Building global support for trade in the new millenium

by Stormy Wylie
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There are many changes taking place in global agriculture, among them e-commerce, trade issues, consolidation and biotechnology, and the opportunities are enormous, according to David W. Raisbeck, vice-chairman of Cargill, Inc.

But if grain companies are going to survive and thrive in the 21st century, they must be willing to change with the times, Mr. Raisbeck told members of the North American Export Grain Association earlier this year in Phoenix, Arizona, U.S.

"We have to be willing to stand up and challenge those who resort to demagoguery to protect the status quo," he said.

Over 96% of the world's market for agricultural products is outside the United States, and many parts of the world are opening their borders to more agricultural trade, he added. A year ago, the ministers from the 21 economies that make up Asia-Pacific Economic Cooperation — nearly half of global trade and population — endorsed the creation of an open regional food system, where food and agricultural products can be freely traded.

"That change in attitude represents an enormous opportunity for global agriculture," Mr. Raisbeck said, especially for much of the developing world. "The irony is that when much of the world — Asia, Latin America and the former Soviet Union — is opening up to more trade, there are factions in the U.S. and Europe that want to put on the brakes."

The chaos at the U.N. Conference on Trade Issues earlier this year in Seattle, Washington, reflected how people react to change, he said.

"Certainly, there's a vocal minority in the developed world who see change in trade policies as a threat," Mr. Raisbeck noted.

There has been opposition in the United States to establishing Permanent Normal Trade Relations with China, although the U.S. Department of Agriculture has projected that China will account for half of the growth in U.S. farm exports to Asia. (Both the U.S. Senate and House of Representatives have approved granting PNTR to China.)

Much of the opposition to PNTR for China has focused on human rights, Mr. Raisbeck said. "But there are many who believe having China in the World Trade Organization would be good for human rights," he added.

WTO membership could serve as a catalyst to promote human rights in China, so long as it also encourages greater economic and political reform.

China is going to be an important factor in the world grain trade, Mr. Raisbeck said.

China was a net importer of grains in the mid-1990s. Then, a poor U.S. crop combined with sudden stronger demand in China helped drive up world grain prices. China abruptly changed course and began to increase its subsidization of domestic production. "That triggered more production, reduced consumption at home and caused a swing to exports," Mr. Raisbeck said. "That, of course, contributed to the lower world prices we've been experiencing."

China's agricultural policy took another turn when it barred the purchase of grain from farmers by private traders, he noted. The goal was to eliminate the financial losses of the government grain bureaus by getting rid of competition, he said, but grain bureaus also were ordered to buy and store all the grain farmers wanted to sell, which pushed stocks even higher.

"The irony of all of this is that after years of pursuing self-sufficiency as the number one goal, Chinese leaders are starting to see it as something of a problem," Mr. Raisbeck said. "All of these developments, coupled with what we hope will be China's impending entry into the W.T.O., will affect the grain export industry. Long term, we think it will be good news."

Other Asian economies are beginning to recover from the economic recession of the late 1990s, he added. "There are still some trouble spots and it will probably be a couple of years before economic growth rates return to pre-crisis levels," he said. "Real GDP growth rates in Asia for 2000 are generally higher than they were in 1999. But the growth rates are still significantly below where they were before Asia's economic crisis began in July 1997."

The major Asian stock markets — China, Hong Kong, India, Taiwan and South Korea — have largely regained their earlier levels. But in most of Southeast Asia, stocks haven't done as well, Mr. Raisbeck noted. "They've improved from the descent that began in July 1997 but are below their pre-crisis levels."

Although Asia is recovering, it isn't what it once was, Mr. Raisbeck said.

"The streets in Bangkok — a good measure of the hubbub of commerce — are not as crowded," he said. "It's nothing like it was in the mid-1990s. Entire buildings are empty. Construction cranes loom over buildings that are half finished. And there's not a construction worker in sight."

GDP growth in Asia dropped from 3.4% in 1997 to minus 0.4% in 1998, then grew by 2.7% in 1999. For 2000, growth is projected at 2.4%, followed by continued growth in 2001 (3.2%), 2002 (3.6%) and 2003 (4%).

"But the bad news, from Cargill's perspective, is that total Asian grain imports are still about 5% below where they were in 1995-96," Mr. Raisbeck said. "And as I mentioned before, recovery will likely be somewhat slow."

Projections for GDP growth in Japan — far and away the largest agricultural importer in the region — remain low, at about 0.5% in 2000, he said.

"In fact, Japan's economic growth ranks dead last when compared with other countries in the region," he noted. "But the really good news is in the way Japan is opening up and changing the way it does business."

Cargill recently became the first foreign company in Japan to be appointed by the courts to restructure a Japanese company, Mr. Raisbeck said. "In the past, the large Japanese trading companies largely shielded us from this market," he said. "So, we're seeing progress on the openness front — after more than 40 years of persistence."

Change also is occurring in Indonesia, where the government has deregulated the food distribution system. Cargill is now able to deal directly with a federation of cooperatives that make tempe tofu. Cargill struck a deal last year to supply the coops with 200,000 tonnes of soybeans over a year's time. This arrangement, Mr. Raisbeck said, was made possible by the break-up of the government's state-run logistics agency, BULOG.

Biotechnology also has been a "lightning rod" for critics who oppose trade, Mr. Raisbeck said. "It's easy to prey on the fear of the unknown, which is a very powerful emotion," he said. "The fact is, it's impossible to prove that something is 100% risk-free."

Cargill was prepared for criticism when it announced that its grain handling facilities would accept crops enhanced through modern biotechnology.

"We felt we had to take the lead on this issue because there's so much misinformation out there," he said. "In our view, biotechnology presents far more opportunities than threats."

Percentage change in Asian imports of commodities, 1995-96 to 1999-00











Soybean meal


Total grains


Vegetable oils


Source: Cargill, Inc.