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WET MARKETS EXPOSE GLOBAL WILDLIFE TRADE

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Archives, Global Trade Daily, International Trade

WET MARKETS EXPOSE GLOBAL WILDLIFE TRADE

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A Watershed Moment for Preserving Lives – Theirs and Ours

Wildlife trade where exotic animals are sold for parts, food or medicine – even as pets – is multibillion dollar business. One in every five wildlife species is at risk of being ensnared in wildlife trade, driving an estimated 8,775 species to the edge of extinction.

Human consumption of wild animals has long been a public health concern, linked to the origin of outbreaks such as Severe Acute Respiratory Syndrome (SARS), Middle East Respiratory Syndrome (MERS) and Ebola Virus Disease. Nonetheless, China is reopening wet markets where COVID-19 may have originated, albeit with purportedly improved regulations on hygienic conditions.

On February 24, China announced a ban on the sale and consumption of wild animals in China. But China’s Ministry of Finance announced on March 17 it would increase the tax rebate on an array of exported products, including edible snakes and turtles, primate meat, beaver and civet musk and rhino horns.

Wet markets featuring exotic species are not uncommon throughout Asia. Wildlife farms (an oxymoron) also raise animals for traditional medicines. And in an unrelated problem — as uncovered in the recent Netflix hit Tiger King — purveyors of tigers, leopards and other big cats continue to fuel the fantasies of Americans who want selfies with a baby cub. Spoiler alert: at the end of the series, it’s revealed there could be 5,000-10,000 tigers living in captivity in the United States compared with 4,000 in the wild.

Has the strange confluence of Joe Exotic and COVID-19’s potential origins from a bat in a wet market finally brought the world to a watershed moment in wildlife trade?

China Rebates Exports of Wild Exotic Animals

No Trade Without Demand

Attempts to prevent or limit wildlife trade often focus on the supply side. But trade is driven by consumer demand. It’s the demand for wild animals and plants that signals there’s money to be made both illegally and legally.

Wildlife harvested for food encompasses a broad range of practices, from illegally importing ultra-rare exotic animal meat such as African gorillas and elephants, to the sustainable and legal Australian kangaroo meat trade. According to the UN Food and Agriculture Organization, wild meat is often the only available source of animal protein in poverty-stricken areas, where it’s unlikely to be internationally traded.

However, there is evidence that urbanization is driving increased demand in commercial trade of wild meat because of the relatively higher prices paid by urban dwellers. Increasing affluence (particularly in Southeast Asia) has increased demand for wildlife products, which have taken on luxury status. For example, in some Asian countries, consuming certain species is believed to help the eater absorb the animal’s strength and resilience. Nonetheless, consuming wild animals carries significant danger of transmitting zoonotic diseases that can occur through any contact with the animal or meat, via the hunters, middle market distributors, sellers in the market or consumers.

Many wild animals are hunted for the purported medicinal properties of their organs, bones and skin. The endangered pangolin is believed to be the most-trafficked animal in the world. Their scales are ground into various medicines to treat anything from malarial fever and deafness to “demon-possession” in women. Despite the illegality of killing them, huge quantities are still seized by customs officials while being smuggled from their native habitats in India and Myanmar. African wildlife, including crocodiles, elephants and rhinos have long been poached for use in traditional medicine, exported mostly illegally, though some hunting for trade is managed and legal.

Endangered and non-endangered wild animals are also traded and transported live to be sold as exotic pets. According to U.S. pet ownership statistics from 2017-2018, over 18 million U.S. households owned some form of exotic or specialty pet, totaling just shy of 90 million individual animals. This number includes hundreds of species of fish, wild birds, reptiles and mammals like macaws, iguanas and monkeys.

Shifting Trade Routes for US CITES imports

Explanation of Visual Tool and Data

Regulating Legal Wildlife Trade

When picturing international trade in wildlife it’s easy to jump to images from the news of monkeys being smuggled in underwear or elephant poaching in Tanzania. However, a huge amount of wildlife trade occurs legally for breeding, biomedical research, exhibitions, conservation and even law enforcement and forensic work.

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is an international agreement ratified in 1975 to which 183 countries are now a party. It was negotiated to ensure that international trade in specimens of wild animals and plants does not threaten their survival. More than 37,000 species are categorized by the degree of protection they need. Trade in species threatened by extinction is permitted only in exceptional circumstances. Trade must be controlled for species where their utilization is incompatible with their survival. A third category includes species that are protected in at least one country that has asked other CITES parties for assistance in controlling the trade. All forms of trade in animals covered by the agreement must be authorized through export quota and licensing systems.

According to CITES data, over a million legal transactions involving live animals or their by-products such as fur, skins and dried herbs occur each year, and this does not include the millions of transactions involving species not on the CITES protected list. The CITES Trade Database may represent the largest data collection currently available on the sustainable use of wildlife. Each “record” in the database provides details of one permitted shipment (import, export or re-export) of live or dead animals and plants and their parts and derivatives. Below is an example of data extracted from the database on the number of “big cats” covered in the panthera genus that were traded live in a given year.

Number of Big Cats Traded Live Per Year

Participation in CITES aids governments in regulating and monitoring legal trade in animals, supports conservation efforts by making species easier to track, and arguably provides communities with an incentive to keep native populations healthy and thriving, for the subsistence of local communities and as a resource to cultivate for their livelihoods. For example, CITES has supported the growth of community-managed vicuña populations in Bolivia and Peru, which are shorn for valuable fiber.

