Why free trade matters to US agriculture

by Erica Shaffer
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Kevin Smith, Seaboard Foods
Kevin Smith of Seaboard Foods discusses the future of free trade at the Agricultural Business Council of Kansas City.
 

KANSAS CITY, Mo. – Ranchers and farmers in the United States have been grateful beneficiaries of trade with Mexico and Canada, but stakeholders in the US agriculture industry fear free trade in general, and the North American Free Trade Agreement (NAFTA) specifically, are vulnerable targets in an anti-globalization climate.

As top US officials traveled to Mexico for wide-ranging discussions about border security, migration and trade, the Agricultural Business Council of Kansas City convened a forum of agriculture and trade experts to explain the importance of trade to US agriculture.

The event featured Bob Young, Ph.D., chief economist, American Farm Bureau Federation as the keynote speaker. Participating in the panel discussion were Chad Bontrager, deputy secretary, Kansas Dept. of Agriculture; Chris Chinn, director of the Missouri Dept. of Agriculture; Warren Erdman, executive vice president, administration & corporate affairs, Kansas City Southern Railway; Bill Krueger, CEO of Lansing Trade Group LLC and Kevin Smith, assistant vice president, international sales, Seaboard Foods.

 Bob Petersen, Kansas City Southern Railway
Bob Petersen, executive director Agricultural Business Council of Kansas City.
 

Bob Petersen, executive director, Agricultural Business Council of Kansas City, expressed concern that many individuals don’t remember the pre-NAFTA era of business and trade, and the speakers at the forum came armed with figures to show the impact of NAFTA before-and-after the agreement was implemented in 1994.

When NAFTA was implemented in 1994, the US was a net pork importer, exporting about 3 percent of its production, Smith said. In 2016, the US was the largest pork exporter in the world. Smith said that NAFTA has made the US, Canada and Mexico partners in trade.

“There’s a difference between a customer and a partner,” he said. “A partner is somebody you’re going to come into a long-term relationship with and you’re not always going to win.”

Seaboard exports approximately 30 percent of the company’s pork production,” Smith said. “Mexico accounted for about 60 percent of that figure; Canada is about 1 percent,” he said. “Overall, Mexico is the largest destination for US pork; Canada is the fourth largest.”

A major benefit of NAFTA has been the continental integration of North America, Smith said.

“Canada is a large producer of pork but there are some logistical challenges for moving that product from the Western side of Canada — where they produce the product — over to the Eastern side in Quebec and Ontario where 60 percent of the population lives,” Smith explained. “It’s actually logistically cheaper and economically more feasible to move that product from the US. So Canada tends to produce in the West and export into the US and off its west coast; and import into its population centers on the east.”

In Mexico, Smith said, US hams are a “huge consumption item.” Roughly 23 percent of meat harvested from every hog is a ham. In the US, hams are consumed mostly during the holidays, but in Mexico, hams are consumed year-round in a variety of applications.

On a state level, Chinn said NAFTA has grown Missouri beef industry revenues from exports to $1.9 billion in 2015 from $656 million in 1994. “For the pork industry, it’s increased 12 times from the number of exports in 1994,” she added. “Our exports contribute $48 per hog that is sold in the United States today. So if we were to lose these trade agreements, it’s going to have a huge impact on Missouri agriculture and on the economy in the state of Missouri.”

In the debate over the pros and cons of free trade, the issue of job losses is a familiar theme. But the advocates of free trade say that jobs created because of free trade agreements somehow get lost in the discussion.

 Bill Krueger, Lansing Trade
Bill Krueger, CEO of Lansing Trade Group.
 

“One area that we haven’t hit on as much is the work force,” Krueger said. “Everyone has their own opinion about immigration. But we do have to understand, in general, we are dependent on immigrants to work in the meat industry, in the grain industry, in the processing industry in order to be competitive.”

Kansas City Southern’s Erdman explained that the rail company has invested more than $4 billion in Mexico since 1997 when the company took on the concession of the Mexican railway and in the process, trained a lot of workers.

“Granted, that investment was made in Mexico, but what can be lost is that investment facilitates US jobs,” he said. “Without that investment in Mexico, our ability to move grain to market would be compromised.”

“We all want to make America great again,” Erdman concluded, “but I would submit if you want America to be great you’d better make sure you protect your export markets.”

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READER COMMENTS (1)

By Mark Ebeling 2/25/2017 1:29:57 AM
Does your comparison of dollar values of exports take into account the time value of money? If not, inflation makes the dollar comparison invalid