LINCOLN, Neb. – Overseas markets provide significant revenue to Nebraska’s agricultural sector – approximately 30% of the state’s annual farm receipts. In 2020, those export sales included $2.3 billion in Nebraska soybeans, $1.2 billion in beef, $1.1 billion in corn, and $425 million in pork.
The Nebraska Farm Bureau notes that every dollar of agricultural exports generates $1.28 in related economic activities such as transportation, financing, warehousing and production.
It is therefore beneficial for residents of agricultural states to understand the extensive linkages of the agricultural sector with the global market and the need to enhance opportunities for increased overseas sales.
A recent agriculture-focused conference in Omaha featured presentations by professors from the University of Nebraska-Lincoln who explained the fundamentals of international trade. The event, held at Green Plains Inc. headquarters, also included discussions on how growers can broaden understanding of global trade in their communities and organizations.
Nebraska’s Clayton Yeutter Institute of International Trade and Finance co-sponsored the event with the US Grains Council. The council and the National Corn Growers Association have been offering a series of in-person workshops at trade schools since 2016. The Aug. 26 event in Omaha also received support from the Nebraska Corn Growers Association, Iowa Corn Growers and South Dakota Corn.
PRICES AND FOREIGN COMPETITION
The first international negotiations to establish global trade rules took place after World War II and focused on reducing tariffs – the taxes consumers and businesses pay on imports, said Jill O’Donnell, director of the Yeutter Institute, to the public.
Economist Douglas Irwin observed that the fundamental question in trade policy was how much protection domestic producers should have from foreign competition, O’Donnell noted.
In the second half of the 20th century, countries participating in global trade negotiations reduced trade restrictions, balancing national protection considerations against benefits such as reduced costs to consumers through tariff reductions and improved access to foreign markets, while trading partners lowered their barriers.
In a series of multilateral trade negotiations from the 1960s to the 1990s, participating countries gradually widened the scope of negotiations to include reductions in non-tariff barriers, O’Donnell said. This step has helped create opportunities for increased agricultural trade in particular, although non-tariff barriers remain a significant impediment in current trade.
Governments have adopted the principle that reductions in trade barriers negotiated through international talks would apply equally to all participating countries. In other words, each member country would receive the same “most favored nation” status. Under the World Trade Organization, member countries have agreed to abide by a binding dispute resolution process.
In the United States, the Constitution gives Congress control over trade policy, but Congress has delegated some authority to the executive branch, O’Donnell said. A key example is the Trade Promotion Authority, passed in 1974. Under the TPA, a presidential administration negotiates a new trade agreement, and Congress then votes for or against, without amendment, to approve or reject it.
Over the past two decades, this global business structure has faced multiple challenges, O’Donnell said. Multilateral negotiations under the 164-member World Trade Organization have stalled and countries have instead relied on an increasing number of bilateral and regional trade deals. The WTO has proven unable to deal with issues such as industrial subsidies and the complexities of non-market economies, including China’s. The United States began to take unilateral punitive measures, such as the trade barriers imposed by Sections 232 and 301, which are federal laws rarely used in the past. The WTO dispute settlement process has fallen into oblivion due to a lack of support from the United States and other countries.
At the same time, O’Donnell said, skepticism about open trade has grown among both US political parties, given the impacts on domestic industry of global interdependence. The TPA, used to advance trade deals since the 1970s, expired last year, and its relaunch remains uncertain.
The Yeutter Institute holds leadership positions in three Nebraska departments (Law, Agricultural Economics, and Commerce), reflecting the interdisciplinary background of Nebraska native Clayton Yeutter, who has held positions in the private sector and also served as a U.S. Representative of Commerce and United States Secretary of Agriculture. Two of the Yeutter Chairs—Matthew Schaefer in Law and John Begin in Agricultural Economics—presented at the conference. The third Yeutter chair is business professor Edward Balistreri.
In his presentation, Schaefer explained the challenges facing global and regional trade agreements. He described the Indo-Pacific economic framework, the trade policy that the Biden administration is pursuing with 13 countries. Under this approach, the administration does not seek the traditional objective of regional trade agreements – tariff reductions – but instead focuses on four themes: trade facilitation; supply chains; clean energy, decarbonization and infrastructure; and anti-corruption.
Begin updated the conference on factors contributing to the current global fertilizer access crisis. Among the factors: strong demand due to strong crop prices. Fossil fuel prices. The conflict in Ukraine and the sanctions against Russia and Belarus. China’s production deficits and export limits. US tariffs on phosphate fertilizer imports from Morocco.
Discussion at the conference turned to the American public’s views on trade, and O’Donnell noted that the Yeutter Institute had a podcast this year with Catherine Novelli, a former trade negotiator and Department of State, offering detailed information on the subject. Watch the podcast at https://yeutter-institute.unl.edu/listening-america. The podcast was part of the Yeutter Institute’s ongoing Trade Matters podcast series, available at https://yeutter-institute.unl.edu/podcastaddressinga range of trade-related topics.