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McKinney Talks Trade in New Haven

by Steve Grinczel

Published: Friday, October 16, 2020

The rural acreage connecting Fort Wayne to the Indiana-Ohio state line isn't known for conversations such as those that take place regularly within the halls of power in Washington, Beijing or London.

But that was the case last Thursday when Ted McKinney, U.S. Agriculture undesecretary for Trade and Foreign Agricultural Affairs and the pride of Tipton, Ind., visited M&J Farms in New Haven.

Mick Lomont's 1,700-acre spread on the corner of U.S. 30 and Girard Road has hosted incongruous events in the past, most notably country singer Luke Bryan's Farm Tour Concert on Sept. 30, 2015.

However, McKinney played to a more intimate town-hall-style crowd—as opposed to the 20,000 who showed up to hear Bryan—and the subject matter was considerably more serious than "all my rowdy friends are comin' over tonight."

McKinney took his audience of area farmers and agri-business leaders, state officials and U.S. Rep. Jim Banks (R-3rd District), on a world tour that included stops in China, Canada, Mexico, the United Kingdom, the European Union, Africa, India, Southeast Asia and South America.

The message on foreign trade probably wouldn't have been much different had the straight-talking McKinney been giving it from behind a podium in the United Nations instead of in front of a mammoth John Deere tractor.

The grass roots growing in eastern Allen County and throughout Indiana extend globally, McKinney explained, and even the thorniest relationships abroad are worth cultivating.

"I never met him before, but he's really knowledgeable, isn't he?" said the 81-year-old Lomont. "I think he wants to hear input from farmers because it's so important. With our markets up in the air, if it wasn't for international trade our prices would be a whole lot less, so farmers are very interested.

"Sometimes we just take things for granted, but boy, we can't live without our (foreign) neighbors, that's for sure."

Earlier in the day, McKinney toured South Bend's Food Bank of Northern Indiana with U.S. Rep. Jackie Walorksi (R-2nd District) before meeting Banks to observe the Farmers to Families Food Box distribution operation at the Community Harvest Food Bank in Fort Wayne. On Friday, he held another round-table discussion with farmers in Van Wert, Ohio.

And last week Tuesday, he made a statewide virtual presentation on trade issues impacting Indiana agriculture, sponsored by Indiana Farm Bureau, similar to the one in New Haven.

"This is what we've got to do because for sure what happens on the farms and businesses of those right here in this tool shed has a direct effect on China and vice versa," McKinney said. "And so, if I do nothing more than communicate what I see as the solutions, the state of affairs, the facts, the process going forward then I hope I'm doing part of my job.

"I enjoy immensely bringing people together, because we have to. This world is much smaller than we think, and a fair amount of their futures depends on these relationships—with absolute certainty."

The former director of the Indiana State Department of Agriculture is still personally invested in his family's Tipton County corn and soybean farm, by extension these days through his twin brother Tom. Dubbed by Agriculture Secretary Sonny Perdue as his "million-miler," McKinney logged 430,000 international air miles before the COVID-19 pandemic shut down travel in March.

McKinney is optimistic that Phase 1 of the U.S.-China trade deal, which is set to increase from $36.7 billion in 2020 to $44 billion in 2021, will produce desired results.

"I don't have to tell you how it's going; just look at the markets," he said. "A lot of the movement is by products Indiana produces. Corn and soybeans are doing quite well. Pork is moving like mad. Yup, we know we'd like to get the margins up, but at least the movement, particularly when we had so much protein backed up in the processing plants, is moving very rapidly. We opened it up to poultry, we opened it up to a lot more beef.

"By any account, I'm pleased with how that's going. We've had about three weeks of all-time record highs in sales of some of the products produced around here. I don't know if we'll make that ($36.7 billion), but I sure don't want to disrupt the movement and tracking we've got going now. We'd like to see them buy more ethanol, which they can and their laws are in place to do that."

The U.S. is also "nudging" China to buy more specialty crops, like fruits and vegetables. He also sees movement on China's part to accept American pork treated with the feed additive ractopamine as Taiwan already has.

"So let's see how they do, and see how it looks on Dec. 31st," he said.

Trade talks with the U.K. since it split from the European Union are "generally positive," McKinney said, despite what he called negative reporting in the island nation's media.

"The one major thing our friends in the U.K. are concerned about is animal welfare standards," McKinney said. "To their credit, they have good, high standards. The problem is the myth that's been purveyed by the E.U. that ours are substandard, and that couldn't be further from the truth."

The U.S. is trying to gain access to African agricultural markets by establishing a foothold in Kenya.

"It's a good news, bad news story," McKinney said. "The bad news is there's still corruption there, but it's much better than what it was. They really want our product more than we think we sensed in the past. Part of this is because they've had some good, but also some not-so-good experiences with China, which is really trying to penetrate that east and south part of Africa."

If Congress were to appropriate more money for developing trade, McKinney said USDA would likely invest it in Africa and Southeast Asia.

