A Time for Reflection

As President Obama assembles his new administration, outgoing Secretary of Agriculture Ed Schafer gives his take on the future for the industry and discusses George W. Bush’s impact on agriculture during his eight years in power.

A new global marketplace is emerging. One billion new middle-class consumers are developing in what we call the BRIC countries of Brazil, Russia, India and China, and certainly in Mexico as well. As these economies grow they are driving strong demand for grain and also for beef and pork and chicken and dairy and processed foods as well. These are markets that America's farmers and ranchers are well positioned to serve and where they can hold their own against competitors. All they need is fair access and a level playing field in the foreign markets and we'll get the job done. That's why President Bush has consistently made expanding free trade one of his very highest priorities.

The results from our nation's past efforts in this arena have been impressive. In 1994 when the North American Free Trade Agreement created a free trade zone covering the United States, Canada and Mexico, our agriculture exports to those countries were about US$10 billion a year. We know there have been some bumps along the road, but today Canada and Mexico rank as our number one and number two trading partners. They are our biggest markets, and our total exports in agriculture to those two countries reached $30 billion last year year.

The Central American Free Trade Agreement has been a similar success. Since it began to take effect in 2005, our agriculture exports to member nations have grown rapidly. Our export sales to the five nations that fully implemented the CAFTA-DR Agreement jumped to US$2.3 billion in 2007, 67 percent higher than their pre-agreement level. They were up another 45 percent last year. All in all, the Bush administration has negotiated 17 free trade agreements. Of the 11 that have been fully implemented, our agriculture exports have increased 76 percent.

The Bush administration is still pushing hard to finish up and conclude some of these free trade agreements including three with Colombia and Panama and Korea. Though we are still awaiting action by Congress on those three agreements, they've been hung up on presidential politics, couldn't get them on the floor. We think we have the votes to get them passed. We've had 400 members of Congress in various situations regarding these, including many of them in Colombia regarding the free trade agreements.

These are good for our country and good for their country. And now that the election is over, hopefully we can get some of these moved because, for instance, in the three countries I just mentioned – Colombia, Korea, and Panama. If we can get these agreements signed and sealed in Congress it will mean US$3 billion a year in new agriculture export opportunities for American farmers and ranchers. And we're excited about that, and we hope that soon we'll be seeing these trade agreements put in place to allow us to compete more and better in the global marketplace. These trade agreements have opened the door for market share gains already by America's agriculture producers. And they also give us a legal guarantee, a legal framework, for which fair access to those markets continues in the future.

Safety fears

Of course, concerns about safety of the food imports can create trade barriers that are just as formidable as any tariff schedule. That is certainly one of the lessons that we learned from dealing with the fears of our trading partners after the first case of BSE appeared in our borders here within the United States in 2003. That experience led us to press even more strongly for the international acceptance of objective scientific standards as we set sanitary and phytosanitary standards. Taking away the barriers of emotion, of politics, of competition, and moving into a measurable standard based on science is very important.  I also think our approach has won growing acceptance around the world. It helped us win a classification as a controlled risk nation last year from the World Organization on Animal Health. And it helped us re-open markets around the world. Those efforts helped restore US beef and beef product exports last year to US$2.6 billion, about two-thirds of the level before the BSE restrictions.

The question for the next president is going to be whether we will continue to seek broader opportunities for our producers in the global markets, or will we pull back. We have more anti-trade folks in Congress today and if they prevail, this could be bad for agriculture. I encourage President-elect Obama to take a hard look at this administration's record of success and record of agriculture growth and strength in economic activity before making any decisions about this. We also must remember that what we are able to do abroad depends partly on the decisions that we make here at home-decisions about our domestic support programs. And to deserve the support of all Americans wherever they live, our safety net of farm programs must make a wise and efficient use of taxpayer dollars. Also to withstand challenges from our trading partners, they should be seen as market-based and not price-distorting.

And we worked hard in the new Farm Bill to try to bring some of those issues in including some reforms in setting loan rates and setting marketing issues and gross income rates for those who receive the subsidy payments. Those safety net programs, along with the continued conservation and rural development with renewable energy initiatives, are all crucial for the future of rural America. And they all depend on strong and broad-based public support for our farm policy and for our farm programs. President Bush has been a strong advocate for conservation throughout his time in office. In 2002 the Farm Bill marked an historic increase in funding for these programs, and in the 2008 Farm Bill it moved us even further ahead.

Together, these two landmark measures have increased funding for conservation programs by US$21 billion. The conservation programs we now have in place prevent soil erosion, they preserve wildlife habitat, improve carbon capture and deliver environmental benefits as well, at the same time helping producers earn additional revenue from their land. This administration has also invested an average of US$14 billion a year in rural development projects, a 36 percent higher spending level than we had when we took office.

