Trade Is Crucial to Modern Beef Industry
Steve Dittmer | AFF Sentinel
Colorado Springs, CO
Originally sent to subscribers 07/18/24
Politics is about compromise. Usually, the only difference revolves around degree.
That said, we considered Donald Trump’s policies to be far superior without question in 2016. We also believed and wrote, in the late summer of 2016, that he could win, despite the opinion of many that no one could beat Hillary. The contrast this time -- amply driven by actual evidence of the last nearly eight years -- is even starker this time around.
That doesn’t mean there won’t be challenges for the beef industry if things go as expected and Trump becomes the 47th president. We think both adversaries and some party regulars have oversimplified Trump’s musings on trade. He has not come out against trade. He has said reciprocal trade, which his advisers have characterized as trade with nations we have trade agreements with, trade on the same general level of tariffs and non-tariff trade barriers. All of that with another country’s economic and military stance towards the U.S. taken into consideration, especially on goods and services with military or intelligence implications.
That doesn’t even take into account the intellectual thievery and the patent protection paramount to national safety. We sat in on a presentation a few years ago regarding China’s copying of our patent system and subsequent improvement on the system while the U.S. has weakened and corrupted our own patent system. That patent system, a natural function of our property rights principles, has been the foundation of innovation and success of our free market system from the jump.
But the selection of J.D. Vance as Trump’s running mate, while certainly a strong and smart choice in many ways, may present some influence on policy problematic for the beef industry.
Of course, the obvious is his acceptance of his wife being vegetarian. We have no idea how much influence that might introduce.
Secondly, he is no disciple of free trade. He would not have voted for NAFTA or USMCA, relatively benign trade agreements with our next door neighbors.
We are very cognizant of his background, familiarity and champion of manufacturing and labor in the so-called Rust Belt of the upper Midwest. We grew up in that region and there is no question that foreign competition has created major problems in that region, some of them self-inflicted and some not. Some of us well remember the German and Japanese invasion of the auto industry in the ‘60s and ‘70s that embarrassed Detroit’s automakers, showing that precision engineering, smart manufacturing, better enabling and training of workers and listening to customers provided better cars and trucks.
Detroit tried to foist tiny, light-weight, plastic-laden, under-powered, fast deteriorating jitneys on us in the ‘70s and Japanese and German manufacturers buried them, driving some out of business and some to the government for bailouts.
Ironically, the new design and manufacturing system the Japanese used to beat Detroit came from an expert from New Mexico Detroit had ignored (W. Edwards Deming).
For further irony, the automakers with legions of marketing and design experts have missed the boat again. They have themselves threatened their very existence by ignoring customer demand, flouting science and physics and chasing government favor and subsidy. They’ve abandoned focus and innovation in gasoline and diesel powered vehicles and lost billions.
There is no question some of the deterioration of manufacturing in the Midwest stemmed from corporate and industry missteps. But labor unions believed that they were indispensable, that corporations could and should pay unsustainable wages and benefits, that both companies and workers were owed existence and inevitability. Not only is there no free lunch, sometimes situations change and your lunch gets eaten if you don’t adapt.
The expectations of a better standard of living is central to the recent history of the Midwest. J. D. Vance’s family moved north just as millions did after WWII, to go where manufacturing industries required little education and no capital to make good money and a higher standard of living. Recall also, that this shift was engendered by the post-war period, when America was the unchallenged economic power in the world. Europe and Asia were in ruins, our manufacturing base had actually been built up during the war and our management skills honed.
The ‘50s and ’60s were a tremendous era of prosperity and advancing living standards for America -- for those who had survived the pre-war Depression and the World War itself.
That all changed in the ‘70s, when the oil wars broke out, manufacturing in other parts of the world had recovered, Americans discovered inflation and the late ‘60s cultural changes began permeating American society. American industries faced real competition for the first time in decades and serious adjustment and innovation was necessary.
AFF has supported free trade from its beginning. That does not condone theft of intellectual property, unfair state subsidy of industry and unfettered shipping of products and services of military technology. But we still believe the same thing for American citizens that we have preached for the beef industry from day one. The consumer -- in this case, consumer/citizen/taxpayer -- should come first. If that means industries, companies and workers must adapt to new market conditions, to new paradigms of production, so be it.
Tariffs are a tool, hopefully a temporary, tool and often a mere threat of tariffs is enough to establish or re-establish a level playing field.
The cattle and beef industry production chain was not always quick but it has adapted to changing demands of consumers, to costs and types of production practices, to challenges from other animal proteins and plant proteins. The changeover from inch-trim to quarter-inch trim happened in a matter of weeks. The change in focus from producing pounds to focusing on consumer preferences for taste and tenderness took a decade or more. The shift from good and very good product to nearly always great product -- 60 percent Choice and two percent Prime to 80-90 percent plus Choice and Prime -- has happened astonishingly quickly, given we’re dealing with a biological product, produced in widely varying geographic and climate conditions.
The story this week is that Beyond Meat, once valued at $10 billion is now valued at less than half a billion and negotiating with bondholders to restructure a much-diminished balance sheet and survive declining sales.
We still believe in the same principles Bourke Cochran espoused in the 1920s. And we do need to correctly assess the circumstances to make sure trade is competitive on a fair and level playing field.
We also need to remember that several of the greatest trade deals the beef industry has ever seen came during Trump's first term.
We need to make sure we elect members of Congress who see the value of free trade.
In future columns, we’ll lay out some recent data and research that directly addresses recent tariff moves and the results
Our address: Agribusiness Freedom Foundation, P.O. Box 88179, Colorado Springs, CO. 80908.
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