Everybody Wins When the World Unites in Sport and Trade

September 8, 2016

Everybody Wins When the World Unites in Sport and Trade

Sep 8, 2016

Every four years, countries spanning the globe come together to compete on athletic fields, celebrating a spirit of sportsmanship that links us all – an exciting fortnight of sports like the one that recently concluded in Rio de Janeiro, Brazil. 

The Olympics is truly an entertainment juggernaut, but that wasn’t always the case. Footage was hard to come by until 1960, when the Summer Games from Rome, Italy, were first broadcast on American television. 

U.S. viewers were treated to 20 hours of coverage over the two-week period that year. Compare that to the 6,750 hours of coverage – plus countless Olympics themed commercials – that emanated from the recent games. 

Evolutions like these are a testament to technology and the fact that the world is becoming more and more interconnected. And they can be seen just as vividly in America’s farm fields. 

Did you know that 1959 marked the last time America had an agricultural trade deficit, making 1960 the first year of an unparalleled string of surpluses? 

Back then, we exported just $3.95 billion in agricultural goods and imported $4.1 billion, according to U.S. Department of Agriculture (USDA) statistics. Fast forward to 2015, and U.S. farm-and-ranch-related exports topped $133 billion, while the country boasted a $19.5 billion trade surplus. 

Big strides like these don’t happen by chance. Similar to any elite athlete, it takes years of work, and cooperation with governing bodies and fellow competitors, to achieve greatness. 

In trade, the body that coordinates countries is the World Trade Organization (WTO). The WTO was formed January 1, 1995, after 120 governments agreed to make international trade of goods and services more free and fair. 

The Agreement on Agriculture was just one part of this pact, and since its introduction, global farm trade – including America’s food, feed, fiber and fuel exports – has really taken off. 

This agreement outlined tariff rate reductions. It set forth guidelines that countries must follow, including rules related to subsidy levels and technical barriers to trade. And, it promoted transparency and formed a system for governments to air grievances and defend themselves against the charges of others. 

So far, the results of this increase in cooperation have been undeniable for America’s farmers and ranchers. 

U.S. agricultural exports averaged $23.5 billion a year from 1960 to 1994, yet they’ve only fallen below $50 billion one year since the WTO system was put in place. The jump in farm-related trade was an astonishing $10 billion between 1994 and 1995 alone, and the value of agricultural exports has accelerated greatly since 2005, when tariff reduction levels were phased in under the WTO deal for most countries. 

USDA data show that sorghum exports have increased by $1.6 billion and corn exports by $1 billion from 1995 to 2015. 

It’s not just the value of exports either. Overall volume of agricultural trade is up too, with USDA data showing that grain trade remained strong throughout the past two decades, with export volumes of oilseeds, meat and specialty products climbing much higher.

Looking at this through the lens of grain in all forms, as the U.S. Grains Council does, also shows this trend clearly. 

A recent Congressional Research Service paper on agricultural trade summed up the importance of these achievements: 

"USDA estimates that during the most recent three years (2013-2015), the value of U.S. agricultural exports accounted for between 10 percent and 11 percent of total U.S. exports. Within the agricultural sector, the importance of exports looms even larger, accounting for 20 percent of the value of overall agricultural production in 2013.

"USDA estimates that each dollar of agricultural exports stimulates an additional $1.27 in business activity, while each $1 billion in agricultural exports supports 7,550 jobs." 

Of course, America’s record of success doesn’t mean that it’s alone on the playing field. 

The WTO’s World Trade Report 2014 examined the trends that drove overall trade growth during the past decade, and it largely credits the rise of the developing world. 

Countries like Brazil, China and India have seen their economies expand and purchasing power climb as more citizens move out of poverty. Developing nations now account for half of global output and trade, according to the WTO. 

But this has also exposed weaknesses of the WTO framework, which is more than 20 years old. 

When the Agricultural Agreement was first signed, developed nations in Europe and North America largely dominated the trade arena. So, WTO members aimed to fuel developing-country growth by excluding them from some reforms and offering less stringent rules. 

It worked, but now many developing nations still want special treatment and, some would argue, are even abusing the current system to avoid reform and gain a competitive advantage.

For example, a recent study by DTB Associates showed that agriculture subsidy rates in Brazil, China, India, Thailand and Turkey are rapidly increasing and are well above WTO limits.

If the Olympics teach us anything, it’s that everyone should have to play by the rules, and if they don’t, it’s up to the international governing body to restore order and fair competition. 

America’s continued gold-medal position in agricultural trade just might depend on it.

This article was written by the U.S. Grains Council.