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“BUY LOCAL” WOULD EVEN SPOIL FARMERS MARKETS

local

“BUY LOCAL” WOULD EVEN SPOIL FARMERS MARKETS

The Locavore’s Dilemma

I live in Madison, Wisconsin, home of the exceedingly vibrant and sort-of-famous Dane County Farmers’ Market. Every Wednesday and Saturday, thousands of people—myself included—descend on downtown Madison to peruse and purchase fresh fruits and vegetables, baked goods, meats, cheeses, canned jams and pickles, arts and crafts, and even artisanal soaps. The city prides itself on its loyalty to local farmers and merchants.

Yet what at first blush seems a quintessential expedition of “buy local” greatness isn’t actually local at all. The Dane County Farmers’ Market belies its titular jurisdictional limits. Purveyors arrive in the wee hours of the morning from all corners of the state. Take, for instance, the Door County Fruit Markets company, which sells apricots, raspberries, strawberries, and blackberries. They hail from Door County, a three-hour drive across the state from Dane County. There’s also Canopy Gardens, producers of four varieties of salsa, whose home base is in the north central part of the state, separated from Madison by no fewer than six county lines. These are but two of many examples. Indeed, only a modest percentage of the venders come from within Dane County.

And then there are the buyers. Young people, old people, families, and businesses drive from all over Wisconsin to pick out the perfect tomato or to sample some of Stella’s famous cheese bread. Neighbors from Minnesota, Iowa, and Illinois likewise frequent the market. (Don’t forget, either, about the innumerable inputs that go into the farming process — tractors, irrigation systems, gasoline, the farmer’s morning coffee, and so on — that originate beyond the county boundary.)

 

The market’s popularity, variety, energy owe themselves to trade and to quality—not to locality.

 

If the Dane County Farmers’ Market were truly limited to local, its vivacity would be severely diminished. Plump, juicy cherries from three-hour-away Door County? Forget it. Salsa from Canopy Gardens? Sorry, they’re not “local.” Thankfully, we all recognize this as absurd. And we all recognize that drawing the line at the county is arbitrary. The market’s popularity, variety, energy owe themselves to trade and to quality—not to locality.

Foodstuffs—and in particular, produce—present fertile ground for undue emphasis on “buy local.” Often, the farmers relatively close to us will be able to provide higher quality produce, simply because of the short transportation time between harvest and market. Of course, soil and climate also influence quality, and nearby corn might be better than corn from a half a world away. Then again, though, you don’t hear anyone in Wisconsin championing local bananas.

Buy Best

The farmers’ market anecdote illustrates the crucial distinction between “buy local” and “buy best.” At first glance, the distinction appears merely semantic. Buying local because local is the best makes complete sense economically and socially. But buying local for the sake of buying local presents a philosophy steeped in isolation that falls dangerously close to tribalism. It advocates the contraction of trade and flies in the face of two centuries of liberalization and globalization of the economy.

 

Like the county line, the national boundary is completely arbitrary from an economic perspective.

 

Liberal, global trade has led to the vastest prosperity the world has ever seen. Adam Smith once wrote, “In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.” The less trade is restricted between individuals and across borders, the more “the body of people” can “buy whatever they want” the “cheapest.” In the 240 years since, increased trade and globalization has corresponded with a never-before-seen rise in prosperity. As society becomes more integrated, its members can leverage the division of labor, leading to lower prices, better goods and services, and a higher standard of living for everyone. It’s true that free trade and globalization make the rich richer. But they also make the poor richer. Trade provides cell phones to people in developing countries. It increases wages. It fosters international peace. As I have written before here and here, trade has made our modern lives what they are.

So it is one thing to personally live according the “buy local” rhetoric, boxing yourself in with higher prices and lower quality. But is quite another thing when the “buy local” rhetoric becomes enacted in law. The obvious harms that would befall a county-only farmers’ market are the same exact harms that policies of protectionism inflict upon nations and their residents. Like the county line, the national boundary is completely arbitrary from an economic perspective. National protectionism is simply “buy local” on a larger scale.

