Making the Case for Trade
By Ruth Bradley
In mid-March, US Secretary of Agriculture Tom Vilsack headed a trade mission to Chile and Peru and, while in Santiago, talked to Business Chile not only about bilateral relations, but also about the Trans-Pacific Partnership, the trade agreement that would, if ratified, bring together 12 countries from around the Pacific, including Chile and the United States. A lawyer, Secretary Vilsack has headed the US Department of Agriculture since 2009 and, before that, served two terms as Governor of Iowa. An ardent advocate of the benefits of trade, he urged the business community to do more to “market” these benefits among their customers and workers.
-US food exports to Chile have grown a lot since the Free Trade Agreement. Is there room for further growth?
–Yes, there is because, as the Chilean economy continues to grow – even if not at quite the rate it grew five years ago – there are going to be more middle-class consumers wanting and needing access to American beef, poultry and so on. And, as the notion of renewable energy and fuel takes over in Chile which I think it will at some point, that’s an opportunity. As the Chilean livestock industry grows to meet growing demand in Asia, for example, that could create more opportunities for feed from the US or it may be that it’s about the science of agriculture – better genetics, hardier plants, livestock that is capable of withstanding the stresses of a changing climate. So I think there are just unlimited opportunities.
-What about collaboration on research in biofuels. Is that an interesting área?
-I think that is an opportunity. I don’t think Chileans have been thinking like that. They’ve been focused on a more traditional line in terms of agriculture but they now see it as a way of balancing mining and some of the extraction industries…and are looking for more value-added opportunities. They are also trying to create a stronger relationship with a number of US states, including the State of Washington which is doing a lot of work on this.
-Is there anything in particular that AmCham Chile should be doing to promote bilateral trade and investment in agricultura?
–The answer to that may surprise you. What I think it should be doing is to encourage appropriators in the US Congress to adequately and fully fund agricultural research. Traditionally, the way we help countries is through fellowships, but Chile’s economy is now so much stronger that it no longer qualifies for those programs. So if we want to exchange scientists with Chile, if we want joint research, we have to figure out a creative way to finance it….more capacity for our research dollars would give us more capacity to develop those relationships.
-US food and agricultural exports to the rest of the world reached over US$150 billion in 2014. Do you have any estimate of what TPP could add to that?
-The Peterson Institute, which is a non-partisan group, has evaluated the overall impact of TPP on the American economy and they’ve estimated that, by 2030, exports will increase by over US$350 billion and that will translate into over US$130 billion of additional income. Now, historically, agriculture has been roughly 9% of overall US exports. A more targeted review by the American Farm Bureau Federation has suggested that, in their view, agricultural exports will increase by over US$5 billion which will translate into over US$4.4 billion of additional income for American farmers. Now I suspect that the Farm Bureau numbers are more immediate whereas the Peterson Institute is looking at the longer view.
-Do you see opportunities for US-Chile collaboration or joint ventures to supply other food markets, say in Asia, as a result of TPP?
-I don’t think TPP is going to provide necessarily greater market access from the US to Chile or Chile to the US or to and from Peru because we have Free Trade Agreements with both countries. But what it will do is provide a more integrated supply chain so, if Chile is increasing exports to Asia of some product, that may create demand for machinery that is produced in the United States. Or conversely, if the US is exporting wine to Asia, that may create new opportunities in our own domestic market for Chilean wine.
-What do you see as the outlook for TPP’s approval by the US Congress? I think you’ve said you hope it will be through by the end of the year. Is that right?
-The hope is based on my belief that this is an agreement that’s beneficial on balance to the economy, farmers and, I believe, workers as well. As we make the case, as we educate folks about what’s in the agreement – the protections that are available, the historic aspects of this agreement in terms of labor and the environment, protections that actually have enforceable trade sanctions attached to them, the historic work done on small business involvement in exports, the consistency of the sanitary and phytosanitary rules based on science and not some political concern for a particular constituency – and when people understand all that, I think that, even though trade agreements are always hard to get through the process – regardless of when it is – at the end of the day, enough members of Congress in the Senate will vote for this.
-Before the election?
–Yes, I’m hopeful it could be before the election. There’s no reason it can’t be done before the election.
-Because everyone’s mind is on something else….
-Well, they were hired to do a job and they ought to be doing their job. And their job isn’t necessarily to only think about being re-elected. The Peterson Institute suggests that a year’s delay in implementation could cost the American economy US$94 billion. So if you say, well, we’ll do it in the lame duck [between the election and the new Congress taking office], first, what assurance is there going to be that there’s any greater interest in doing it then as opposed to now? Second, how many legislative work days are there in that lame duck session? And, three, are we going to hear the excuse that the American public has spoken and they really ought to have their new people be given the opportunity to weigh in on this issue? And, if that’s the case, then you’re talking about an extended delay because the new people are going to take a while to get up to speed.
-You’re from Iowa which has an important farming community. What’s the grassroots feeling there about TPP?
-Well, it’s like every place else, it’s a bit divided. The agricultural community in Iowa is very supportive of TPP. Corn growers, soya bean growers, pork producers, beef producers – [they’re] very interested. We have a commodity-based agriculture in Iowa and they see more open markets and more consistent rules. Now, there are probably some workers in the manufacturing world who may not be as excited about this as the farmers. So it’s sort of reflective of the country’s debate. There’s a direct correlation and a direct understanding on the part of farmers about why they benefit from exports. They know that 30% of their sales are export-related and 20% of their income comes from exports, so they get it. For workers, it’s not quite as clear because we – the collective we – need to do a better job of explaining the benefits of trade so people understand that there are jobs being created and they are connected to trade, there are higher-wage jobs, there’s expanding opportunity and it makes the world a safer place. There are many benefits to this but we don’t do a particularly good job of marketing. The business community talks to itself about trade. CEOs will talk to CEOs. We need the CEOs to be talking to the American public, to their consumers to say, look, you like diversity of choice, you like lower-cost goods…part of the reason for that is trade. And to the workers, do you know that your job is connected to contracts we’ve entered into through that supply chain? The people who are opposed to trade have an easier message. When a plant closes or gets relocated to country x, it’s “trade”. People get that…so, naturally, a lot of people think trade is bad because they haven’t heard the other side of the story very well.
-So you need business to help you sell TPP?
-Agricultural leaders do a really good job of that and I think business leaders could learn from them on that score, about how to market aggressively to their workers and their customers the benefits that they receive directly from trade. Not what the CEO gets or what the company gets, but what they personally get.