A Proclamation

There’s been a lot going on in the news lately.  With the killing of Osama bin Laden, the flooding of the Mississippi and the Governator’s troubles in California, you might understandably have missed a proclamation that came out of the White House last week.

In it, President Obama declared this week to be World Trade Week.

But for folks in agriculture, every week recently has been World Trade Week, as we wait for the final i to be dotted on a deal that would send three long-pending Free Trade Agreements to Congress for approval.

These FTAs, with South Korea, Panama and Colombia, have been languishing since 2006 and 2007.  We’ve lost a billion dollars in market share in South America, much of it in corn exports, as our friends and allies there make pacts with other countries because they’re tired of—and insulted by having to—wait for us to enact the agreements.

Colon Container Terminal, Panama (Photo courtesy Julie Root, RFD Radio)

Very few trades and even fewer political issues are considered win-win.  This, however, is one of them.  These countries are clamoring for our goods.  We’re clamoring for their markets.  Passing the FTAs would support 9,000 in America for every billion dollars in new exports.  The Korea FTA alone is expected to create about 70,000 jobs, according to the Obama Administration.  More than 22,000 of those jobs would be in agriculture. 

You can see why every week is World Trade Week for farmers and ranchers.  We’ve been working hard to get these FTAs passed.  As Illinois Farm Bureau President Philip Nelson recently wrote in an opinion piece to newspapers around the state, it’s like we’re in first place with 100 yards left in a marathon, and we’ve stopped to re-tie our shoes as our competition comes up from behind.  If we don’t get up and finish, we’re going to be overtaken and lose out.

And so, we have a proclamation of our own, since President Obama’s didn’t mention passage of the FTAs:

Whereas

• Free Trade Agreements with South Korea, Panama and Colombia were negotiated in 2006 and 2007, and have not yet been sent to Capitol Hill for approval;
• The U.S. has lost more than $400 million in corn exports to Colombia alone in the past two years;
• American heavy equipment manufacturers would finally be able to ship their products without excessive tariffs;
• And, whereas unemployment claims rose in three of four weeks from April to May;
• Now, therefore, the Illinois Farm Bureau, representing two out of every three Illinois farmers, does hereby proclaim that President Obama should immediately send, and that Congress should immediately pass, the Free Trade Agreements with South Korea, Panama and Colombia.  Doing so would benefit our economy and create jobs.  Doing so would be the perfect way to celebrate “World Trade Week.”

Dated the eighteenth of May, of the year two thousand eleven.

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In Defense of Ethanol

Recent articles in the Wall Street Journal and Chicago Tribune have taken to lambasting ethanol, in light of former Vice President Al Gore’s statement in Greece that he no longer supports first-generation ethanol subsidies.  The sub-headline in the WSJ article, in fact, says the ethanol industry ‘serves no useful purpose’; the Tribune article calls the industry “Illinois’ and possibly the nation’s most gluttonous corporate freeloader,” and says “spending billions of taxpayers’ and consumers’ dollars on ethanol [is] at best a costly crapshoot.”

These statements make it appear that burning ethanol is equivalent to burning money.  Nothing could be further from the truth.  Ethanol production helps the economy, the environment, and is vital to national security.  Let’s examine some facts.

According to a study published in the Journal of Agrobiotechnology Management & Economics, the Volumetric Ethanol Excise Tax Credit (VEETC) and the ethanol import tariff, which both articles take to task, is responsible for between 56,000 and 112,000 American jobs.  The study says the future of the biofuels industry—and those jobs—depend on the extension of the VEETC and import tariff, both of which expire at the end of this month.

An analysis by AUS Consultants shows the elimination of VEETC would result in consumers paying $3 billion more in higher gasoline costs, including $500 million in federal gas taxes, household income falling by $2.9 billion, and 120,600 more Americans having to file for unemployment.  Another study shows the American ethanol industry has generated an estimated $33.4 billion in federal tax revenues and nearly $17 billion in state and local tax revenues since 1978 – a 5 to 1 return on investment of the VEETC.

Doesn’t sound much like a costly crapshoot, does it?

If more evidence is required that ethanol “serves a useful purpose,” we can look at a study done by economist Dr. Donis Petersan which shows that a 100 million gallon-per-year ethanol plant results in:

• $70 million to the local economy during construction
• Expansion of the local economic base by $233 million each year
• 45 direct jobs, plus 101 indirect jobs throughout the area
• Household income raised by $7.9 million annually.