The original article can be accessed at FEE.org.

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Joseph S. Diedrich is a student at the University of Wisconsin.

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

nebraskans

NEBRASKANS SUPPORT TRADE BUT TRUST IN MEDIA AND WASHINGTON IS LOW

A new survey of Nebraskans finds that citizens appreciate trade’s benefits, especially for farmers and ranchers, but want more reliable information about trade policy.

Anxious but confident: the more international trade the better

Nebraskans surveyed are anxious about the economy but confident with respect to the importance of trade to their state’s agricultural production complex.

Released last month by the Carnegie Endowment for International Peace and the University of Nebraska-Lincoln (UNL), the new report, “U.S. Foreign Policy for the Middle Class: Perspectives from Nebraska,” assesses state views about how U.S. foreign policy interacts with the economic wellbeing of the middle class in the nation’s heartland. The research team interviewed over 130 Nebraskans in six communities across the state in the summer of 2019 (before the economy was further affected by the coronavirus pandemic) to gauge their perceptions.

Whether respondents hailed from urban Omaha or rural Scottsbluff, and whether they worked directly in agriculture or in health care, local government or education, those interviewed were remarkably consistent and clear on the subject of trade policy and the state’s agriculture sector: the more international trade, the better.

Focus Group Cities

The big picture is not the only picture in the Nebraska economy

Macro-level statistics obscure the importance of Nebraska’s agriculture sector. The Bureau of Labor Statistics reports that manufacturing contributes more than twice as much as agriculture to Nebraska’s GDP (10.9 percent versus 4.9 percent, respectively). But within manufacturing, “food and kindred products” is the top category. The broader agricultural production complex includes processing but also transportation, warehousing, agriculture-related research, and other professional services such as IT, legal, insurance, and financial.

Thus, while Nebraska has a diversified economy and workforce, one in four jobs is directly or indirectly tied to the state’s agricultural production complex, according to UNL researchers. Some interviewees pointed to main street businesses like car dealerships as a barometer for agriculture, saying that farmers are more likely to purchase new cars or trucks when they have profitable years.

As the report notes, “Even if they do not hold one of those ag-related jobs, most Nebraskans likely benefit in some way from the revenues the sector generates. That may explain why so many of those interviewed, whether directly involved with agriculture or not, said they supported any trade policies that worked best for farmers, ranchers, and others associated with the agricultural production complex.”

Trade a most important foreign policy

Exports dominate the discourse on trade

The Nebraskans interviewed spoke about trade almost exclusively in terms of exports, perhaps not surprising for a state that consistently ranks highly in the production and export of many agricultural products from soybeans and corn to beef and beef products. Nebraska’s most important export markets are Canada and Mexico, U.S. free trade agreement partners.

The majority of those interviewed saw U.S. trade agreements as benefiting Nebraskan agriculture, in particular the U.S.-Mexico-Canada Agreement (USMCA) and the U.S. trade deal with Japan (as a second best alternative to the Transpacific Partnership, from which the U.S. withdrew in 2017). While many supported the President’s tough stance against China, they also worried about the potential for future lost market share due to shifting supply chains brought on by the trade war. In the voice of one interviewee, over the long run, the United States needs to “focus [more] on developing markets…and less…on picking a fight with China.”

The seeming invisibility of imports

Imports were rarely mentioned by those interviewed, whether from a consumer or supply chain perspective. Aside from one manufacturer who said that increased steel tariffs had put cost pressure on his inputs, most discussion of tariffs revolved instead around retaliation on U.S. agriculture exports, not the impact of U.S. tariffs on imports. This is not surprising: exports are celebrated in news releases and headlines. Import data is portrayed in the negative light of trade imbalances. Imports of intermediate goods make up 60 percent of global trade by some estimates, but in the form of parts and components for the production of final goods, they lack visibility.

