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How Trade Affects U.S. Farmers

Excerpts from “How Does Trade Affect Me?,” the March 13, 2018, blog entry in “Big Sky Farm Her. Navigating Life as a Montana Farmer” by Michelle Erickson-Jones.

Trade has become an area I am increasingly interested in studying as well as advocating for. In order to advocate for trade, a notoriously complex, slow moving, and polarizing policy issue, I needed to convey why trade is important to me. Why it is important to our farm, our state, and our national agriculture economy.

Why is trade important to our farm? 

We rely on export markets to provide us with consistent outlets for our grain. Unfortunately, there is not enough demand domestically for wheat. Also unfortunately, we do not necessarily have the ability to change the crops we raise for numerous reasons. We pride ourselves in our ability to produce high quality hard red winter and spring wheat that is in high demand in the Asian [and other] markets. They need/want our wheat to produce products that are popular in those markets. We want to maintain these markets as an outlet for our production.

My personal feelings on trade and its impact on our operation are that current trade policy and the shift towards protectionist policies keep me up at night. Never before have policies and government regulations caused me to lose sleep. I lose sleep [now] because I know agriculture trade is incredibly competitive, our ability to increase market share is limited, trade policy is incredibly slow to develop (and requires at least two willing partners), and because I know every day that goes by under our current policies risks our market share. It risks decades worth of work done by individual farmers through our commodity commissions, trade negotiators, other government officials and others.

Like most farmers I dream of the day my children take over the farm, I dream of giving them a better agricultural economy and a better operation than I started with (not that there was anything wrong with our operation but there is always room for improvement). Our current trade policy puts that dream at risk.

Why is trade important to our state? In 2016 Montana exported $1.6 billion in agricultural products. Agriculture is also the number on economic driver in Montana. We depend on our export markets to maintain that economy for the state.

Montana has a proud history of producing high quality wheat, barley, and beef among many other products. These products are in high demand across the globe, largely because of the high quality. We produce some of the highest quality hard red wheat (both winter and spring) as well as durum in the world. Many of the most competitive markets for these products demand Montana raised products. The Montana Wheat and Barley Commission (MWBC), in conjunction with [U.S. Wheat Associates] has spent decades developing relationships with Japanese buyers to ensure we can supply them with the quality they demand. The Montana Wheat and Barley Commission has traveled to Japan countless times as well as welcoming their trade teams to our farms. Despite their hard work, their ability to attract and maintain those relationships hinges on our free trade agreements. The TPP 11 agreement without the United States gives Canada and Australia a $65 per metric ton discount compared to U.S. sourced wheat; this is a tariff reduction that we will not be able to overcome, despite years of market building.

Why is trade important to our country? Agriculture trade has been growing exponentially over the past 50 years. So much so in fact that we have had a trade surplus in agricultural goods for the past 50 years. Across the nation agriculture maintains our rural economies and creates vital jobs throughout our communities. Trade policy throughout the past several decades has opened up new markets for agricultural exports, increased access in existing markets, and lowered or eliminated various tariffs and technical barriers to trade. Opportunities for improvement still abound; however, the benefits far outweigh the drawback for the agricultural community.

The increase in market access and increase in economic activity has been a significant driver in the improvement of our rural economy. Unfortunately, that rural economy continues to be under threat, a threat that risks significant economic impacts, as well as a domino effect that impacts every facet of our economy.

In conclusion, I have become passionate about international trade, I am passionate about the agricultural industry and our export partners, and I am passionate about the future of our industry. We depend on trade to maintain our export markets, ensure we have the ability to pass on our farmers to a future generation, and to ensure the rural economies stay strong for decades to come. I also understand trade is not perfect. International trade, bilateral agreements, and multi-nation free trade agreements will always have winners and losers. It is a difficult situation to deal with, it is delicate to advocate for, and it is a fact that does cause me great concern. It is also increasingly difficult to stand by and watch protectionist trade policies risk the future of agriculture and more importantly risk the future of my own farm.

Agriculture, particularly the wheat and barley industry, depend on maintaining our current market access, increasing access to new markets through free trade agreements, and improving our current agreements. Trade does not thrive on protectionism and uncertainty.

