Proposed Pacific free-trade agreement gets mostly thumbs-up in Nebraska, Iowa

Source: By Russell Hubbard, Omaha World-Herald staff writer • Posted: Monday, March 30, 2015

‘More customers are better’ [JUMP]Proposed Pacific free-trade agreement gets mostly thumbs-up in Nebraska, Iowa

A long line of hopper trucks filled with corn. A high-tech ethanol plant that turns it into motor fuel. And livestock in the near distance that might soon end up as table beef in an Asian supermarket.

The corn, the cattle that grow eating on it, and the state’s other main row crop of soybeans are by far the leading export commodities produced in Nebraska, and long have been, accounting for $6.6 billion in 2013 ag exports, with Nebraska the fifth-leading U.S. farm and ranch exporter. Iowa, the second-largest ag exporter, had $10.2 billion of farm and ranch produce reaching world markets in 2013.

So it’s no surprise that foreign trade is emerging once again as a major topic in Nebraska ag circles. Under negotiation is a prospective free-trade pact to rival the North American Free Trade Agreement, this one called the Trans-Pacific Partnership. It involves 12 Asian, Pacific and North and South American countries, and it would lower and then remove trade barriers, making Nebraska beef, corn and soybeans cheaper for consumers in those nations.

There is plenty at stake. The prospective partners already account for about $4 billion of Nebraska exports of all types. The theory is that lowering border import fees known as tariffs — protective levies designed to make imported goods more expensive than local ones — will stimulate everyone’s economy, lift standards of living and promote innovation if stagnant and inefficient businesses can’t survive minus the government aid.

The negotiating parties are the United States and Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

So far, the budding free-trade agreement has widespread support in Nebraska. Sometimes dubbed “NAFTA for Asia,” the Trans-Pacific Partnership would do away with trade barriers such as the 34 percent tariff that Vietnam levies on U.S. beef and the 20 percent Japan adds to the cost of U.S. soybeans.

Others aren’t so sure about lowering barriers with the Trans-Pacific partners. John Hansen, president of the Nebraska Farmers Union, is a critic of some recent free-trade agreements, saying the United States has a track record of giving up more than it gets.

Earlier this month, Nebraska Gov. Pete Ricketts said “the Trans-Pacific Partnership holds enormous potential for the continued growth of Nebraska agricultural exports.” A letter he sent to U.S. congressional leaders was signed by the leaders of 22 Nebraska ag organizations.

And it is not hard to find individual farmers and ranchers who support the idea of more customers.

“We have to continue to try for more exports,” said Mark Jagels, who produces corn, soybeans and cattle in Davenport, Nebraska. “That’s because 95 percent of the world lives outside our borders.”

Trading partners in Asia, Jagels said, already recognize Nebraska beef as a prime brand name — a symbol of quality. Large markets exist in Japan and Vietnam, he said, and world protein consumption is rising as more nations develop consumer economies with higher disposable incomes.

“In a real sense, we in Nebraska are charged with feeding the world,” Jagels said, citing the state’s vast underground water reserves, fertile soil for staple grain crops and massive tracts suitable for cattle feeding. “But we want to be treated the same as anyone else when it comes to exporting to any particular country.”

Asia, home to five of the Trans-Pacific agreement nations, is “a big critical market,” said Gregg Fujjan, who grows corn and soybeans about 50 miles west of Omaha. A new and fast-growing niche, he said, is the use of soybean meal as feed for farmed fish. Corn, he said, is always a staple export, part of “a virtuous cycle” Nebraska farmers and ranchers often mention.

It goes like this: First, corn is grown and some of it is distilled to create ethanol. The ethanol distillation creates a high protein corn leftover, a cattle feed upon which livestock thrive. And everything in the cycle — the corn, the beef, the ethanol and the cattle feed leftovers — earn export income for the producers of each of the commodities.

Iowa farmers also support the Trans-Pacific Partnership, said Ray Gaesser, who farms corn and soybeans on 6,000 acres in Corning and this year is serving as chairman of the American Soybean Association.

“Exports are high on our list, and free-trade agreements are the way to do it,” Gaesser said. “It is important to the country and agriculture in general.”

