NAFTA a key topic at the TEGMA Fall Symposium

September 22, 2017 - by Arvin Donley | Reprinted from World Grain

KANSAS CITY, MISSOURI, U.S. – During the annual Transportation, Elevator & Grain Merchants Association (TEGMA) Fall 2017 Symposium, speakers focused on NAFTA negotiations and regulatory compliance in the financial markets, and noted the emerging influence agriculture has with the Trump administration. The symposium, held jointly with the National Grain Car Council (NGCC), took place Sept. 15 at the InterContinental Hotel on the Plaza, and drew more than 120 attendees.

“Agriculture is back in vogue,” declared Lance Kotschwar, chief ethics & compliance officer, The Gavilon Group LLC. He said USDA is taking on the mantle of “decision-maker, and the president is listening to Secretary Sonny Perdue.”

Pat Ottensmeyer, president and chief executive officer, Kansas City Southern Railway Company (KSC), said Perdue paid a visit to the White House last spring to inform the president those regions likely to be impacted most negatively by a U.S. pullout from NAFTA were those that were responsible for electing him.

“Policy makers don’t always have the data, but this administration is listening,” Ottensmeyer said.

KCS is virtually immersed in NAFTA. The railroad has invested $4.5 billion in the Mexican transportation system. The company hopes to sustain trade gains it has made with Mexico over almost three decades by not making NAFTA negotiations a firefight, as Ottensmeyer put it. The lobbying process is done, he explained, and negotiations are under way.

“Mexico is willing to negotiate to even trade deficits out,” said Ottensmeyer, “but they want to do it through expansion.”  

He pointed out that modernization of NAFTA is a worthwhile goal, but should not come at the expense of disrupted trade flows. His company hopes negotiators will follow these tenets as they hammer out a deal:

  • Do no harm: Interrupting the $1.3 trillion in annual trade across borders or reverting to the high tariffs and other trade barriers that preceded NAFTA would be devastating for workers, farmers, and companies in the United States and the 14 million U.S. jobs supported by NAFTA.
  • Move quickly: Uncertainty about the future of America’s terms of trade with Canada and Mexico would suppress economic growth and create political reactions that undermine U.S. exporters.
  • Keep the agreement trilateral: Maintaining NAFTA’s three-party framework is critical as transitioning to entirely new bilateral agreements presents real risks. Such a transition could disrupt the flow of commerce and cost jobs.
  • Use NAFTA’s amendment procedures: Using these procedures expedites the process and minimizes risk of disrupting trade.
  • Continue to follow TPA (Trade Promotion Authority) process.

The dairy industry is getting more involved in international trade. “We used to be an island,” said John Wilson, senior vice-president and chief fluid marketing officer at Dairy Farmers of America. “Exports were not an option.”

But as dairy prices worldwide have increased, the U.S. dairy industry is exporting more products. Wilson said he was optimistic and bullish about U.S. agriculture in the world marketplace. He expects growth for the dairy industry, and exports will be the reason.

Brian Burke, principal of John Stewart & Associates, commented that the U.S. used to supply 70% of the world’s corn; now it ships only 40% around the world. But he offered an interesting perspective on the situation. Corn exports are leaving in other forms, he said.

"When you look at the drop in corn exports, you need to look at it in this perspective: it’s being exported as ethanol, distillers dried grains, and as meat that was corn fed.” Burke suggested corn be considered a supply rather than a crop.

Burke remarked that crop growers have hedged the weather in the last couple of years, but a drought in the U.S. Corn Belt would lower yields despite yield gains spurred by precision farming and technology advances.

Speakers also touched on the regulatory landscape that expanded dramatically in the wake of the 2007-09 financial crisis. Jon Efken, director, GCB head of commodities sales, Merrill Lynch Commodities, commented that business, trade and financial regulations are as old as the country. But the formal beginning of a regulatory state began in 1863 and 1864 when the National Banking Act established a system of national banks. Since then regulation has become part of the nation’s fabric.

“Now at banks and other businesses, at least one day a week is spent on compliance,” Efken said. But he also pointed out that the growing regulatory burden has not stopped trading, although credit markets have tightened. Efken sees the regulatory environment being loosened a bit. Changes will be made through tweaking and reduction rather than by complete overhaul and elimination.

“Appointees in the current administration want to reduce regulations,” he said.

Kotschwar said many OSHA and EPA employees don’t see their jobs as just “fining and confining” people and businesses who can’t comply.

“Agencies actually want to help,” he remarked. “A lot of employees feel relieved under the new administration that they can do their jobs.”

Presiding over the meeting were TEGMA officers: Chairman Ryan Pellet, JD. Heiskell & Co.;  First Vice Chairman Roger Fray, Landus Cooperative; Second Vice Chairman Scott Mills, Lansing Trade Group;  President Bob Petersen; Secretary/Treasurer Erica Venancio.