Michelle Erickson-Jones is a 4th generation farmer in South Central Montana, married to a 4th generation Montana rancher. They are raising two little boys who hopefully will be the 5th generation on their farm. The family raises wheat, malt barley, safflower, sunflowers, corn, alfalfa, forage grains, and maintains a small cow/calf operation. Michelle is the current president of the Montana Grain Growers Association but notes that all views expressed in her blog are her own. She recently worked with Farmers for Free Trade to record a national television ad focused on the importance of trade. 

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U.S. Wheat Trade: A Farmer’s Perspective

By Gary Baily, Washington Grain Commission Chairman, USW Director and a wheat farmer from St. John, Wash.

As Washington Grain Commissioners, trade has consumed a great deal of our time this past year. Relationships with our international partners are critical to the survival of our trade with countries such as Japan. Most of us have seen the proposed effects on our trade with Japan if the United States stays outside of the Trans-Pacific Partnership (TPP): a phased in $65/MT tariff reduction for TPP countries, U.S. market share for wheat falling from 50 percent to about 23 percent, and a reduction of baseline futures prices of $0.50 at a time when prices are already depressed.

I have been raising wheat in Eastern Washington for almost 30 years and have seen wheat fall victim to political whims several times. Looking back, however, I have not been as anxious about the future of our industry since the financial crisis of the 1980s. The divisive nature of the North America Free Trade Agreement (NAFTA) negotiations and the conclusion of the above mentioned TPP trade treaty without the United States cause concern about the long-term heath of our profession. This is especially true for young farmers who may not have the equity or financial backing to weather these storms.

Adding to the current trade environment is President Trump’s announcement that tariffs on steel and aluminum imports are being considered. The effects of those tariffs have yet to be quantified. If enacted, agriculture exports will likely be targeted for retaliation.

It is time for the President to consider the ramifications of his proposed tariffs, and acknowledge the positive contributions that our industry has for trade, and re-engage in TPP.

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Let’s Level the Playing Field for Wheat

By Gordon Stoner, President of the National Association of Wheat Growers (NAWG) and a wheat farmer from Outlook, Mont. This op-ed first appeared in “The Hill.”

The United States is known for producing the highest quality wheat in the world, yet when U.S. farmers market their wheat at a Canadian elevator, it is automatically labeled as “foreign wheat” and given the lowest possible grade (a way to measure grain quality). Cross-border wheat faces major hurdles in Canadian marketing channels, primarily due to the country’s grain grading system. Conversely, Canadian wheat has full access to the U.S. bulk grain handling system. U.S. wheat farmers should be treated the same when delivering to Canadian grain elevators as their neighbors to the north are when delivering to U.S. elevators. The modernization of the North American Free Trade Agreement (NAFTA) is a ripe opportunity to level the playing field.

I grow hard amber durum wheat primarily used in pasta production. This high-quality wheat class is valued for its premium protein and gluten strength, within 10 miles of the Canadian border. When prices are higher in Canada, it would not be difficult for me to take advantage of those price premiums and drive across the border to deliver my wheat. But until this grading issue is resolved, that is not an option. My neighbors just on the other side of the border do not have this problem; if prices are higher at a U.S. elevator, they can easily drive south to deliver their wheat. This kind of disparity is frustrating for farmers in Northern Tier states, especially given declining wheat prices and thin profit margins in recent years.

Canada’s grain policies require all wheat not grown domestically to be segregated and classified as “foreign grain” and therefore automatically demoted to “general purpose” or feed wheat. Canada’s grading system even discriminates against wheat grown in the United States that is identical to varieties of wheat approved for planting in Canada (Canada regulates the varieties of wheat plants that can be graded, unlike the United States, where we only grade based on the intrinsic properties of the grain). Such classification results in a substantial price discount regardless of the quality of the wheat, and segregation costs provide little incentive for elevators to handle U.S. wheat of equal or better quality.

An updated NAFTA should remove Canada’s discriminatory grading treatment. All U.S. wheat moving into Canada should be evaluated on quality parameters without regard to country of origin. Canada’s policies are clearly national treatment issues, which Canada has a current obligation to resolve under its World Trade Organization commitments. However, NAFTA can also be the vehicle to fix the grading issue. Canada’s grain policies deprive U.S. wheat farmers near the border of significant marketing opportunities, while millions of bushels of Canadian wheat stream uninterrupted across the border.

