Cargill to grain dealers: Stand for trade
PRIOR LAKE, Minn. — A top Cargill Inc. official told grain elevator company leaders that trade is the "heartbeat" of the overall economy, and warned that soybean and potential corn exports could be "collateral damage" in a potential trade war.
Devry Boughner Vorwerk, vice president of Global Corporate Affairs, Cargill Inc., said new tariffs on steel and aluminum could indeed spark a trade war.
"U.S. agriculture exports like soybeans could be thrown into the fray and become collateral damage," she said. In 2017, China imported 100 million metric tons of soybeans.
"Retaliation against U.S. exports could make a very difficult farm economy that much more difficult."
Vorwerk was a keynote speaker on March 8 in front of some 600 attendees at the Minnesota Grain & Feed Association's 111th annual meeting and trade show at the Mystic Lake Casino Hotel in Prior Lake, Minn.
The Cargill executive warned of a "chain of retaliatory measures" stemming from tariffs. "This isn't made-up stuff," she said, recalling her own days in the early 2000s as senior economist in agricultural affairs for the U.S. Trade Office. There she learned that "every country has its list of go-to retaliation products" for imposing retaliatory tariffs.
"Nations will target their most competitive exports and disadvantage American farmers once again," she said. "This is very real. It is very real in this moment. Conversations are happening today in capitals worldwide, from Beijing, to discussions in the European Commission. And there will be consequences."
Wearing purple for International Women's Day, in a room largely filled with men in their 50s and 60s, Vorwerk called NAFTA the "great North American unifier" for "one of the strongest economic zones in the world."
U.S. ag exports to Mexico have quadrupled since its inception in the early 1990s. Minnesota's exports to NAFTA partners were $6.8 billion in 2015 and about $1.8 billion of that was corn and soybeans, feed products and pork, connecting to about 40,000 jobs across the state.
Vorwerk said NAFTA could be improved by expanding overall access for agricultural goods, reducing barriers by harmonizing food safety standards and others, simplifying customs procedures and expediting dispute settlements. "We're looking at maintaining investor-state provisions so capital can move across borders and be secured when it's invested," she said. She said 40 percent of U.S. exports are tied to U.S. investments overseas.
She said cascading trade responses becomes a "t for tat, quid pro quo environment." It jeopardizes existing soybean exports and potential for exporting corn to China for ethanol production.
"We have the power to not assault one of our largest customers," Vorwerk said, and added, "Once you offend your largest customer, you have to go and repair that. And that repair takes a very long time."
She said 1 billion people, primarily in east Asia and southeast Asia, are crossing the threshold of earning $2,000 per year in gross domestic product per year per capita to $10,000 per year. Since the U.S./Korean trade agreements was struck in 2010, beef consumption there increased by 25 percent.
Vorwerk asked farmers to urge political leaders to step up for opening new markets to U.S. products, including Cuba. She is chair of the U.S. Agriculture Coalition for Cuba and was co-chair of the U.S. Business Coalition for the Transpacific Partnership.
She noted that 11 nations signed the TPP. Now, Britain and others talking about "docking on" with the TPP, a deal "negotiated by the United States" and now dropped by the Trump administration. She asked elevator officials to advocate Congress for the U.S. to re-insert itself into the deal. The 11 countries in the TPP represent about $62 billion in U.S. ag exports today and U.S. involvement could expand that by $4.4 billion.
Vorwerk warned that there is competition from the so-called Mercosur (an acronym for for a Southern Cone Common Market group) — a bloc comprised of Argentina, Brazil, Paraguay, Uruguay and Venezuela.
She said that China has put together the "One Belt One Road" strategy that uses the ancient Silk Road to reassert China's trade dominance. "We're looking at this as the largest infrastructure project in history" touching 65 percent of the world's consumers, she said.
She said 780,000 jobs in Minnesota are trade "supported." State exports account for $33 billion annually. Among other things, trade reduces the cost of a grocery basket. She said worldwide, "the fervor in trade" has helped lift 650 million people out of poverty, worldwide.
Cargill two months ago launched an online effort called "fedbytrade.com" which "tells the real stories and the merit behind trade as a driver behind our growth." She said she couldn't say the financial investment in the project or how its success might be measured.