U.S. import tariffs have likely affected consumer prices to some degree. In research prepared for the Yeutter Institute by Edward Balistreri of Iowa State University, tariffs imposed in 2018 and 2019 as part of the U.S.-China trade war may have cost Nebraska’s households as much as $600 per year through a combination of lost export opportunities, increased productions costs, and increased consumer prices. A potential doubling of tariff costs on imported items theoretically risked households near the lower bounds of the middle-income range falling out of the middle-income bracket while those tariffs were in place. Despite being a pocketbook issue, the cost of imports was notably absent as a topic of discussion across interviews.

View on China engagement

There is more than one “heartland”

The Carnegie Endowment conducted similar interviews and focus groups in Ohio in 2018 and Colorado in 2019. There are important nuances among and within these three states. On trade policy, Nebraskans were far more aligned in their views than Ohioans.

Nebraskans tend to view agriculture as the backbone of the state’s economy, leading to more consistent opinions on the beneficial role of trade. Ohio has a much larger manufacturing workforce that has experienced heavy losses in recent years, with trade policy and globalization often taking the blame. This perception has led to deep divisions over trade policy among those interviewed in Ohio.

In comparing the three states, the report notes that such “place-based economic considerations appeared to drive attitudes on the intersection of U.S. foreign policy with the perceived economic interests of America’s middle class.”

“I don’t trust Washington”

Unfortunately, where participants in all three states did seem to agree was in their mistrust of institutions and their sources of information regarding foreign policy.

Project participants consistently said they did not trust the news media or official Washington to provide unbiased information about trade and foreign policy. As a result, many said they do not always feel they have enough knowledge to develop well-informed opinions. They also do not believe that decisions about foreign policy are made with middle America’s economic interests in mind.

One Nebraska participant illustrated a common sentiment in expressing, “I don’t think anybody knows what the truth is and I don’t …trust Washington to tell me what the truth is.” If participants wanted to learn more about trade and foreign policy, they often said they did not know where to find trustworthy sources of information.

Quote about trust

How to amplify middle-class voices?

At a time of intense debate over what the aims of U.S. trade policy should be, such depth of perspective from Americans across the country is important. Do we need new structures to gather it?

The Office of the U.S. Trade Representative formally seeks public comment as part of its process to determine negotiating priorities and statutorily maintains 26 advisory committees to make sure U.S. negotiating objectives “reflect U.S. public and private sector interests.” The advisory system includes a committee designed for input from state and local level leaders. Yet these structures are neither visible nor accessible to most Americans.

Elected officials may of course offer input outside of these constructs. Nebraska Governor Pete Ricketts gave an example on an episode of the Yeutter Institute’s Trade Matters podcast:

“When there was a rumor that the United States was going to pull out of the South Korean Trade Agreement, I picked up the phone on a Friday afternoon to call our U.S. Trade Representative, Ambassador Lighthizer, to tell him how bad that would be for Nebraska,” Governor Ricketts said.

“He called me back on Sunday afternoon, so very responsive…he doesn’t always tell you what you want to hear, but certainly wanted to listen as I was talking about why South Korea was such an important trading partner.”

Place-based trade policies?

Governor Ricketts’ comments and the report findings reinforce a central conundrum of trade policy: it has disparate impacts on the economies of different U.S. states.

In their pursuit of the national interest, foreign policy professionals, including trade negotiators, understandably do not want to pick winners and losers or wade into domestic politics. But integrating more information about the economic experience of middle-class Americans into the trade policymaking process can help inform policy options that anticipate the losses — and local opportunities — from trade policy.

Meanwhile, what about those who said they wanted to learn more about trade and foreign policy, but did not know where to find information they could trust? They also reported that locally trusted leaders can play a key role in how people think about policies. Perhaps such leaders are a starting point for deeper conversations about trade.