Gaesser said every $1 billion in U.S. ag exports creates at least 6,000 jobs in transportation, storage, machinery and allied fields.

As for soybeans, about 60 percent of the U.S. crop winds up exported, Gaesser said. China gets about 25 percent of those exports, but large customers also include Japan and Mexico.

Soybean meal and oil are used for high protein cattle feed as well as for fish feed.

“We need to continue to create and build new markets,” said Gaesser, adding that a sentiment of “more customers are better than fewer” sums up the view of most farmers.

And farmers aren’t the only ones with something at stake. Farm machinery forms a major part of world exports for Nebraska and Iowa, with combine harvesters, mechanical sprayers, shovel loaders and tractors leading the way.

When and if any of that growth in ag and related exports will come to pass via the Trans-Pacific agreement is still an open question.

Phil Karsting, the Nebraska native who heads the U.S. Agriculture Department’s foreign service, said Congress might vote this year on the pact in its conditional form. That, he said, would spur a final agreement among the countries.

Such fast-track approval involves a simple thumbs up or down, forgoing amendments or revisions by Congress. The negotiating process — which happens in secret — began in 2010.

“The American economy and agriculture will be better off for it,” Karsting said. “There is a lot of opportunity for us to improve our positions in the partner countries.”

Getting fast-track authority is a major goal of the Obama administration, with some agreement on the matter between parties in Congress.

“I think the majority view is that trade contributes to stability and prosperity,” Karsting said. “In the past, countries used to send gunboats when they had trade disputes.”

Hansen, leader of the Nebraska Farmers Union, isn’t for gunboat diplomacy. Nor is he for what he calls blindly negotiated free-trade agreements. Hansen said he favors trade with the world as a basic economic policy, but that rosy predictions of success haven’t always come true.

Hansen also said tariffs aren’t the only question in free-trade agreements. He said most other nations in the world employ a value-added tax that averages 18 percent globally. Currency manipulation to gain a trade advantage and government ownership of for-profit companies are also common in some countries, including China.

(China isn’t part of the Trans-Pacific Partnership, but the agreement’s advocates say the United States would benefit from signing agreements with the rest of Asia before China does.)

“What needs to be considered is the track record of trade agreements, the promises made, and how perfectly they were realized,” Hansen said.

According to the Washington-based advocacy group Public Citizen’s 2014 analysis of NAFTA, the trade policy turned a combined $32.5 billion U.S. trade surplus with Canada and Mexico in 1993 into a $177 billion deficit by last year.

The analysis, which cites statistics from the U.S. International Trade Commission, says that while exports to Canada and Mexico have risen, imports to the United States from them have climbed more.

“The average annual U.S. agricultural deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level,” Public Citizen said.

University of Nebraska-Lincoln ag economist Wesley Peterson said trade deficits within individual categories such as ag or manufacturing are irrelevant to the overall economy. What is important, he said, is the total economic growth.

“NAFTA has made a big difference,” Peterson said. “We are doing a lot more trade than we used to.”

Peterson said an example of free-trade benefits can be seen in the textile industry, once a leading light of U.S. industry.

“Sure, we have a trade deficit in textiles, because all of that is now done offshore,” Peterson said. “But you also have to realize that consumers are benefiting from cheaper clothing. Farmers tend to think only of production, but there is always the consumer side as well.”

He said that most economists believe that if one sector might be injured by trade policy, others will surely rise as a result.

“People will always tend to be parochial, self-interested and locally focused,” Peterson said. “In Mexico, farmers are complaining about cheap U.S. corn. But research and analysis shows a net gain from trade liberalization.”

Back at the Green Plains plant in Central City where pieces of Nebraska’s ag economy sit side-by-side, 50 workers are employed making ethanol, corn oil and livestock feed. The company, which has 12 plants nationwide, last year exported about 82 million of its 966 million gallons of ethanol produced.

And with more countries instituting requirements on how much ethanol must be blended into the fuel supply, the company is looking for more export opportunities and the policies that would encourage them.

“A liberalization of trade barriers would be hugely beneficial to our industry,” said Jim Stark, the company’s head of investor relations. “We are very keen on finding new markets.”