While U.S. agriculture can't afford to discourage the demand generated by 1.5 billion Chinese for American products, McKinney said, diversification in Southeast Asia is a way to protect the U.S. from a breakdown in its relationship with China.

"We see fantastic purchases by Vietnam, the Philippines, Indonesia, we think Malaysia is in the wings, Thailand is a great opportunity, Singapore is small but very mighty, and the list goes on," he told the farmers. "They, too, are entering the global middle class, and that means you buy a little more nutrition for the kids followed immediately by education. And everybody knows you all have a very safe, high-quality, and in some cases, high-volume product."

Europe is proving to be very troublesome, McKinney explained, because of its "draconian" regulations influenced by advocacy organizations, and potential outright bans with regard to innovations and inputs, such as pesticides and fertilizer.

"They've drunk a lot of precautionary-principled Kool-Aid," he said. "Their risk-assessment is off-the-charts nuts. It's nothing like the way the rest of the world treats risk assessment and the net, when you have a precautionary principle that says I want zero risk, is to just say no.

"They have some very good, laudable goals. They want to improve and work on soil health. Well, good for them, look at what Indiana is doing. We're No. 2 in the nation on cover crops that are planted after harvest, only to a small state in the Southwest called Texas—not bad."

McKinney said USDA is looking at the European situation as a long-term battle.

"We're up for it, and we're working with industry and farmers," he said. "But I'm telling you what, this may not affect some of you who have gray hair like me, but it most certainly will affect your kids and grandkids if we don't get a handle on this."

The U.S.-Mexico-Canada Agreement is turning out to be much better than the North American Free Trade Agreement it replaced, McKinney said, and he was a NAFTA proponent. However, it's not without its flaws.

"Trade has increased and we've got to make sure that continues," McKinney said. "We have got to take care of our neighbors and they've got to take care of us. We're going to see how well they abide by the agreement they signed. There's already indications that nefarious kinds of actions are going on up north in dairy."

Canada has been known to ramp up prices on high-value dairy products while dumping lesser-quality products, such as dry milk, at a bargain on the world market.

"I wish we could all do that, and that's what we've tried to stop," McKinney said. "The good news is the USMCA allows the penalties, or the process, to address that. We hope they come to their senses on their own and not require a 2-by-4 to work with it. But so far, all countries ought to be fairly happy even at this early stage."

While U.S. ethanol production continues to slowly recover from fuel prices depressed by the pandemic, McKinney remains "bullish" on the gasoline additive produced primarily from corn in American and sugar cane in Brazil.

He sees potential for significantly more clean-burning ethanol consumption abroad if countries like Mexico, India and China would use it for nothing more than to help clean up oppressive pollution in their large cities.

"It would be enormous," McKinney said. "If India opened up, and they do have ethanol for industrial purposes but not for autos and trucks, even a little bit, it would be unbelievable. China's laws allow for it, and that's why I'm hopeful they might buy some ethanol by Dec. 31st. They really need it.

"I still think we're going to break through some day. The need is so great, the cost is so effective. It's just a great opportunity for some people to clean up their air, get better fuel mileage and have consumers pay less."

Brazil continues to be a complex market because it imports ethanol from the U.S. and exports ethanol to America, California in particular, and is known to change policy, on things like tariffs, in mid-stream.

"Largely, California set extremely high standards on their petroleum-based products," McKinney explained. "Cane-sugar can get you an ever-so-slightly better greenhouse gas score. (But) we have made dramatic improvements with corn-based ethanol. Meanwhile, Brazil has really gone big on ethanol, but they can't produce enough because they make more money with sugar than ethanol, so we provide the balance."

Upgrades have been made to the H-2A visa program that allows foreign workers to be employed on a seasonal basis on American farms.

"Have we done enough? No, we have to improve it," McKinney said. "The other thing, though, is H-2A gets caught up in the overall immigration battle royale that's going on. How many immigrants should come in? Can we have a guest-worker program? I would say yes, and agriculture has certainly voted yes. It works.

"We have not effectively communicated that those guest workers are coming in to do work that nobody else wants to do. As long as that's not something Americans want to do, we'll go south, but many times it's used politically as a statement that says, 'Oh, they're taking your jobs.' No, no, no, not so fast."

A difference-maker for McKinney has been the permission he has received from the administration to be tough during trade negotiations.

"I don't mean we're going to be unfair," he said. "I seek a win-win. I want a two-way street. I want the country I'm working with to benefit as much as I am because I want a long-term relationship and you're not going to get that if I win and they lose."

McKinney circled back how important homegrown relationships are to international trade by recounting an impromptu interaction he had during a speaking engagement in Rome.

"As I introduced myself, I said I'm a Purdue University grad," he said. "Afterward, this guy from Saudi Arabia, with the turban, the robes flowing (comes) over and in good English he said, 'I, too, am a Boilermaker. Boiler up!'

"This is the world we live in. You work with your neighbors and customers, and that's what we're trying to do around the world."

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