Related in the series by The Carnegie Endowment on U.S. Foreign Policy for the Middle Class:

-Perspectives from Colorado

-Perspectives from Ohio

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Jill O'Donnell

Jill O’Donnell is a professor of practice and the director of the Clayton Yeutter Institute of International Trade and Finance at the University of Nebraska-Lincoln. She is the host of the institute’s Trade Matters podcast. She served on the research team for the report discussed in this article, along with colleagues from the University of Nebraska-Lincoln’s Bureau of Business Research and the University of Nebraska Public Policy Center, in partnership with the Carnegie Endowment for International Peace.

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

ARGENTINA APPLIES OVER 500 EXPORT DUTIES – HOW’S THAT WORKING OUT?

Argentina is no stranger to economic crisis. Nearly 600 different export taxes aren’t helping.

Argentina is no stranger to economic crisis. Before the spread of the COVID-19 pandemic, Argentina was experiencing more than 50 percent annual inflation, among the highest in the world. The IMF recorded a 2.5 percent drop in Argentina’s GDP in 2018, which shrank another 2.2 percent in 2019, throwing some 40 percent of the population into poverty. With a debt-to-GDP ratio of almost 90 percent and facing economic contraction of as much as 5.7 percent this year, Argentina’s government stands at the brink of its ninth default on international loans.

How could it get worse?

Trade restrictions can reinforce poor economic outcomes. As reported to the OECD, Argentina introduced, increased or expanded 585 different export taxes between 2000 and 2012. Hitting its farmers hard, Argentina’s new government recently increased export taxes on agricultural commodities. Export taxes on soybeans, soy oil and soy meal increased from 25 to 33 percent, while the taxes on exporting corn and wheat were raised to 12 percent from around 7 percent.

Export taxes distort decisions about what and how much to produce, affecting the cost to produce and the price of the export. Whether the measure significantly affects the world supply and price of that commodity depends on the global market power of the exporting country. For example, Argentina is the world’s third largest supplier of corn and soybeans. To the extent that Argentina’s exports are deterred by the tax, supply in the domestic market could increase, driving prices for the commodity producer down but also creating an input subsidy for domestic producers that use that commodity. As a result of the distortive effect of export taxes on the price of traded goods, it is unsurprising that trade as a percentage of Argentina’s GDP is significantly lower than countries in its peer group of middle income countries.

Argentina 585 export taxes

So why have them?

It is more common for governments to restrict imports to try to protect domestic producers of goods that compete with imports. For example, restricting imports of bread might favor local bakers who could then sell their products at higher prices without fear of competition from foreign producers. Yet we know the cost of suppressing competition means consumers (companies and individuals) will pay higher prices.

In contrast, export duties are less common than import restrictions and have a different justification. Smaller, resource-limited countries sometimes apply export restrictions to a small number of products to ensure adequate domestic supplies or to lower domestic prices. As a major world exporter of agricultural products, Argentina’s export taxes are a way for the government to raise revenue and address its fiscal gap.

How’s it working?

Argentina requires export registrations and permits, while fully banning the export of certain commodities including scrap iron, steel, copper and aluminum. Export taxes vary but Decree 37/2019 issued in December 2019 sets a general rate at 12 percent, with exceptions. The incoming government has already adjusted the rates, increasing soybeans and soy products to 33 percent while reducing others such as rice from 12 to six percent, dry beans from nine to five percent. Others remained the same. Wheat, corn, sorghum, wine, fruits and vegetables are taxed at 12 percent, while beef and chicken at nine percent.

Heavy trade taxation has distorted and decreased the productivity of Argentina’s economy. Moreover, the duties create incentives for rent-seeking as businesses seek special exemptions or reductions in taxes. Special exemptions prop up businesses that may have otherwise failed, preventing workers and resources from moving to their highest-valued uses in the economy. Such outcomes follow the tenets of Adam Smith’s basic economic treatise, The Wealth of Nations: the result of price and trade intervention “can only be to force the trade of a country into a channel much less advantageous than that in which it would naturally run of its own accord.”