Trade agreements have the potential to create a level playing field where individuals, families and companies can make their own decisions about what to buy and sell. The role of trade agreements is to provide that opportunity, and that benefits both U.S. wheat buyers and wheat producers. Industry groups on both side of the border agree that this is an issue that needs to be resolved.

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NAFTA Holds Mexico’s Door Open to U.S. Wheat; Could Open Cross-Border Trade with Canada

Original article published on Oct. 12, 2017 by the American Farm Bureau Federation in collaboration with U.S. Wheat Associates.

Before the North American Free Trade Agreement (NAFTA) entered into force on Jan. 1, 1994, state intervention and import tariffs held back U.S. wheat exports from the Mexican market. NAFTA ended both, and the newly opened market helped the Mexican flour milling and wheat foods industries to flourish, along with U.S. wheat imports (see chart).

USW represents the interests of U.S. wheat farmers in international markets. As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s sophisticated buyers, millers and food processors solve problems or increase their business opportunities utilizing specific U.S. wheat classes as ingredients in specific types of wheat foods. This effort, supported by wheat farmers and the partnership with the Market Access Program (MAP) and Foreign Market Development (FMD) program, has fostered a productive relationship that has endured for decades through many challenges.

Source: USDA Foreign Agricultural Service, Official USDA Estimates.

Mexico Leads All U.S. Wheat Importers

Today, Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 MMT on average going back many years. Mexico’s U.S. wheat imports typically only fall just short of the volume Japan imports. Not in marketing year 2016/17 (June to May), however, when Mexico’s flour millers imported more than 3.3 MMT of U.S. wheat, which is more than any other country. That volume is up 39 percent over marketing year 2015/16.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. HRW wheat. The association representing Mexican flour millers says a rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70 percent of the country’s wheat consumption. That puts HRW producers in a good position to meet that demand. In 2015/16, Mexico was the leading HRW importer and buyers took advantage of favorable prices and the high quality of the 2016/17 HRW crop to import 2.0 MMT. That is 79 percent more HRW imports compared to 2015/16 and again led buyers of that class. Being closer to HRW production and having a highly functioning ability to import a large share of HRW directly via rail from the Plains states — duty free under NAFTA — is an advantage for Mexico’s buyers.

In addition, Mexico is home to Bimbo, the world’s largest baked goods company, and an increasing number of other cookie and cracker companies. The functional properties of U.S. soft red winter wheat (SRW) is well suited to the production of cookies, crackers and pastries, and serves as an excellent blending wheat. Millers supplying this growing market imported an average of 1.2 MMT of SRW between 2011/12 and 2015/16. With imports from the Gulf of more than 1.0 MMT of SRW in 2016/17, Mexico was the year’s top buyer of SRW again. USW and state wheat commissions from the PNW are also helping demonstrate how millers and bakers can reduce input costs by using U.S. SW as a blending wheat for specialty flour products.

The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way under NAFTA and, for now, U.S. wheat continues to flow to our customers in Mexico. Total exports sales to Mexico returned more than $633 million to wheat farmers across the Plains and east of the Mississippi River in 2016/17.

The data for this map is based on Mexico’s market ranking for primary class of wheat grown in that state in the 2015/16 marketing year. Most wheat states’ farmers rely on Mexico as their number one market.

Source: Small Grains Summary and Export Sales, USDA

Increasing Competition

With U.S. wheat farmers facing financial hurdles, open access to the Mexican market is needed now more than ever. A prosperous Mexico is crucial for U.S. wheat farmers. But these savvy Mexican milling and baking sector customers have shown they can also adapt to other wheat supplies.

After a price shock in 2007/08, Mexico lifted its non-NAFTA wheat import tariff and wheat from other origins began to trickle in. From the first single boat carrying French wheat in 2010/11, non-NAFTA imports became a quarter of all Mexico’s wheat imports by 2015/16. The cost of U.S. wheat has a freight advantage over competitors, but if Mexico encourages purchasing from other origins or a new NAFTA agreement results in impediments to U.S. wheat imports, it has plenty of supply alternatives that are ultimately harmful to U.S. wheat growers.