However, despite the best efforts of agreements such as CITES, the legal trade in animals is still a grey area. Ethical concerns exist over whether there is any acceptable way to transport live animals, and introducing non-native species to new habitats can sometimes wreak unexpected ecological and economic havoc, even with good intentions. The United States imported over 800,000 plants and live animals covered by CITES in 2018, including wolves from Sudan, bears from Canada, and flying foxes from Indonesia.

Illegal Wildlife Trade On Par with Illegal Drugs and Weapons

Illegal international trade in wild animals is worth billions, comparable in size and scope to the illegal drug and weapons trades, making it one of the largest black markets in the world.

Civil conflict and wildlife trafficking often go hand in hand. In countries mired in conflict and suffering from weak governance, criminal organizations and militia groups are reaping huge sums of money from wildlife trafficking with terrible knock-on effects for society along with the animal population. In the Democratic Republic of Congo, for example, armed groups sustain conflict from the money made from poaching and illegal wildlife trafficking. Youth are being torn from their families, conscripted into poaching, while the community suffers violence and economic setbacks.

A Pivotal Moment in Wildlife Trade

What more can be done to protect wildlife? One solution is to reduce consumer demand. China has increased public health and safety warnings about the consumption of wild animals and has conducted raids and arrests for those found catching or selling wild animals. The U.S. Agency for International Development created targeted campaigns using celebrities to try and reduce ivory demand. An organization called Change Wildlife Consumers is attempting to use behavioral science to influence consumer behavior.

With renewed scrutiny on wildlife trade due to its impacts on human health and the health of native species and habitats, the stage may be set for governments to impose stricter prohibitions on wildlife trade. But if demand persists, wildlife markets and similar activities may be driven underground, making it riskier but more lucrative for unscrupulous traffickers to deal in wildlife trade.

Joe Exotic landed in jail for other crimes. Meanwhile, wet markets and trade in wild animals remains both a threat to animal survival as well as to the health of humans and our economies on a global scale.

___________________________________________________________

Alice Calder received her MA in Applied Economics at GMU. Originally from the UK, where she received her BA in Philosophy and Political Economy from the University of Exeter, living and working internationally sparked her interest in trade issues as well as the intersection of economics and culture.

This article originally appeared on TradeVistas.org. Republished with permission.

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Archives, Global Logistics, Global Trade Daily, In The News

Food Sector Faces Multipronged Consequences of COVID-19 Outbreak

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Brick and mortar, as well as online food chains, are facing the wrath of the current COVID-19 outbreak. The worldwide supply chain includes distribution, packaging, as well as sourcing of raw materials. Lockdowns are disrupting the transportation of packaged foods, prepared foods, non-alcoholic and alcoholic beverages. Before the pandemic, the major growth drivers were growing consumption of ready-to-eat convenience foods among on-the-go consumers.

Shifting lifestyle patterns, rising per capita income, and a growing population have been the prominent growth-enhancing factors associated with the food sector prior to the outbreak. However, shutdowns of restaurants and quick service facilities due to lockdowns have hindered the growth of the food & beverage industry to a large extent.

Online Food Orders Surge as Offline Food Chains Struggle to Cope with COVID-19

In view of the dual nature of the food industry, the impact of COVID-19 is multifaceted on online and offline food chains. The offline food chain comprises of cafes and restaurants that have been shut down across the globe. However, online food deliveries remain operational in most of the regions. The packaged food industry, in particular, is witnessing prolific demand for milk products and shelf-stable foods. As consumers hurry to fill their pantries, the demand is projected to surge even further. Almost every region of the world has been affected by the coronavirus crisis, namely, Asia Pacific, Europe, North America, and the rest of the world. An example of how supply chains were gravely affected is derived from Coca Cola Co.

The carbonated beverage giant, sources raw material from China where the outbreak surfaced in early December of 2019. During the initial days of the pandemic, the company faced a great deal of difficulty in managing the frontend of its supply chain. The production, supply, and export of raw materials from China were delayed due to which the company now solely relies on its suppliers in the US for sourcing sucralose. The major companies in the food & beverages industry affected by coronavirus outbreak include Subway Restaurants Inc., Starbucks Corp., PepsiCo Inc., Papa John’s International Inc., McDonald’s Corp., KFC Corp., International Dairy Queen Inc., Dunkin’ Donuts LLC, Domino’s Pizza, Inc., and Burger King Corp. For instance, Starbucks had to shut down about 2,000 outlets in mainland China after the pandemic began to spread like wildfire.

Livelihoods and Lives at Risk from COVID-19 Pandemic

The looming food crisis amid trade disruptions, quarantines, and border closures continues to endanger both livelihoods and lives worldwide. The huge imbalance between supply and demand resulted from economic shock in the midst of the widespread shutdown of businesses. The uncertainty surrounding the eventual retreat of the COVID-19 pandemic is adding to the crisis. Fast and effective measures are required to mitigate the effects of the pandemic on the vulnerable food supply chain.

Nutritious and diverse food sources are in short supply in the wake of the global health crisis. Furthermore, greater food insecurity is prevalent in regions hit hard by COVID-19 such as Spain, Italy, and the US. However, there is still the need for anyone to panic about the food crisis as the world has adequate stock of it. The only problem is making it accessible to every section of the society amid strict lockdown.

What Has the World Learned from History?