Argentina counter to WTO norms on export taxes

Argentina isn’t exempt from economic laws

Trade, Adam Smith went on to observe, is driven by “a propensity in human nature … to truck, barter, and exchange one thing for another.” Certainly, in Argentina this propensity is curtailed today by these restrictions that make it almost impossible for people to exchange goods and services abroad.

Economic laws are universal. Individuals in Argentina have the same creativity and entrepreneurial capacity as do people in other countries. An important way of helping to unleash that capacity would be for Argentina to remove all export and import duties without pitting sectors against one another.

In Argentina, policymakers believe that they can manage the economy better than the forces of market competition. But Argentina has spent more than a third of the last 70 years in recession. Global trade rules explicitly prohibit quantitative restrictions but permit export taxes under limited circumstances. Instead, Argentina uses them liberally and broadly. Eliminating them would enable free trade to spur economic growth.

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Agustin Forzani

Agustin Forzani is an MA student in the George Mason University economics department and MA fellow with GMU’s Mercatus Center. He received a BA in economics from the National University of Rosario in Argentina and a BA in Agribusiness from the National Technological University in Argentina.

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

farm

A SHORTAGE OF FARM GUEST WORKERS COULD THREATEN AMERICA’S HARVEST

Harvest season is here

Right now, acres and acres of lettuce sit ready to be picked in California’s Salinas Valley – an area known as the Salad Bowl of the World. But who will harvest it?

The Golden State is an agricultural powerhouse, producing more than 400 commodities, including one-third of all U.S.-grown vegetables and two-thirds of our fruits and nuts. In 2019, California’s agriculture exports totaled $21.02 billion, ranking first among all states in the value of farm exports for the last twenty years. California’s almonds are a favorite of the European Union, its dairy products ship to Mexico, California pistachios travel to China, and the state’s high-quality rice is increasingly popular in Japan.

Spring means harvest season is here – or will be soon – for many crops in California and around the country, from asparagus to cucumbers to tomatoes and more. Thousands of workers are needed to pick these crops. And over the years, those workers have become harder and harder to find – a challenge that is being exacerbated by the COVID-19 pandemic.

Labor shortages cause farm losses

The American Farm Bureau Federation says that U.S. agriculture needs 1.5 to 2 million hired workers. These challenging, often seasonal, positions are essential to food production – but few U.S. citizens are willing to fill them. A California Farm Bureau Federation survey found that 56 percent of California farmers have been unable to find all the workers they need during the last five years.

While some farmers are shifting to labor-saving technologies, others can’t afford the expense of mechanization. And many of the high-value fruits and vegetables that California is known for must be harvested by hand to ensure their quality.

Given this chronic labor shortage, immigrants – most from Mexico – play an increasingly crucial role in our food system. Foreign-born workers can legally come to the United States to perform short-term farm labor under the H-2A Temporary Agricultural Worker Program, often referred to as the H-2A visa program.

56 percent cant find workers needed

Temporary labor through H-2A program

The Immigration Reform and Control Act of 1986 established the agriculture-focused H-2A program and a separate H-2B program for skilled workers in industries like healthcare and tech. The H-2A program is the primary way that U.S. farmers can legally hire immigrant labor from countries deemed eligible by the Department of Homeland Security (DHS). The process requires several steps and fees.

To participate, farmers must first receive a temporary labor certification for H-2A workers from the Department of Labor (DOL). This should be submitted 60 to 75 days before workers are needed. Then, farmers must file a petition to the DHS U.S. Citizen and Immigration Services (USCIS). After USCIS approves the petition, prospective H-2A workers outside the U.S. apply for a visa through the U.S. Department of State at a U.S. Embassy or Consulate and seek admission to the U.S. with the U.S. Customs and Border Protection (CBP) at a U.S. Port of Entry.

