How does trade affect me?

How does trade affect me?

I recently worked with Farmers for Free Trade to shoot a national ad focused on the importance of trade. The group bought ad space in on networks President Trump is known to watch as well as during shows he is known to watch. These ads (while available on YouTube) will air on the Washington D.C. and Mar a Lago affiliates for FOX, MSNBC, and CNN. Trade has become an area I am increasingly interested in studying as well as advocating for. I have previously written about trade, NAFTA 2.0, but participating in this ad made me realize I needed to personalize the case for trade. In order to advocate for trade, a notoriously complex, slow moving, and polarizing policy issue, I needed to convey why trade is important to me. Why it is important to our farm, our state, and our national agriculture economy.

Why is trade important to our farm? 

We rely on export markets to provide us with consistent outlets for our grain. Unfortunately there is not enough demand domestically for wheat. Also unfortunately we do not necessarily have the ability to change the crops we raise for numerous reasons, which I have discussed previously, here. We pride ourselves in our ability to produce high quality hard red winter and spring wheat that is in high demand in the Asian markets. They need/want our wheat to produce products that are popular in those markets, including noodles. We want to maintain these markets as an outlet for our production.

Trade however is a difficult benefit to quantify for individual operations, I cannot give you economic data for the benefits to our individual operations because of previous free trade agreements, I cannot give you expected market share growth for our individual farm. These data metrics do not exist and would be nearly impossible to quantify. I am left to rely on economic data geared toward the entire state or the entire nation. I am left with the evidence we have seen that very clearly shows the benefits of free trade agreements in agriculture.

Here is what I can tell you though, my personal, gut, feelings on trade and its impact on our operation. The current trade policy and shift towards protectionist policies keeps me up at night. Never before have policies and government regulations caused me to lose sleep. I do not lose sleep because I think the grain markets are going to crash tomorrow, that is not the way it works. I do not lose sleep because I think our market share will disappear tomorrow, that is also not the way it works. I lose sleep because I know agriculture trade is incredibly competitive, our ability to increase market share is limited, trade policy is incredibly slow to develop (and requires at least 2 willing partners), and because I know every day that goes by under our current policies risks our market share. It risks decades worth of work done by individual farmers through our commodity commissions, trade negotiators, other government officials and others.

Like most farmers I dream of the day my children take over the farm, I dream of giving them a better agricultural economy and a better operation than I started with (not that there was anything wrong with our operation but there is always room for improvement). Our current trade policy puts that dream at risk. We risk not having enough export markets, we risk losing valuable market share forever, we risk undoing decades of work to provide our international customers with the products they need, and we are quite literally risking the future of agriculture. I realize that sounds dramatic, and bordering on doomsday, but unfortunately the worst case scenarios are in play.

Why is trade important to our state? 

In 2016 Montana exported $1.6 billion in agricultural products. Agriculture is also the number on economic driver in Montana. We depend on our export markets to maintain that economy for the state. We have already seen the damage a down agriculture (and natural resource) economy does to our state’s budget after we missed revenue forecasts in 2017. We can debate about the actual fate of the rainy day fund and how the state spends its money but the bottom line is – a $300 million fund – disappears in a hurry when agriculture struggles.

Montana has a proud history of producing high quality wheat, barley, and beef among many other products. These products are in high demand across the globe, largely because of the high quality. We produce some of the highest quality hard red wheat (both winter and spring) as well as durum in the world. Many of the most competitive markets for these products demand Montana raised products. The Montana Wheat and Barley Commission in conjunction with U.S. wheat has spent decades developing relationships with Japanese buyers to ensure we can supply them with the quality they demand. The Montana Wheat and Barley Commission has traveled to Japan countless times as well as welcoming their trade teams to our farms. On average the MWBC welcomes 13 trade teams and 60 visitors annually who are either current customers or potential customers for our products. Despite their hard work their ability to attract and maintain those relationships hinges on our free trade agreements. The TPP11 agreement without the U.S. gives Canada and Australia a $65 per metric ton discount compared to U.S. sourced wheat, this is a tariff reduction that we will not be able to overcome, despite years of market building.

Mexico represents Montana’s top barley market. Barley production in Montana was worth roughly $250,000,000. Mexico is a major part of that equation as our exports have expanded considerably since NAFTA was signed over two decades ago. Our relationship has flourished so much that Cuauhtémoc-Moctezuma-Heineken (CCM/Heinken) sourced 100% of their barley from Montana in 2017 and occupies 40% of Malteurop’s barley facility capacity in Great Falls. In 2017 CCM/Heinken imported 100,000 metric tons of barley from Montana into Mexico. If you are not familiar with the company name – you may be familiar with one of the final products they create: Dos Equis. Prior to NAFTA any barley or malt imports into Mexico were slapped with a hefty tariff: 128 and 175 percent respectively. According to a recent article from U.S. Grains Council this relationship is in jeopardy because of the uncertainty surrounding NAFTA 2.0. Despite years of crafting this relationship, private industry forging their own agreements and relationships, our uncertain trade policy is forcing companies such as CCM/Heinken to look to other export markets.

“Competing supplies from Europe that have still been subject to this quota and tariff system will gain duty-free access this year, making NAFTA’s duty-free access not only a selling point, but a necessity for U.S. barley and malt to remain competitive. CCM/Heinken confirmed the company will need to look elsewhere for their malting barley needs should NAFTA be terminated and tariffs on U.S. barley be re-imposed.”

Why is trade important to our country? 

Agriculture trade has been growing exponentially over the past 50 years. So much so in fact that we have had a trade surplus in agricultural goods for the past 50 years as well. In 2015 the agricultural industry created over $400 billion in economic activity and contributed to almost every facet of our economy. Across the nation agriculture maintains our rural economies and creates vital jobs throughout our communities. Trade policy throughout the past several decades has opened up new markets for agricultural exports, increased access in existing markets, and lowered or eliminated various tariffs and technical barriers to trade. Opportunities for improvement still abound however the benefits far outweigh the drawback for the agricultural community.

In a letter to President Trump in early 2017 many, many industry groups urged President Trump to “do no harm” to NAFTA and maintain our vital export markets in a letter. One of the most compelling stats in the letter is as follows:

“Although some important gaps in U.S. export access still remain, increased market access under NAFTA has been a windfall for U.S. farmers, ranchers and food processors. U.S. food and agriculture exports to both countries have more than quadrupled, growing from $8.9 billion in 1993 to $38.6 billion in 2015.”

The increase in market access and increase in economic activity has been a significant driver in the improvement of our rural economy. Unfortunately that rural economy continues to be under threat, a threat that risks significant economic impacts, as well as a domino effect that impacts every facet of our economy.

Conclusion

I have become passionate about international trade, I am passionate about the agricultural industry and our export partners, and I am passionate about the future of our industry. We depend on trade to maintain our export markets, ensure we have the ability to pass on our farmers to a future generation, and to ensure the rural economies stay strong for decades to come. I also understand trade is not perfect. International trade, bilateral agreements, and multi-nation free trade agreements will always have winners and losers. It is a difficult situation to deal with, it is delicate to advocate for, and it is a fact that does cause me great concern. It is also increasingly difficult to stand by and watch protectionist trade policies risk the future of agriculture and more importantly risk the future of my own farm. Agriculture, particularly the wheat and barley industry, depend on maintaining our current market access, increasing access to new markets through free trade agreements, and improving our current agreements. Trade does not thrive on protectionism and uncertainty. As Floyd Gaibler of US Grains Council once said: “Agriculture and trade are intricately tied together.”

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