The 2007-2008 food crisis offered the world some important lessons which can be utilized to avoid letting a health crisis turn into an indispensable food crisis. Policymakers worldwide are intent on not repeating their mistakes of the past. As the measures tighten around the pandemic, it will be even more challenging to prevent the downfall of the global food system. Logistics bottlenecks are a major challenge facing the globe at present. The global food industry is certainly strained in terms of transport and accessibility.

So far food supply has been sufficient thereby disruptions have been minimal. However, the production of high-value commodities such as vegetables and fruits has declined. Hence, governments, especially in India, aim to restart the agriculture activities in parts during the harvest season.

What Does the Immediate Future Hold for Food Sector?

The food supply chain disruption is expected to continue through at least May 2020 as new cases of COVID-19 continue to rise. Movement restrictions will continue for at least two more months in various parts of world, which is why minimizing bottlenecks will remain crucial for major manufacturers in the food industry. Agricultural production, on the other hand, will be affected by a shortage of veterinary medicines, fertilizers, and other inputs. Moreover, demand for seafood products and fresh produce will continue to decline in view of less grocery shopping and closure of restaurants. In particular, aquaculture and agriculture sectors are among the most adversely affected by the pandemic. Canned seafood and other frozen food products will be on the other hand in demand. The suspension of school meals in emerging nations in India is another area facing the brunt of the COVID-19 outbreak.

One thing is certain: the poorest sections of the society including the migrant workers will be the worst affected by the pandemic. In India, migrant workers are terrified of dying from hunger even before the pandemic can strike. Feeding millions of poor families is a daunting task being faced by the government of India. Individuals continue to contribute their part to help the vulnerable ones. However, feeding them every day requires uninterrupted production and supply of essential food items. The food sector in developing nations will thus certainly face greater strain over the entire system in the foreseeable future.

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Nandini is a senior research consultant working with Future Market Insights (FMI), a global market research and consulting firm. She has been serving clients across Food & Beverages, Pharma, and Chemical domains. Currently leading FMI’s Food & Beverages division, Nandini handles research projects in various sub-sectors, viz. Food Ingredients, Food Innovation, and Beverages. The insights presented in this article are based on FMI’s research findings on Impact of COVID-19 on Food Sector Industry of Future Market Insights

pistachios
Archives, Global Trade Daily, Imports/Exports

PISTACHIOS: THE QUIRKS OF AGRICULTURAL TRADE IN A NUTSHELL

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Disappearing Red Pistachios

If you’re an American over a certain age, you might recall the experience of staining your fingers while prying open red pistachios. They were a somewhat exotic treat, put out on occasion in a special bowl. That might seem strange to younger Americans who are only familiar with the natural tan pistachios that are ubiquitous as a post-workout food and snack.

The different associations are the result of a dramatic shift in where pistachios were produced and shipped after 1979 when the United States imposed sanctions against Iran in response to the Iran Hostage Crisis involving the taking of more than 50 American diplomats.

Mr. Whitehouse Leaves Washington

Pistachios are a biblical fruit, renowned as a court favorite of the Persian Queen of Sheba, a frequent traveler on the Silk Road and Mediterranean maritime routes. Iran has cultivated them for thousands of years, though large scale commercial production in Iran began just over one hundred years ago. American production is a much more recent phenomenon.

In 1929, American botanist William Whitehouse explored Persia on behalf of the U.S. Department of Agriculture, scooping up pistachio samples from farms located in modern day Iran. He returned in 1930 and planted test plots. When the trees matured a decade later, only one proved fruitful – Whitehouse named it Kerman after a city in Iran’s Rafsanjan central plateau. Pistachio trees can live hundreds of years and take their time to reach peak production – around twenty years.

Ironically, the U.S. pistachio industry – born from a single Iranian seed – matured in the 1970s precisely at the moment Iran’s trade with the United States, including of pistachios in dyed-red shells, came to a crashing halt.

The tale of U.S.-Iran pistachio trade has four plotlines that dramatize the broader quirks of global agricultural trade.

Plotline 1:

Extreme Quantitative Restrictions – A Trade Embargo

For most of history, Iran has been the world’s biggest source of pistachios. They are Iran’s most significant agricultural export by volume and value. Iran was the biggest supplier to the United States, but damaged relations following the Islamic Revolution of 1979 changed that. U.S. sanctions imposed since that time have a complex and layered history but have almost always involved a complete embargo on Iranian exports to the United States.

Following the lifting of the initial embargo in 1981, Iran’s food exports to the United States rebounded somewhat before the embargo was reintroduced in 1987. In an easing of sanctions in 2000, very modest amounts of foods from Iran were imported through Treasury Department-issued licenses. By 2010, imports of foods from Iran were again fully prohibited. The 2015 Iran Nuclear Deal would have enabled Iran to export pistachios and other agricultural products and lifted restrictions on financing, which Iran hoped would inject much needed capital investment in the agricultural sector. U.S. withdrawal of the Nuclear Deal in May 2018 saw a return to strict U.S. sanctions on imports from Iran.

Milestones in US-Iran competition in global pistachio trade

Plot Line 2:

Classic Farm Subsidies

When sanctions were first imposed in 1979, U.S. pistachio production was 7,700 metric tons, up quite substantially from the first U.S. commercial crop in 1976 of just 680 metric tons. In comparison, Iran had averaged 19,504 metric tons per year in the decade leading up to sanctions, but peaked in 1978 at nearly 59,874 metric tons. At the time, Iran accounted for nearly 100 percent of U.S. imported pistachio nuts. After falling off during the embargo, Iran renewed exports when the embargo was lifted in the early 1980s.