Open positions unable to fill

Rules are in place so that the H-2A program does not take jobs from domestic workers or lower the average wage. Before hiring H-2A workers, farm employers must demonstrate to the DOL that they are unable to recruit U.S. citizens for their open positions. They are also required to pay a state-specific minimum wage that may not be lower than the average wage for crop and livestock workers in their region during the prior year, known as the Adverse Effect Wage Rate.

Once approved, H-2A visa holders are allowed to work in the U.S. temporarily. The visa can be re-approved annually for up to three years. A worker loses their H-2A status if they leave their job. After a worker has three years of H-2A status, they are required to leave the United States for at least three months before applying to receive a H-2A visa again. The H-2A visa does not apply to a worker’s family members and does not give workers a way to gain permanent legal status. Unlike the H-2B program, there is no cap set on the total number of H-2A visas that can be granted each year.

number farmer workers exceeds visas

Greater need than visas

In 2019, nearly 258,000 immigrant workers were granted H-2A visas, with most working in Florida, Georgia, Washington, California, and North Carolina. Participation has jumped from 48,000 positions certified in 2005. However, the number of farm workers that are needed each year far surpasses the number of H-2A visas that are granted. Data from the U.S. Department of Agriculture (USDA) shows that the percentage of farm workers who are not legally authorized to work in the United States grew from 14 percent in 1989 to more than 50 percent in recent years.

While the H-2A program has grown in size, both farmers and farm worker advocates are critical of it. Farmers say it is a complicated, expensive process to navigate. Furthermore, year-round agriculture sectors like dairy farming, pork production or even mushroom farming can’t use the program since it is only available to seasonal industries. Labor groups argue H-2A needs reform to provide more protections to workers.

Agriculture’s workforce challenges recently received some attention on Capitol Hill. In December 2019, the full House of Representatives passed the bipartisan Farm Workforce Modernization Act (H.R. 5038). Among its many changes, the bill would make H-2A more flexible for employers and establish a new, capped program for year-round workers. It would also provide a pathway to permanent resident status for farm workers and include new enforcement measures. While the House’s passage of H.R. 5038 marks the first time that body has approved immigration legislation since 1986, the bill has not received a vote in the Senate.

The Trump Administration has also shown interest in updating the H-2A program, streamlining the application process on the USDA website. DOL issued a proposed rule in September 2019 that would update how the Adverse Effect Wage Rate is calculated, among other provisions. That rule has not yet been finalized. Additionally, in October 2019 the DOL issued a final rule to modernize the market labor test by allowing farmers to advertise jobs on a central online registry rather than a local print newspaper.

critical industry

COVID exacerbating labor shortage

Travel restrictions and government closures due to COVID-19 are adding to the concerns about America’s shortage of farm workers. The U.S. stopped processing non-emergency visas like H-2A in Mexico on March 18, 2020 out of health concern for U.S. Embassy employees. This immediately led to calls of alarm from agriculture stakeholders who are looking ahead to a busy spring and summer season.

The State Department later said it would continue processing H-2A applications and granted new flexibility so both new or returning workers would not be required to go to a U.S. consulate for an interview according to social distancing protocol. The DOL announced additional, temporary H-2A flexibilities in April 2020 to help prevent a labor shortage. However, governments around the globe continue to enforce travel restrictions to limit the spread of the coronavirus, potentially keeping workers from the harvest.

Some farmers are reporting that they are unable to get workers on time. In Canada, foreign workers have been delayed by border restrictions and canceled flights. Once they arrive, the Canadian government requires workers to be quarantined for 14 days (with pay) before they can begin work. The United States does not have a similar quarantine requirement but American farmers are concerned that fruit and vegetable harvests will still be impacted. Workers who have arrived are in the fields for longer hours due to the labor shortfall. Abad Hernandez Cruz, a Mexican farm worker in Georgia, told Reuters why he is working 12+ hours a day: “if the farm doesn’t produce, the city doesn’t eat.”