These investments have created or saved two million jobs in rural America. They brought broadband services to 2.7 million people and businesses. We spent US$50 billion for rural infrastructure development, water treatment facilities and rural water delivery systems, community facilities. We've upgraded health care, emergency response services, while also committing over US$800 million to renewable energy and energy efficiency projects.
Yet we know that further investments are going to be needed to ensure that rural America enjoys the same access to services and economic opportunities as the more densely populated part of our country, and also allows rural America to compete in that global marketplace.

Alternative energy

Part of the activity in rural America certainly is renewable fuels. The rapid growth in demand for renewable fuels has brought a dramatic economic change in rural America, and especially just over the last couple of years. It has created new jobs, new investing opportunities, while also enhancing America's energy security. And yet while this industry has made remarkable progress in a short time-it's still evolving. It's still having impact. I know you have members here in this very room who have seen feed prices increase and had to deal with hard issues here, but today there's a broad, bipartisan agreement that to meet our nation's future energy needs we must develop our renewable fuel industry. We must look into biomass, feedstocks and the business models that go with them.

It is imperative for us in the United States to move to a more energy independent arena, to be able to be more self-sufficient for energy at home. And that also brings along a better environmental benefits and increased economic activity in rural America. The new Farm Bill provides US$1 billion to help us with this effort. But you know we just need to continue to generate that public support that is needed to help this industry reach its full potential. And I am excited about the opportunity to move into our second generation of ethanol, to be able to build this fuel with products that are waste products that are grown specifically for fuel, that don't impact the feed and food costs that we have.

I was recently in a pilot facility in Colorado that's making fuel from wood chips. It's a pilot facility-the pilot is successful. We put the wood chips in the end of the facility, we waited for a while, and it came to the other end, and fuel came out of the tap there. That's going to lead us. And we're hoping soon that United States Department of Agriculture will be able through our biomass energy loan programs to be able to do a loan guarantee for this new facility in Georgia that will be able to produce 100 million gallons of fuel made from wood chips. And when we are able to move into that second generation, and we commercialize the opportunities in cellulosic feedstocks, it changes the face of how we generate energy in this country.

We also have to look at energy independence and the resulting economic activity, how important it can be in our lives. Because our effort is to replace about a billion barrels of foreign oil that we buy, and not only do we send our precious US dollars overseas to do that but we get dependent on a lot of countries that don't like us very much. And as we see this convergence of renewable fuels driven by agriculture, if we can replace that one billion barrels of oil that we now buy overseas by renewable energies from the agriculture arena, it doubles farm income in this country. Think about the economic activity in small towns and communities in areas across the United States of America if we can do that. That's how important these issues are.

New era

In all of these arenas-in conservation, rural development, renewable fuels, President-elect Obama and his team will have a chance to consolidate the gains that we've made over the last eight years and lead America to even greater successes. And I certainly encourage them to do so. They will have to confront the continuing challenge of food security both here at home and abroad.Since 2001 this administration has worked to make sure that more people who are eligible for our domestic nutrition and food programs actually enroll and receive those benefits. We're proud of the range of participation, and the Food Stamp Program has climbed from 54 percent of those who are eligible in 2001 to 67 percent for those who are eligible the last time we measured in 2006.

On the international front, we face the urgent reality of a world population that will grow by more than 70 million people this year and it will continue to grow at those rates. We have to find a way to feed all these new mouths. We have to way to feed people without any more land in the world. The UN estimates that the number of hungry people worldwide this year climbed 75 million, and now its stands at roughly 925 million people in this world today that are hungry. And for all of us in food and agriculture, this is the challenge of the 21st century. Our administration has worked to develop long-term solutions to world hunger, and there are many dimensions to this challenge. But we believe meeting them will require us to share more than just our surplus commodities. That's what we have traditionally done. We are proud that America's citizens provide over 50 percent of all the world's food aid today.

But we need to help other countries boost their production and increase their yields. We need to share with them our experiences, our background, how they can grow their own food and feed their own people. We need to export our techniques, our hybrids and our biotech crops. We need to help them develop agriculture infrastructure, water use and fertilizer machines. We need to look at precision farming and the ways that we can help folks all over this world feed themselves. As this world develops, it's our responsibility. Once again it's going to be up to the next president to decide whether we'll continue to break away from past policies or are we going to stay the course.

We're proud of the way we're moving forward. I've personally talked to leaders in country after country after country that say, ‘Thank you, to the citizens of the United States of American, not only for the commodities and food that you give us to help feed hungry people, but for your willingness to share with us the way that we can develop our own agriculture so that we can be self-sufficient in our country’. Those are some of the good things that are happening and that have happened over the last eight years.