In March 1986, the Commerce Department found in favor of a U.S. industry petition that complained the Iranian government was subsidizing pistachio production. Iran (as many developing countries do) was providing supports to its agricultural producers by subsidizing the cost of key inputs such as fertilizer, chemicals, seeds, water and energy and by guaranteeing a minimum price for their output. The investigation resulted in a 99.5 percent countervailing duty on in-shell pistachios and a 318 percent duty on roasted pistachios.

Because Iran was not a signatory to the General Agreement on Tariffs and Trade (GATT) and is not a WTO member (the United States has repeatedly blocked its application for accession), no injury determination was required.

US tariffs on pistachios

Plot Line 3:

“Less Than Fair Value”

In a parallel 1986 investigation, the U.S. International Trade Commission (USITC) found that the volume of raw in-shell pistachios imported from Iran had increased significantly after the embargo was lifted in 1981. U.S. producers had secured 93.2 percent of the U.S. market in 1980, which was about 12.5 million pounds. By 1985, the overall size of the U.S. market had swelled to 61 million pounds, and Iran’s share had grown to 42.3 percent, accounting for almost 100 percent of all imports.

At the same time, the unit value of imports from Iran (import price) fell by around half. The USITC determined that raw in-shell pistachios imported from Iran were being sold at “less than fair market value” (or, being “dumped”) in the U.S. market, causing material injury to the U.S. industry. The Commerce Department calculated an offset in the form of a 241 percent antidumping duty, which would be applied in additional to the 99.5 percent countervailing duty.

In years of embargo, the duties were irrelevant and thus only two reviews have since been conducted to determine whether the duties should remain in place. In both 2005 and more recently in 2017, the USITC determined they should.

Plot Line 4:

Developed v. Developing Country Producers

According to the Iran Pistachio Association (IPA), Iran has around 150,000 farmers, but more than 70 percent of the production is small-scale on orchards of 2 hectares or less. In a “good” year, annual pistachio production capacity reaches 280,000 metric tons in Iran, but harvesting is inefficient. Pistachios are picked by hand from fallen clusters, their hulls removed by hand, and the nuts graded manually. Inadequate water management undercuts Iranian production, but when Iran’s yield is strong, the country’s pistachio exporters hold a price and geographic advantage. And IPA says they are competitive globally based on strong demand for the wide variety of Iranian pistachio cultivars with different flavor profiles and a higher kernel to in-shell ratio.

In contrast, the United States has some 950 growers, mainly in California, whose mechanized production is highly efficient, yielding a whopping 487,500 metric tons over the 2018-19 season (though output is cyclical and weather-dependent so yields may be down over 30 percent this year). Achievements in increased outputs made during a period when the U.S. market was closed to Iran, its only major competitor, enabled the U.S. industry to reach a position where it could both serve the domestic market and challenge Iran for market share all over the world. Iran has barely exported any pistachios to the United States since 1986 but it remains a contender in key third markets.

US leads pistachio production

Combined, the United States and Iran account for more than 70 percent of global exports of pistachios. Iran tends to hold the top spot in the Middle East, India, and Eastern Europe and holds an edge in developing country markets. The key battlegrounds in the U.S.-Iran pistachio wars are Western Europe and China where demand is strong and growing.

American pistachio growers fretted when the Trump administration raised tariffs on products from China. When China retaliated, raising the tariff on U.S. pistachios from five to as high as 55 percent, that created an opportunity for China to substitute Iranian pistachios. However, Iran ultimately suffered a bad crop year and it’s not clear whether China collected the tariffs, so sales of U.S. pistachios in China actually increased.

Not a Happy or Tragic Ending

The U.S. pistachio industry was concerned about the potential for renewed competition from Iran under the 2015 nuclear deal that eased sanctions. Their fears were allayed when the USITC voted to maintain the 1986 legacy of prohibitive tariffs. No matter, the Trump administration has strengthened sanctions and the embargo remains.

In the end, global demand for pistachios is higher than production, leaving room for both American and Iranian producers to find a market for all they can grow.

In an NPR interview four years ago, Brian Blackwell, a grower from Tulare County, CA wasn’t concerned about the reentry of Iranian pistachios in the U.S. market and explained the nature of global commodity markets this way: “This is a global marketplace nowadays. So, if Iran brought a million pounds of pistachios into the United States, that just means there’s a million pounds that didn’t get sold in China or Europe. U.S. pistachios could fill that market.”

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

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Archives, Global Trade Daily, News

Growers Edge & CropX Partnership Addresses Farming Challenges

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Savings for water, fertilizer, energy, and labor costs are just some of the many added benefits farmers can anticipate following the announcement of an agriculture-focused partnership between Growers Edge Financial, Inc. and CropX. The strategic partnership addresses farming challenges head-on and solves complex issues through advanced technology solutions, including soil-sensing technology designed to eliminate crop-input costs through accurate, reliable data.

“The financial instruments available today do not meet the needs of farmers who want to embrace new ways to improve the profitability and sustainability of their operations,” said Joe Young, president and chief operating officer, Growers Edge. “Working with strategic partners like CropX, we are providing the incentive a farmer needs to confidently adopt new technologies that can drive their long-term sustainability and business success despite rising environmental and business challenges.”

Through a careful process utilizing CropX cloud-based technology and integrated in-field sensors, soil data and management is optimized and implemented based on analyzed data determining the precise amount of water specific to plant needs, ultimately boosting crop yields while maximizing opportunities in cost-savings and waste reduction.