Agriculture is a critical industry

Agriculture has been deemed a critical industry during the pandemic. Americans are seeing firsthand the strengths and vulnerabilities of our complex food supply chain. One paradox is that farmers across the country have been forced to dump millions of gallons of milk and destroy millions of pounds of fresh food while some grocery store shelves go bare. The widespread closure of restaurants, hotels and schools has left farmers with no market for half of their crops due largely to the differences in Americans’ eating habits while quarantined at home.

So far, a lack of labor has not been a major force behind this food dumping. However, the situation could change if the pandemic persists longer into the harvest season or if farm workers begin testing positive for COVID-19. Farmers are also concerned that fewer workers will apply for H-2A visas over fears of catching the virus. Without enough workers, leafy greens, berries, and cucumbers would likely be the first crops to be left fallow, followed by peaches, plums, nectarines, and citrus.

The important role that guest workers play in ensuring America’s food supply during the pandemic underscores the interconnected nature of global agriculture trade. In reality, without H-2A and other immigrant labor, that romaine lettuce in Salinas would never make it to your salad bowl, or to other dinner tables around the world.

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Sarah Hubbart provides communications strategy, content creation, and social media management for TradeVistas. A native of rural Northern California, Sarah has melded communications and policy throughout her career in Washington, D.C., serving in government affairs, issues management, and coalition building roles in the agricultural sector. She is an alum of California State University, Chico and George Washington University.

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

growers edge

Growers Edge & CropX Partnership Addresses Farming Challenges

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

A Vote on USMCA is a Vote for Predictability

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.

phase one

The Phase One Deal: How We Got Here And What Is Next

President Trump announced that the United States and China had reached a partial “Phase One” trade deal in mid-October, signaling a pause in the trade tensions that have steadily grown over the past two and half years.  While the precise goals of the President’s trade action against China have always been vague, there was an unquestionable desire to change certain structural issues of the Chinese economy, particularly with the country’s intellectual property and forced technology practices.  

To put the proposed Phase One deal in its proper context, this article breaks down (1) the various stages of escalation since President Trump took office, (2) what’s known about the contents of agreement, and (3) the potential risks that could derail the deal from being signed.  

The Escalation of the Trade War

The President’s most high-profile actions against China have been his use of long-thought-defunct trade authority, Section 301 of the Trade Act of 1974 (“Section 301”).  Section 301 grants the President the authority to impose tariffs on countries if it determines that the acts, policies, or practices of a country are unjustifiable and burden or restrict U.S. commerce.  

Following a lengthy investigation, the Office of the U.S. Trade Representative (“USTR”) officially determined in March 2018 that China’s policies result in harm to the U.S. economy.  Simultaneously, President Trump signed a Presidential Memorandum outlining a series of remedies that his Administration would take in response to these findings, most notably the imposition of tariffs.  

President Trump’s Section 301 tariffs currently cover most products imported from China, after having been rolled out in four different lists:  

-List 1 of the Section 301 tariffs went into effect July 2018 and imposes a 25 percent tariff on $34 billion worth of goods from China.  

-List 2 went into effect August 2018 and imposes a 25 percent tariff on $16 billion worth of goods.  

-Following China’s retaliatory tariffs on Lists 1 and 2, the United States announced List 3, which began imposing a 10 percent tariff on $200 billion of Chinese products in September 2018.  The List 3 tariffs were increased to 25 percent after negotiations between the two countries fell apart.

-List 4 could hit almost $300 billion more of Chinese products.  Part of the list (“List 4a”) went into effect on September 1 and imposes 15 percent tariffs on $112 billion of Chinese products.  The U.S. is scheduled to impose 15 percent tariffs on the remaining $160 billion of the list (“List 4b”) starting December 15.  

The Trump Administration has taken aggressive action to increase pressure on China that goes well beyond the Section 301 tariffs.  Since President Trump took office, he has targeted China’s steel and aluminum industries through global tariffs on these products. He has (at least temporarily) sanctioned major Chinese tech firms or restricted their ability to do business with the United States.  He has sanctioned Chinese individuals and entities connected to North Korea and others related to the treatment of the Uighurs in western China. He signed into law a major expansion of authority for the Committee on Foreign Investment in the United States (“CFIUS”), which has immediate and future implications for Chinese investment in the United States. 