Source: Global Trade Atlas

New Negotiations Can Build on NAFTA’s Success

Wheat trade with Mexico under NAFTA is already open and fair, but improvements to the agreement are possible. The three NAFTA parties agreed to some improvements as part of the Trans-Pacific Partnership (TPP) agreement that could be incorporated into a NAFTA update. TPP would have updated rules on sanitary and phytosanitary (SPS) measures, which have created major trade problems in some markets. U.S.-initiated trade restrictions often backfire on U.S. agricultural exports, so the wheat industry supports maintaining open markets for all parties.

Renegotiations could also enable full reciprocity for cross-border wheat trade with Canada. Canada allows tariff-free access to wheat from the United States and certain other foreign sources. However, a Canadian law requires that imported wheat, even wheat of the highest quality, must be segregated from most Canadian wheat. It is automatically given the lowest grade established by regulation and therefore receives the lowest possible price.

By contrast, Canadian producers are free to market their wheat in the United States through normal marketing channels. When graded at a U.S. elevator, Canadian wheat is treated the same as U.S.-origin wheat and is assigned a grade based on objective quality criteria, meaning that unlike U.S. wheat going north, it retains its value when it crosses the border.

“U.S. farmers should be able to deliver their wheat to a Canadian elevator and not automatically receive the lowest grade because it was grown on our side of the border,” said Ben Conner, USW Director of Policy. “This concept is needed for U.S. wheat farmers who live near the Canadian border, is supported by the Western Canadian Wheat Growers Association, and is already Canada’s legal obligation under existing trade agreements.”

The map above illustrates U.S. land that would be most affected by an open border with Canada for wheat via truck. The blue rings represent land south of the border that is within 25, 50 and 100 miles away from a Canadian elevator.

Do No Harm, Please

The U.S. wheat industry welcomes the opportunity for improving the framework for cross border wheat trade between the United States, Canada and Mexico, but would strongly oppose changes that might limit the current NAFTA’s benefits for wheat farmers and their customers, particularly in the Mexican food processing industries.

“I cannot emphasize enough how important our Mexican customers are to U.S. wheat farmers,” said Jason Scott, a wheat farmer from Easton, Md., and USW Past Chairman. “There is nothing wrong with modernizing a 23-year-old agreement, but that must be done in a way that benefits the food and agriculture sectors in both countries.”

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Historic NAFTA Renegotiation Underway

By Ben Conner, USW Director of Policy

On Aug. 16, 2017, the United States, Mexico and Canada began negotiations to modernize the North American Free Trade Agreement (NAFTA). The first round concluded on Aug. 20. It was historic, in the sense that this is the first time the United States has attempted to renegotiate all parts of an existing trade agreement.

The Mexican market is extremely important to U.S. wheat farmers, and duty-free access under NAFTA to U.S. wheat is extremely important to Mexican flour millers. As the top export destination in marketing year 2016/17, Mexico accounted for 12 percent of all U.S. wheat exports. This growth stems without doubt from a successful trade agreement that has provided positive economic opportunity for a growing Mexican middle class that is able to spend more money on products made from U.S. wheat.

It is too early to say what kind of outcome to expect, but U.S. agriculture has been emphatic in its message to “do no harm” in these negotiations to the agricultural industry and its customers. That was reflected in the opening remarks of Ambassador Lighthizer, the U.S. Trade Representative, when he acknowledged the importance of NAFTA to U.S. farmers.

However, he also said the agreement had fundamentally failed many parts of the U.S. economy and required major changes. As the negotiations move forward, we will find out what changes will be proposed and acceptable to all three parties — and what tradeoffs will be required.

One change that would benefit wheat farmers and the wheat trade, particularly in northern border states, is a commitment from Canada to treat U.S. wheat farmers equitably when delivering across the border to a Canadian elevator. The current system is a legacy of the old Canadian Wheat Board monopoly, and there is broad recognition that it should be updated to allow reciprocal treatment for U.S. and Canadian farmers.