“Giving farmers direct access to all of the intelligence below the ground empowers them to sustainably cultivate more profitable and productive farms by accurately predicting and managing crop needs. However, many farmers are hesitant to invest in soil sensing technologies after being burned by complex, expensive – and often even ineffective – technologies in the past,” said John Vikupitz, president, CropX. “Our partnership with Growers Edge will help farms of all sizes and budgets confidently embrace in-soil data technologies to modernize farm management.”

Beginning in 2020, the two companies will host a pilot program in which farmers can participate in that includes a Growers Edge money-back guarantee and irrigation practice prescription.

USMCA
Archives, Global Trade Daily, International Trade

A Vote on USMCA is a Vote for Predictability

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For all their legal nuance, trade agreements are written to make commerce more predictable. The rules are meant to increase business confidence, boost investment and spur job creation. It’s time for Congress to show bipartisan support for a more predictable North American market, and pass the United States-Mexico-Canada Agreement (USMCA).

USMCA is a much-needed upgrade of the North American Free Trade Agreement (NAFTA), a text that was largely copied over from the US-Canada bilateral trade agreement signed in 1988. To say that NAFTA is outdated is an understatement. Canada and Mexico have concluded trade deals with other countries that do things NAFTA could have never anticipated 25 years ago. USMCA is needed just to keep up.

Three chapters of USMCA deserve far more attention than they’ve received.

First, the chapter on health and safety standards is a must for US agriculture. The biggest threat to our ranchers and farmers is a lack of science-based import regimes abroad, not tariffs.

Tariffs are a tax on trade, whereas health and safety standards, applied in a non-scientific or in a discriminatory way, can act as a ban trade. US agricultural exporters have long demanded more science-based approaches to what are called sanitary and phytosanitary standards, and USMCA delivers on this. USMCA also puts forward a number of consultative mechanisms that will help prevent certain market access problems from arising in the first place.

US agriculture needs Chapter 9 of the USMCA.

Second, the chapter on technical barriers to trade is essential for US manufacturers. It covers the regulatory measures that impact over 90 percent of goods exports from the United States. This is fertile ground for protectionism. Governments can easily use regulatory measures, or ways of assessing conformity with them, that shield domestic producers from import competition. In fact, they can completely shut down trade with a few strokes of the legislative pen.

In USMCA, American manufacturers have more of a voice in the regulatory process in Canada and Mexico concerning their exports. Importantly, USMCA also calls on the three countries to recognize that, in setting technical specifications, performance, and not the provenance of the regulation, is what should matter. This is a longstanding US demand, and USMCA represents a tangible win for US exporters in this regard.

American manufacturing needs Chapter 10 of USMCA.

Third, the chapter on intellectual property is upgraded to reflect the needs of a building a creative economy. The list of international agreements that inform USMCA is striking; many didn’t exist in 1994, never mind in 1988. Copyright protections are modernized, as are those for biologics, a type of drug that could not have been imagined when NAFTA was negotiated. Whereas patents, alone, could help stimulate investment in small molecule drugs, they aren’t enough for the living systems that define biologics. USMCA brings Canada and Mexico closer to the US standard, and in this regard increases protection of American IP abroad.

Other IP provisions will assist a variety of America’s creative industries, from film to fashion to iPhones. These modernized rules, along with consultative mechanisms to ensure a level playing field, will provide the kind of protections that inventors need to bring their ideas to market. This is a win.

America’s creative industries need Chapter 20 of USMCA.

Still, there are some who, while recognizing the benefits of USMCA, worry that the deal cannot effectively enforce labor and environmental standards. They shouldn’t be. The provisions are as good as anything in the EU-Mexico trade agreement, for example, and Europe is renowned for having high expectations on both fronts, both domestically and internationally.

Polls show that, regardless of party, American voters are more supportive of free trade now than ever before. Democrats, Independents and Republicans converge around 80 percent in favor. Polls also show that USMCA has bipartisan backing.

The United States is part of a North American market that thrives on predictability. It’s time for Congress to unite behind USMCA and deliver predictability.

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Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at Georgetown University’s School of Foreign Service.

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Archives, Global Trade Daily, International Trade, Stories

Automation Won’t Destroy Trade – It Might Even Boost It

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Alarm bells are ringing

Many industry observers are sounding alarms about the looming impact of automation, robots and 3D printing, which they fear will destroy jobs, disrupt value chains and maybe even reduce the need for international trade. Developing countries are particularly concerned because trade has been an avenue to economic development and growth for them. But a recent report released by the World Bank shows that the data and evidence don’t support the hype. Instead, automation, robots and 3D printing might actually increase trade as trade costs continue to fall.

Some business analysts have warned that automation and robots could disrupt and shorten global supply chains. The thinking behind the concern is that, if a computer can design it and a 3D printer can make it, then we won’t need to source it from countries abroad that have more abundant low-cost labor than we do. Instead, companies will drastically shorten their value chains, which could reduce international trade.

The anxieties have gotten the attention of development economists and developing countries. Trade and economic growth go hand-in-hand, both in economic theory and in practice. Multiple studies have shown that firms in developing countries that participate in global value chains outperform their local peers that solely focus on domestic markets. If robots eliminate the need for global value chains, this important avenue for economic development could be threatened.

