Little reason for hope from new export initiative
May 18, 2010
While Secretary of Agriculture Tom Vilsack is counted as one of the senior officials on the Export Promotion Cabinet named by President Obama, the likelihood of any sector of agriculture actually benefiting from these moves to bolster American exporting is remote. That goes especially for the parts involving grain-based foods where much that has happened in the Obama administration, as well as in the predecessor administration of George W. Bush, did almost nothing that counts as a net benefit for exports of wheat or wheat flour, the two principal industry products moving in world trade. Even domestic food manufacturers who have tended to look askance on the value of exports because of their strengthening effect on markets have adopted a more supportive attitude as an encouragement to reverse the recent downward trend in acreage planted to wheat.
President Obama’s action last March in creating the Export Promotion Cabinet made up of senior government officials as well as reviving the President’s Export Council, originally started during the Nixon administration, drew little acclaim. Indeed, the administration was said to be setting unrealistic targets — to double U.S. exports in five years and thus adding millions of new jobs — and with seeking to build trade by minor adjustments of the bureaucracy involved in trade. All of this is part of a “new” National Export Initiative that has been met by sharp criticism, not just for political reasons but for sound economics. This administration, it seems, finds itself unable to take solid steps that might stimulate exports like supporting completion of the Doha Round of trade negotiations and recognizing that foreign exchange variations and domestic savings rates have as much to do with exporting as anything else.
For grain-based foods, it is necessary to look no further than America’s shrinking position in wheat and wheat flour exporting to grasp why steps are needed to reverse America’s exporting. Recent
dollar strength, especially compared with the artificially depressed currencies of competing sellers, has had a huge role in seeing the United States drop from being the world’s leading exporter of wheat flour to its current position quite literally at the bottom of the list. In the case of exports of wheat as grain, the United States has lost out mainly to shipments from Black Sea countries, especially Russia and Ukraine, where governments have declared their desire to replace America as the world’s leading exporter.
Particularly astounding is the failure of U.S. shippers to participate in sales to countries whose budgets depend on American aid. Afghanistan and Iraq come most immediately to mind as nations with a foreign trade that is subject to U.S influence, but where their rank as leading flour importers has been of scant benefit to American milling. If the Obama administration wants to have an export program that stimulates employment, it need look no further than wheat flour. The likely impact of a surge in export flour business on employment in this sector of American industry would be immediate.
That American mills are at the bottom of world exporters at a time when the total of global flour trade has chalked up two record years speaks not only to the absence of U.S. government assistance in spurring this business, but to several other negatives. One of these is the relative strength of the dollar that has made competitive sellers like the two flour export leaders, Kazakhstan and Turkey, easy victors in the battle for business. Also important here is the geographic proximity of these two exporting countries to the principal importing nations. A fundamental shift has occurred in global export flour business due to factors that may either be reversed or are beyond the impact of any government. Regardless, a shallow program like that launched by the Obama White House has little or no chance of helping when a focused and thoughtful effort could produce positive outcomes.