As these negotiations continue, USW, the National Association of Wheat Growers (NAWG) and other agricultural organizations will be vigilant in pursuing the interests of the North American food and agriculture supply chains.

 

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Mexico Stands as a Leading U.S. Wheat Buyer

By Steve Mercer, USW Vice President of Communications

U.S. Wheat Associates (USW) represents the interests of U.S. wheat farmers in international markets. The organization is grateful to all its overseas wheat buyers, flour millers and wheat food processors for their strong preference for U.S. wheat and for their friendship. At a time when new circumstances have generated some uncertainty about trade, USW believes it is important to provide perspective on the long-standing, loyal relationship U.S. wheat farmers have with one of those customers: our neighbor to the south, Mexico.

Simply put, Mexico is one of the largest U.S. wheat buyers in the world, importing just under 3.0 million metric tons (MMT) on average going back many years. Mexico’s U.S. wheat imports typically only fall just short of the volume Japan imports. Not this year, however. In the first 7 months of marketing year 2016/17 through Feb. 2, Mexico’s flour millers have imported 2.4 MMT of U.S. wheat, which is more than any other country. That volume is up 5 percent over last year at the same time.

Breaking down their purchases by class, flour millers in Mexico generate strong demand for U.S. hard red winter (HRW) wheat. In 2015/16, they were the leading HRW importers and are taking advantage of the favorable prices and high quality of the 2016/17 HRW crop. At a current volume of about 1.4 MMT, they have imported 71 percent more HRW this year and again lead buyers of that class. A rising number of industrial bakeries, along with traditional artisanal bakeries, account for about 70 percent of wheat consumption according to CANIMOLT, the association representing Mexican millers. That puts HRW producers in a good position to meet that demand. Being closer to HRW production and having a highly functioning ability to import a large share of HRW directly via rail from the Plains states is an advantage for Mexico’s buyers.

In addition, Mexico is home to Bimbo, the world’s largest baked goods company, and an increasing number of cookie and cracker companies. The low protein content, soft endosperm and weaker gluten of U.S. soft red winter wheat (SRW) is well suited to the production of cookies, crackers and pastries, and serves as an excellent blending wheat. Millers supplying this growing market imported an average of 1.2 MMT of SRW between 2011/12 and 2015/16. With imports from the Gulf of more than 730,000 MT of SRW so far in 2016/17, Mexico is the top buyer of SRW again. USW and state wheat commissions from the PNW are also helping demonstrate how millers and bakers can reduce input costs by blending with U.S. soft white (SW).

As it does with all U.S. wheat importing customers, USW focuses on helping Mexico’s buyers, millers and food processors solve problems or increase their business opportunities with U.S. wheat classes. This effort, supported by wheat farmers and the partnership with USDA’s Foreign Agricultural Service, has fostered a productive relationship that has endured for decades through many challenges. More than 22 years of duty free access to the Mexican market under the North American Free Trade Agreement (NAFTA) certainly helped build the relationship.

Yet our customers there have many other sources of milling wheat to which they can turn. In response to rising world grain prices in 2008, Mexico lifted a 67 percent import tariff on wheat from outside the United States and Canada. In 2009/10, France made the first non-NAFTA origin wheat sale to Mexico since the trade agreement was implemented in 1995. Russian and Ukrainian wheat has been imported, too. To date, the tariff has not been reapplied and the Mexican import market is currently tariff-free for wheat from all qualified origins. Just this week, the leaders of Brazil and Argentina, both large grain exporting nations, said they would pursue closer ties with Mexico and other Latin American nations.

Looking ahead, NAFTA will likely be renegotiated. USW and wheat farmers understand that there are a number of elements of the trade agreement that need to be re-examined and modernized. The successful story of how U.S. wheat farmers and their customers in Mexico have worked together in a mutually beneficial way must be shared as part of the effort to update NAFTA. For now, U.S. wheat continues to flow to our customers in Mexico. During upcoming trade negotiations and beyond the eventual outcomes, wheat farmers, through USW, will continue to help and support the buyers from Mexico, as they would help and support their own neighbors.