Anxiety over automation may be overblown

Scare tactics about economic change are attractive because they get our attention. About 15 years ago, we saw headlines about “white collar outsourcing” (once attorneys were added to the list of jobs that could be moved offshore, the panic even spread into boardrooms). Some lawmakers called for restrictions on offshoring, and some of those calls are still alive today. But the mass exodus of white collar jobs did not occur.

The World Bank is a multilateral development agency that makes grants and loans to support capital projects and economic growth in the poorest countries. Anything that reduces the need for trade and global value chains would hit those developing countries hard, putting the automation concerns squarely on the World Bank’s radar.

In its annual World Development Report, the latest released on October 8, the World Bank does not take a definitive stance on the overall effects of automation, and it does not make any bold predictions. But it does make one thing clear: The anxiety over automation hindering trade is not supported by the data and evidence. In fact, the authors show that sectors with the largest increases in automation have also been those with the largest increases in trade. Yep, that’s right: We’re experiencing the opposite phenomenon to what so many are worried about.

Automation actually helping to expand trade

Specifically, the report shows that the percentage change in imports of parts from developing countries from 1995 to 2015 is higher in industries that are more automated. Agriculture and textiles are among the least-automated industries and have the smallest change. Metal, rubber and plastics, and automotive sectors have the highest rates of automation and the largest increases in trade.

Automation in industrial countries has boosted imports from developing countries

Why? Because automation, like robotic assembly and 3D printing, leads to an expansion in output and demand for material inputs. Automation can also lead to the creation of new tasks. So while it brings labor market adjustment pains — like technology and progress always do — automation will not necessarily reduce trade or shorten global value chains.

Meanwhile, investments in digital technologies continue to lower the costs of coordinating across long distances. These lower trade costs are expected to promote trade and lead to a continued expansion of global value chains, particularly for developing countries.

The big picture

Here’s the big picture: Change is the one thing in the economy you can count on. Improvements in how we make things and advanced production technologies are likely to continue, and workers and firms that adapt and embrace these changes are likely to outperform those that do not. But a wide-sweeping elimination of trade and global value chains due to automation and robots? Don’t believe the hype.

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The original version of this article was published in The Hill.

ChristineMcDaniel

Christine McDaniel a former senior economist with the White House Council of Economic Advisers and deputy assistant Treasury secretary for economic policy, is a senior research fellow with the Mercatus Center at George Mason University.

This article also appeared on TradeVistas.org. Republished with permission.

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Archives, Global Trade Daily, International Trade

Soybean Prices are a Proxy for How the Trade War is Going

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Soybeans are in your cereal, candles, crayons and car seats

Soybeans have more far uses than most of us realize. After harvesting, soybeans are dehulled and rolled into flakes as its oil is extracted. Soybean oil has become an ingredient ubiquitous in dressings, cooking oils and many foods, but is also sold for biodiesel production and other industrial uses.

Soy flours feature prominently in commercial baking. Soy hulls are part of fiber bran cereals, breads and snacks. Soybeans are even part of building materials, replacing wood in furniture, flooring and countertops. They are in carpets, auto upholstery and paints. Soybean candles are popular because they burn longer with less smoke. Soy crayons are non-toxic for children. And – because soybeans are high in protein – they are a major ingredient in livestock feed, which provides much of the impetus for globally traded soybeans.

Bean counting

Given this panoply of applications, it should be no surprise that global demand for soybeans is growing, but it’s mostly animal mouths we are feeding. Demand for soybean meal for livestock feed drives two-thirds of the export value of traded soybeans.

According to the Agricultural Market Information System, three countries produce 80 percent of the world’s soybeans to fill this demand: the United States, Brazil and Argentina.

At 123.7 million metric tons produced in 2018, U.S. farmers accounted for 34 percent of world production. Brazil’s farmers yielded 117 million metric tons, accounting for 32 percent of world production, but Brazil exported larger volumes than the United States.

Rounding out the top three, Argentina accounts for 15 percent of world production but exported just 6.3 million metric tons in 2018. China is fourth, producing 15.9 million metric tons in 2018 – just four percent of world production.

America’s second largest crop

Grown on more than 303,000 farms across the United States, soybeans are the second largest cash crop for American farmers. Conventional soybeans are grown in 45 U.S. states while high oleic soybeans are grown in 10 states. Though output varies each year, at 4.54 billion bushels in 2018, U.S. growers are so productive they can now yield twice as many bushels of soybeans as two decades ago. (At SoyConnection.com, you can click on this map to see the number of farms, acres, and bushels produced in each state.)

Three countries produce 80 percent of the world's soybean

China’s insatiable appetite

China cannot get enough soybeans. When China entered the WTO in 2001, the country was already consuming 15 percent of the world’s soybeans, driving 19 percent of global trade in soybeans. By 2018, China’s appetite had grown 815 percent according to the U.S. Farm Bureau, which says China’s demand now supports 62 percent of world trade in soybeans.

According to the Farm Bureau’s calculations, China consumes one-third of every acre harvested in the world – an amount equivalent to or more than total U.S. soybean acreage. Around 60 percent of U.S. yields were sold to China in 2017, which means there was a lot at risk for U.S. farmers caught in the crosshairs of the trade war that unfolded in 2018.

A pawn in the trade war

In July 2018, the United States fired the first tariff shot in its efforts to seek redress for the intellectual property theft cited in its Section 301 investigation into China’s practices, by imposing tariffs on $34 billion worth of China’s imports. China responded with 25 percent tariffs on an equivalent amount, including on soybeans from the United States. The tariff has remained in place as leverage in the trade war – a proxy for whether China perceives progress is being made or not in the negotiations.