In Illinois alone, more than half of the state’s 14 ethanol plants produce 100 million gallons or more per year.  In fact, the average plant output in Illinois is 119 million gallons per year.  That means, in addition to the approximately 1,100 people directly employed by those 14 plants, with a 45/101 direct-to-indirect jobs ratio, an additional nearly 2,500 Illinois jobs exist because of the ethanol industry.

We would suggest 120,600 Americans nationwide who have jobs because of ethanol would beg to differ that ethanol ‘serves no useful purpose.’

But for a moment, let’s ignore ethanol’s importance to the economy.  Let’s pretend instead of a positive, it’s at best a neutral.  Even in that light, we can consider ethanol a strong investment in our national security.

It’s a simple equation—more domestic ethanol equals less dependence upon foreign oil.  According to the Oil and Gas Journal, all U.S. oil companies combined control less than 10% of the world’s oil reserves, and the world’s ten largest oil and natural gas companies are 100% owned by foreign governments.  Most of that oil comes from the Middle East, and it’s no secret that many of those governments don’t like the United States very much.  That doesn’t help national security, being dependent upon countries that aren’t our friends.  Factor in that, according to the Department of Energy/Energy Information Administration, the U.S. is going to need 6-10% more energy in the next 20 years, and you’re talking even more dependence upon foreign oil if we don’t produce it domestically.

When it comes to dependence upon the Middle East, former Central Intelligence Agency Director James Woolsey told an ethanol seminar, “Under current circumstances, we cannot avoid being there.  We have to be there.  But over the long run, it is the purest of folly to assume that problems, such as the proliferation of weapons of mass destruction and terrorism in that part of the world, in part funded by oil money, are somehow magically going to go away.”

Talk about prescient.  Woolsey made that statement in 1998.

So when you factor in the role ethanol plays in national security, now and in the future, and the impact it has on jobs and the economy, it’s difficult to see why these articles would so flippantly dismiss the ethanol industry as a useless, gluttonous freeloader, especially in the face of a national public outcry for renewable energy.  Let us hope the ethanol tax credits and import tariffs are extended, so that our economy and national security do not suffer in the long run.

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To Trade or Not To Trade

International trade, in particular with South Korea and India, has been in the news as of late, in the wake of President Obama’s trip overseas.  It might leave some wondering why the issue is so important to the future of the U.S. economy.  After all, we keep hearing that the problem lies in domestic job creation, not international trade agreements.

Why are international trade agreements important?

It’s really a matter of math.  Only 5% of the world’s population lives in the U.S.—that means 95% of global consumers live outside our borders, and possess 75% of global purchasing power.  By 2025, population growth of 60 million is expected in the U.S. and 1.6 billion in the world.  That means even more consumers will be outside the U.S. in the future.

Why is this critical for agriculture?

Because agricultural production is already plentiful and efficient and we have the delivery system in place, and most of the world’s consumers are outside the U.S., it stands to reason that the ag sector is in prime position for exponential growth as world population grows.  Agriculture is the only sector of the American economy in which there is already a trade surplus.

The more we grow here and sell overseas, the more people we need to hire to do all of the growing, marketing, selling and shipping, and to work in all the associated support industries.  The Economic Research Service (ERS) says agricultural exports alone were responsible for 810,000 jobs in the U.S.  When you take into account the entire agri-food chain, 17% of the American workforce is already involved.

Why is it critical for the entire economy?

Can you imagine if agriculture—and the rest of the U.S. economy—had better and fairer access to foreign markets?  The pending Free Trade Agreement with South Korea alone could increase exports to South Korea by $1.6 billion, which, according to the U.S. Chamber of Commerce, translates into 200,000 new American jobs

Agriculture wouldn’t be the only beneficiary of increased trade.  Exports already support more than 10 million U.S. jobs.  27% of all manufacturing sector jobs are related to exports.  And U.S. jobs supported by exports pay 13-18% more than the national average.  All told, in 2009, the U.S. exported nearly $1.6 trillion-with-a-T in goods and services.  Illinois is the 6th largest merchandise exporter in the U.S—nearly 16,000 Illinois companies exported goods in 2007.

What could all those numbers look like with better access to overseas markets?  How many more jobs could we create?  How much more quickly would our economy be restored to full health?

There’s a lot of hard work ahead.  It will require leadership, responsiveness and accountability.  We in agriculture will do our part to help grow the job base, in addition to the crops in our fields.  But our elected officials need to help as well, by letting a little sunlight get through to foster some of that growth.

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