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New Trade Policies Generate Some Whiplash

As promised, on the first working day of his presidency, Donald J. Trump fulfilled his campaign promise to withdraw from the Trans-Pacific Partnership (TPP), and gave notice to Mexico and Canada that the United States intends to renegotiate some parts of the North American Free Trade Agreement (NAFTA).

For decades, U.S. presidents of both parties have been largely consistent in their views on trade agreements. The TPP vision began under President George W. Bush, and was almost fulfilled under President Barack Obama — two presidents who agreed on few other policy areas. They both believed that opening borders to (mostly) free flow of trade in goods and services would benefit its TPP partners in the Asia-Pacific region and, in turn, U.S. industries.

As producers of high quality wheat classes, U.S. wheat farmers are oriented towards international markets. Through decades of experience, the industry also recognizes that free trade agreements like TPP and NAFTA are good for our customers looking to expand their milling and wheat foods enterprises in part with U.S. wheat quality and value. For exporters and importers, these agreements also offer rules to ensure that the resulting “free trade” is also “fair trade” or close to it.

It is clear that the Trump Administration does see some value in the existing trade agreements. Its next action on trade was to request a panel at the World Trade Organization (WTO) dispute settlement body in the U.S. trade enforcement case about excessive Chinese subsidies. This request, made on January 25, starts the official litigation process under WTO rules.

One could be forgiven for experiencing a bit of trade policy “whiplash.” On Day 1, President Trump withdrew from TPP alleging it is not strong enough for American workers; on Day 3 his Administration used WTO rules to act on behalf of American farmers. The new trade enforcement rules under TPP would have been much stronger than WTO rules in most respects. Now that TPP is gone, the United States must work within rather cumbersome WTO rules across most of the Asia-Pacific, at least until new trade deals are negotiated.

The statement directing the Office of the U.S. Trade Representative to withdraw from TPP also directed it “to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.” USW continues to support new agreements that expand free, rules-based trade, as TPP would have done, and encourage that agricultural interests be able to continue to provide input into those negotiations.

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Wheat Industry Trade Priorities Included in USTR National Trade Estimate

Last week marked the annual release of the National Trade Estimate (NTE) to Congress by the Offices of the U.S. Trade Representative’s (USTR). The NTE report is a 474-page- list of trade barriers facing U.S. companies and producers. It documents a range of trade barriers, including Sanitary and Phytosanitary (SPS), technical and market access restrictions. USW submitted a host of concerns to USTR on October 28, 2015.

The report highlights a few major accomplishments from 2015, including completion of Trans-Pacific Partnership negotiations and the U.S. ratification of the Trade Facilitation Agreement — the first multilateral trade agreement in the WTO’s 20-year history. Beyond the successes of the past year, the report also lays out a roadmap of future work for USTR. Numerous wheat industry priorities made the listing, two of which are highlighted here.

A new addition to the 2016 report was China’s administration of their tariff-rate quota (TRQ) system, which Chinese millers and USW have repeatedly identified as a major hurdle in expanding the use of U.S. wheat in China. The report stated, “Market access promised through the tariff-rate quota system set up pursuant to China’s WTO accession agreement has yet to be fully realized.” Each year China completely uses the portion of the TRQ allocated directly to flour millers. However, the portion held by the state is not fully utilized and almost never reallocated as required by the WTO agreement.

China is not the only country where a TRQ keeps out potential wheat exports. Nearly two decades ago, Brazil committed to a 750,000 ton duty-free TRQ. The NTE report notes that Brazil never opened the TRQ, and therefore has imported no wheat under it. Without either ad hoc access, which Brazil opened in 2013 and 2014, or a functioning TRQ, Brazilian millers must pay a 10 percent tariff to purchase supplies anywhere outside of the Mercosur trade bloc. That leaves the United States, Canada and others at a significant price disadvantage.

These two barriers are just a preview of the issues listed by USTR. USW will continue to work with our partners to pursue resolutions to these barriers that hinder our customer’s ability to purchase U.S. wheat.