In intermittent gestures of goodwill, China agrees to make purchases but has often not fulfilled orders for the promised amounts. When President Trump angrily tweeted on August 23 this year that China was not negotiating in good faith and that U.S. tariffs would cover more imports from China, China responded in part by adding five percent to its tariffs on soybeans.

A factor in price fluctuations

The Food and Agricultural Policy Research Institute at the University of Missouri recently offered a gloomy forecast for lower prices for soybeans: $8.43 per bushel for 2019-20, dropping further to $7.94 per bushel for the 2020-21 marketing years. They say lower prices are resulting from a combination of adverse weather, African swine fever disease that is decimating herd inventories throughout Asia and therefore weakening demand for feed – and the ongoing trade dispute.

On May 13 this year, coincident with some fiery presidential tweets expressing frustration with China, soybean prices reached a 10-year low. USDA estimates that, at 4.54 billion bushels produced last year, a drop in average price per bushel from $9.33 in 2017 to $8.60 in 2018 translates to losses for U.S. soybean farmers of $3.3 billion.

Soybean Prices react to China trade war

Bait and switching

Adding to the strain of lower prices, China has drastically pared back its soybean orders from the United States. In 2016, the United States shipped 36.1 million metric tons of soybeans to China. In 2018, sales dropped to just 8.2 million metric tons.

The Chinese government is able to avoid its own tariffs by directly purchasing U.S. soybeans which it then sells to private users in China. The government has also granted tariff exemptions to Chinese soybean crushers. Just this week, the government granted an exemption to state-owned, private and international companies to import 10 million metric tons of U.S. soybeans tariff-free. Overall, the quantities purchased through these mechanisms is not nearly enough to make up for the vast shortfall in supply from the United States.

So, China is buying more from Paraguay, Uruguay, Argentina, Canada and in particular from Brazil, which has moved in to supply 75 percent of China’s total imports. For U.S. soybean exporters, lower prices per bushel have attracted new buyers from Europe, Mexico and elsewhere, but those sales are not enough to replace lost sales in China.

Plummeting U.S. Soybean Exports to China

Homegrown

China is hedging its bets by rejiggering the incentives it provides to its own farmers. Upon releasing a new white paper, the head of the National Food and Strategic Reserves Administration said that even though China’s food production and reserves are strong, “We must hold the rice bowl firmly in our hands, and fill it with even more Chinese food.”

In addition to directly investing in agricultural infrastructure in Brazil, neighboring Russia, and other suppliers, the Chinese government has set a goal to increase domestic soybean production in five years from 16 million to 24 million metric tons, according to the U.S. Soybean Export Council.

News China reported in January that Chinese farmers in Heilongjiang, China’s main grain producing province, are being provided incentives to switch from wheat and corn to planting more soybeans. For years, the Chinese government has offered price supports for corn. Under new policies, crop rotation can earn Chinese farmers $322 per hectare in subsidies in addition to subsidies of between $373 and $430 per hectare offered by provincial authorities.

The Ministry of Science and Technology is also supporting trials of hybrid soybean seeds that are more weather-resistant and could more than triple the average yield for soybeans grown in China.

China's Soybean Journey

Long term disruptions

It’s possible the United States and China will ink a partial deal in the coming weeks that provides relief for American soybean farmers.

The American Soybean Association says it is “hopeful this ‘Phase 1’ agreement will signal a de-escalation in the ongoing U.S.-China trade war… rescinding the tariffs and helping restore certainty and stability to the soy industry.”

China has reportedly promised to purchase $40 billion to $50 billion in U.S. agricultural goods, which would be scaled up annually. That would be double the $24 billion China spent on American farm goods in 2017.

When seeds are in the ground, the acreage is committed, but as American farmers wait and watch the trade war, they are surely thinking about how to plant around these disruptions in outer growing years.

Over the last year, some reliable overseas customers are buying up stocks of U.S. soybeans that would otherwise have gone to China and some new customer relationships are being forged in emerging markets such as Egypt, Bangladesh, Pakistan and Southeast Asia.

When the tariffs are permanently removed, it will remain to be seen whether trading patterns will also have permanently shifted.

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fourteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

Japan
Archives, Global Trade Daily, Stories

Japan Mini-Deal A Victory for U.S. Agriculture?

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Many American farmers and ranchers breathed a sigh of relief when the United States and Japan formally signed a U.S.-Japan Trade Agreement in September. Billed as the first phase of a more comprehensive trade deal, the Agreement establishes standards to promote digital trade and provides Japanese exporters with improved market access for certain industrial products. In return, Japan agreed to slash tariffs on a wide range of food and agriculture exports – a key outcome for the U.S. agriculture community.

For U.S. agriculture producers struggling with a weak farm economy and uncertainty in global markets, implementation of the Agreement cannot come soon enough. Japan consistently ranks as one of the top export markets for agriculture and food, soaking up over $14.5 billion worth of goods in 2018. But farm groups have been ringing alarm bells ever since the United States withdrew from the Trans-Pacific Partnership (TPP) that would have provided them access to the Japanese market sooner.

