times it felt like it had been setup specifically to promote trade agreements. If trade agreements were simply about removing barriers I would find that great. But trade agreements such as TPP and TTIP go well beyond opening barriers and act as a back door to creating new regulations and rules that must be followed in the US. Further, these new rules and regulations cannot be modified by Congress.