By Dalton Henry, USW Director of Policy

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U.S. Wheat Industry Encourages Discussion on Border Issues with Canada

By Elizabeth Westendorf, USW Policy Specialist

Two weeks ago, government officials from Canada and the United States met for the biannual Consultative Committee on Agriculture — a committee designed to facilitate cross border trade flows and cooperation. In preparation for this meeting, USW sent a letter to the USDA highlighting the need for Canada to correct its discriminatory treatment of foreign grain. Both countries have a strong commitment to cross-border collaboration and open trade, but Canada’s protectionist measures go against these principles and deny U.S. wheat farmers access to a market that is right next door.

While Canada is one of the United States’ largest trading partners, USW continues to have concerns about the closed nature of its bulk grain handling system, which will not allow U.S. wheat to receive an official grade commensurate with its quality. Though Canada privatized the Canadian Wheat Board in 2012, it has not completely liberalized its wheat industry. Instead of letting U.S. wheat into its bulk grain handling system, Canada downgrades all foreign wheat to the lowest grade, feed wheat. U.S. wheat is of comparable quality to Canadian wheat, so this downgrading of all foreign wheat is a blatantly protectionist action. It denies U.S. farmers access to the market across the border, access that Canadian farmers have if they choose to bring their wheat to U.S. elevators during harvest. This lack of access means that when there is a price premium at Canadian elevators near the border, as we saw in the late summer and fall of 2015, U.S. farmers cannot take advantage of those higher prices.

USW hopes that Canada’s new government will commit to reform its Grains Act and allow foreign grain to receive the same treatment as domestic. The United States repealed Country of Origin Labeling (COOL) for meat in December 2015 as Canada requested, but Canada’s discriminatory wheat treatment does much of the same thing as COOL. Now that the United States has domestically addressed its treatment of Canadian livestock, it seems only fair that Canada fix its treatment of U.S. wheat. This will ensure a healthy continuation of the long-term partnership between the two countries. Governments should never be responsible for segregation that market forces could manage more efficiently. USW is happy to see our Canadian industry counterparts calling for reform alongside us, and we look forward to Canada continuing to break down barriers to the free trade of wheat.

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USW Lays Down Policy Priorities for Year Ahead

By Ben Conner, USW Deputy Director of Policy

A professor once told me this about achieving goals: “If you don’t write it down, it will never happen.” On behalf of the farmers we represent, USW takes a similar approach to our policy priorities: we write them down for the board to review every year. That happened again last week at the USW Board of Directors meeting in Washington, DC.

USW divides policy goals into three general categories: the World Trade Organization (WTO), free trade agreements (FTAs) and U.S. government policies. USW priorities in all three categories reflect our mission, which is ultimately to enhance the profitability of U.S. wheat producers and their customers.

The WTO category includes both trade enforcement and negotiations. A major policy priority is to ensure that wheat-producing countries follow WTO rules. Right now, a number of major developing countries are blatantly ignoring those rules, costing U.S. farmers in the form of lower exports and prices, and hurting their overseas customers in the form of more expensive domestic supplies. Studies conducted for USW estimated U.S. wheat farmers are losing more than $1 billion in revenue from domestic support policies in just four countries: China, Turkey, Brazil and India. Some of those countries have blatantly ignored WTO import rules in order to protect domestic wheat sectors. That is unacceptable and underscores the need to enforce past trade commitments. Similarly, our board supports negotiations through the WTO that create a more level playing field, but opposes rules that weaken current disciplines in the WTO Agreement on Agriculture or in continued negotiations under the failed Doha framework.

Free Trade Agreements are another priority. If the WTO negotiations remain at an impasse, aggressive market access gains will only come through bilateral regional sectoral trade agreements. The Trans-Pacific Partnership (TPP) is now signed and, hopefully, will soon be ratified by legislatures including the U.S. Congress. Beyond that, the wheat industry is hoping for rapid TPP expansion to other countries in the Asia-Pacific region as well as to new FTA opportunities.

Finally, U.S. government policies also affect U.S. wheat export potential. One of our priorities is on-going funding for the beneficial federal market promotion programs that — along with investment from state wheat commissions — help organizations like USW provide valuable services and information to customers around the world. USW also supports an end to the U.S. embargo of Cuba.

Now that we have written our 2016 Policy Priorities, it is time to make it happen. We are passionate about the profitability of farmers and their overseas customers, so we will be working hard to remove the policy obstacles in the way.

 

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