Japan top market for U.S. beef

U.S. competitors get a head start

Walking away from the TPP meant that U.S. producers were not eligible to enjoy the tariff cuts Japan adopted under that agreement. Instead, the benefits of improved market access flowed to key U.S. competitors, including from Canada, Australia and New Zealand, as those countries remained under the TPP framework. On top of that, the European Union (EU) landed its own trade deal with Japan that provided European farmers and ranchers with favorable export terms. Taken together, these various agreements put the United States at a serious disadvantage. While Japanese tariffs on foreign agricultural products continued to fall, the United States was stuck paying higher tariff rates, raising the overall cost of U.S. exports relative to competitors.

The U.S. Department of Agriculture captured this dynamic in a report it released late last year on beef exports to Japan. Without a trade agreement, U.S. beef exporters were forced to pay the “Most Favored Nation (MFN)” applied tariff rate of 38.5 percent. Not only were the tariffs paid by European beef exporters (“JAEPA” in the chart below) and by members of the TPP (“CPTPP” in the chart) considerably lower, the tariffs are scheduled to continue dropping over the next 15 years. The widening gap would render U.S. products even less attractive with each passing year.

Japan tariff reduction schedule for beef chart

U.S. strikes a “mini-deal” to catch up

Recognizing the dangers for beef and other U.S. agricultural commodities facing a similar future, the Trump Administration moved to strike a partial free trade agreement with Japan that would level the playing field for U.S. products. Stage one of the U.S.-Japan Trade Agreement mostly achieves that goal by lowering the tariff rates Japan applies to over 90 percent of U.S. agricultural goods, seeking to match Japan’s commitments under TPP.

However, U.S. agricultural producers are not completely out of the woods. That is because the TPP – like most modern trade agreements – included more than just tariff reductions. It also covered a broad range of regulations impacting agricultural trade including customs procedures and product safety approvals. The United States and Japan did not address these so-called “technical barriers to trade” in the first phase of their bilateral agreement.

Awaiting “stage two”

Both U.S. President Trump and Japanese Prime Minister Shinzo Abe have committed to working towards a more comprehensive agreement. The Administration’s U.S.-Japan bilateral negotiating objectives outline goals for every sector of the economy. That should give hope to U.S. agriculture groups, especially rice growers and dairy producers who are still seeking improved market access to Japan. U.S. industrial goods manufacturers, many of whom are eyeing the Japanese market, will be just as eager to see a comprehensive deal in the near future.

U.S. agricultural products left out of Japan mini-deal

The obvious risk is that a comprehensive deal never materializes. The annals of history (and recent memories) are filled with examples of derailed international negotiations. A pending U.S. decision on whether to impose tariffs on Japanese automobiles and parts, for example, could easily send the trade winds blowing in another direction. In addition to disappointing U.S. business groups, failure to land a full agreement could run afoul of World Trade Organization (WTO) rules, which plainly state that trade agreements must cover “substantially all trade.”

Nonetheless, after the year farmers have had, the initial U.S.-Japan Trade Agreement is still a deal worth celebrating.

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Max Moncaster is an Associate Director at the National Association of State Departments of Agriculture, where he focuses on trade and natural resource issues. He has served in trade policy and advocacy roles for public and private sector organizations since 2014.

This article originally appeared on TradeVistas.org. Republished with permission.

 

farmers global equipment
Archives, Global Trade Daily, News

Yield Guarantee Program Supports Farmers While Mitigating Financial Risk

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Farmers and enhancement opportunities are the primary focus of the latest partnership announced this week between Growers Edge Financial, Inc. and GROWMARK, Inc.

While some might associate the agriculture sector with outdated operations, the two companies will offer farmers an opportunity for enhancing efficiencies while maximizing profits through the Yield Guarantee Program from Grower’s Edge.

“In today’s stressed farm economy, farmers are incredibly wary of taking on more financial risk – even when taking that leap could boost profitability. They need guarantees,” said Joe Young, president and chief operating officer, Growers Edge. “Working with strategic partners like GROWMARK, we are providing the financial incentives farmers need to confidently adopt the new technologies that can ultimately drive their long-term sustainability and business success.”

Through carefully and strategically combining AI from Growers Edge’s Growers Analytic Prediction System (GAPS) and information gathered from GROWMARK’s Product Yield Trials, farmers can now rely on the predictive performance and exactly how to benefit from the technology, minus the increased risk for wasted resources and costs.

“GROWMARK is committed to helping our customers grow their bottom line with new ag technologies, which makes Growers Edge an ideal partner for us,” added Lance Ruppert, director of agronomy marketing technology, GROWMARK. “The Growers Edge team is removing some of the risk and creating a new value stream for both the farmer and our technology providers. We think the yield guarantee program will help customers deploy the technologies needed to improve profitability, and we are eager to see it in action.”

To read more about how this is changing farming strategies, please visit: Growers Edge Financial or GROWMARK.

Soybeans Containerization
Archives, Global Trade Daily, Imports/Exports

How Soybeans Can Save Billions in Container Repositioning

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Containers are essential to the shipping and trade industry, making shipping more efficient and often faster. However, many containers are left to sit idle due to the trade imbalance in the U.S. Costing the industry billions of dollars a year, vacant containers sit empty and cause congestion at ports.

However, container repositioning offers a solution to the wasted money and time many face. By repositioning containers to back-haul with U.S. soybeans, it works to help alleviate a huge problem in global trade.

This introduces profitability when product flows back and forth and offering opportunity to US farmers. In fact, many Asian markets have shown a growing preference for containerized shipping of specific goods, such as soybeans due to the preservation it offers to fresh goods. By working to reposition containers, it offers savings as well as opportunity for U.S. farmers. Read more at https://www.ilsoy.org/.