Additionally, the Administration has moved closer to Taiwan. President Trump has authorized significant military sales to Taiwan, and as President-elect, he took a call from Taiwan’s leader Tsai Ing-wen, the first such call by a U.S. President or President-elect since the 1970s. The Administration has either directly or indirectly made clear that these restrictions, sanctions, and geopolitical relationships can be used as points of leverage in the trade negotiations.  

The Phase One Deal

Many details about what is included in the Phase One deal remain unknown.  In announcing the deal, President Trump said “We have a great deal. We’re papering it now.  Over the next three or four or five weeks, hopefully, it’ll get finished. A tremendous benefit to our farmers, technology, and many other things — the banking industry, financial services.”  As the two sides “paper” the agreement into finalized text, what is known about the deal has come largely from statements made by both sides. We know that as part of the deal, the United States will not pursue plans to increase the List 1-3 tariffs from 25 percent to 30 percent. We also know China plans to make large purchases of U.S. agricultural products.  

There are reports the Phase One deal could also delay or cancel the planned List 4b tariffs. Other reports suggest that China is seeking additional eliminations or reductions of the Section 301 tariffs.  

As for the structural changes to the Chinese economy sought by the Trump Administration, it seems as though they could be mentioned in the Phase One deal, but the real work will be addressed in subsequent phases.  

What Comes Next

The stars were aligning for President Trump and President Xi to sign the Phase One deal at the Asia-Pacific Economic Cooperation (“APEC”) meetings in Santiago, Chile this week.  Unfortunately, the APEC meetings were unexpectedly cancelled due to protests in the country, highlighting that a few weeks can feel like an eternity for sensitive trade talks.  

Assuming the U.S. and China can find another location, there are still risks out there that could prevent the deal’s signing.  

One big risk to the deal is the events unfolding in Hong Kong. The Trump Administration has been notably quiet on the protests, outside of President Trump expressing his faith in President Xi to satisfactorily resolve the situation.  The strongest statement from the Administration came from Vice President Pence, who recently said, “[T]he United States will continue to urge China to show restraint, to honor its commitments, and respect the people of Hong Kong.  And to the millions in Hong Kong who have been peacefully demonstrating to protect your rights these past months, we stand with you.”

According to multiple reports, President Trump pledged to Chinese President Xi Jinping that his Administration would remain quiet on the Hong Kong protests throughout the trade talks.  However, the Administration’s hand could be forced if the protests escalate into more sustained violence or if, as is expected, Congress passes legislation in support of Hong Kong with veto-proof majorities.  

Another risk is more vocal opposition from so-called “China hawks” that are dissatisfied that Phase One doesn’t get to the heart of the problems they have with China’s economic practices.  Senate Minority Leader Chuck Schumer (D-NY) cautioned the President that he “shouldn’t be giving in to China unless we get something big in return.” Senator Marco Rubio (R-FL) doubted China’s commitment to the deal long-term, saying, “I do believe that [China] will agree to things they don’t intend to comply with.” There are reports that China hawks within the White House are also pushing the President to reject the deal, notably Director of the Office of Trade and Manufacturing Policy Peter Navarro.  

A deal to end or pause the trade tensions between the United States and China would provide the private sector with more certainty as they make decisions about 2020 and beyond.  The Phase One deal looks to provide at least a pause, but geopolitical actions or domestic opposition could still derail the agreement before it is signed.   

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Rory Murphy is an Associate at Squire Patton Boggs, where his practice focuses on providing US public policy guidance, global cultural and business diplomacy advice that helps US and foreign governments and entities with doing business around the globe.

soybean

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

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.

farmers

Yield Guarantee Program Supports Farmers While Mitigating Financial Risk

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

How Soybeans Can Save Billions in Container Repositioning

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/.