Greater Des Moines business interests are working hard to retain and expand import markets, especially when chief trade agreements are in danger of elimination or massive overhauls. 

The Iowa Economic Development Authority, Gov. Kim Reynolds, the Iowa Association of Business and Industry and the Greater Des Moines Partnership have used a mixture of new programs, trade missions, seminars and good old-fashioned lobbying to get across the message that Iowa — the nation’s largest producer of corn and pork — needs more foreign trade, not less.

For instance, Reynolds this week told reporters that farmers and agriculture interests would be the first victims of a trade war. “Our farmers are the first target, and we know that’s where the unintended consequences will fall is on our farmers and on our manufacturers,” she  said.

She said the economic consequences could be “devastating.”

President Donald Trump’s talk of steep tariffs on aluminum and steel — which shook up the stock market and overseas business interests — came after his withdrawal from the Trans-Pacific Partnership, hardball talk of renegotiating the North American Free Trade Agreement (NAFTA) and demands that trade giant China sweeten the deal for U.S. interests. 

Those are big deals in Iowa, where 30.5 percent of exports are headed to Canada and another 17 percent to Mexico — the principal partners in NAFTA. China gets just over 4 percent of Iowa exports, less than Japan’s 7.6 percent. Those figures don’t include commodities.

There has been plenty of talk of moving more product to China — where former Gov. Terry Branstad is the U.S. ambassador — but also to markets as small as Israel and Cuba. 
Debi Durham, director of the Iowa Economic Development Authority, is taking the tariff talk with a grain of salt, country origin unknown.

“At this point, it’s just sound bites, right?” she said in an interview earlier this week. “Our concern is the broad brushstroke of tariff implementations. I would support targeted tariffs against bad actors involved in these trade agreements. 

Similarly, the federal government should be careful with how it handles the idea of changing NAFTA, a pact that supports 138,400 jobs in Iowa and $4.2 billion in sales of goods and services, Durham said. 

“I have always supported modernizing NAFTA. I have also said we need to enforce our trade agreements,” Durham said. “But when you speak of a broad brush tariff on aluminum and steel, it creates havoc in the marketplace, as you’ve seen.

“Iowa is very sensitive to this steel and aluminum issue, because you have to look at our own backyard. SSAB has a significant investment” in a steel mill in Montpelier, Durham said of the large international company. 

Durham said NAFTA, which went into effect in 1994, needs to be retooled to change some of the regulations so that companies aren’t bypassing NAFTA to do business in Mexico, then simply paying the penalty for violating the agreement.

She supported the Trans-Pacific Partnership, which Trump cast aside. “Bilateral agreements would be best, I agree, but that was a well-crafted piece of trade legislation that would have served America well,” Durham said. “Now we are starting all over. Timing is of the essence. We need to operate with a sense of urgency around these matters.”

When Durham and then-Gov. Branstad were in China and Japan on a trade mission in 2016, there was talk of Australia making a move to increase its meat exports to take up the slack. (Though newer numbers weren’t available, the Australian government reports that the country’s beef exports, which center on lower-value hamburger-grade beef, grew by 83 percent between 2009-10 and 2015-16. U.S. imports accounted for 41 percent of the growth; China, 22 percent.) 

“Trade is like everything else — it is all based on relationships. Once we lose that, it’s difficult to regain that,” Durham said.

Durham also has this beef with the Trump administration: the slow work to hire staff for the trade offices. “You don’t have a fully staffed trade office. The time that it is taking to get its appointees to Congress is not acceptable.”

Iowa’s exports have been the subject of several panels and other sessions in Des Moines lately.  

In 2016, Iowa was second to California for overall ag exports. Iowa was first in pork, corn and feed grain exports. 

But there has been some softening in Iowa’s non-commodity exports since a high in 2014 at $15.1 billion. Last year, the state exported $13.2 billion in manufactured goods and value-added agriculture to 185 countries, the Iowa Economic Development Authority reported. 

“In 2015 and 2016, we started to see a downturn in that, significantly,” said Durham, who is trying to increase those numbers. She made the comment at a luncheon several months ago held by Iowans Supporting Israel. 

In 2016, Iowa’s exports dropped to $12.1 billion, not including commodities. 

“There were a lot of reasons for that,” Durham said. “A strong dollar. Our emerging markets weren’t having the same level of anticipated growth going forward — except for Israel. In 2016, Israel’s trade increased by 15 percent. Year over year to date, we are seeing a 72 percent increase. That is around electronics, machinery and animal feed.”

It’s the type of trade Durham has promoted in a string of trips. 

She has made 10 trade missions in her tenure, going back to June 2011. Included were stops in South Korea, China, Japan, Brazil, Chile, Italy, Kosovo, Germany, India and Israel, where Iowa State University signed a memorandum of understanding on precision agriculture and the University Iowa signed a memorandum on medical device prototyping. 

“I do trade missions all over the world, and there is a sense of urgency and a sense of intensity in which Israel operates,” Durham told Iowans Supporting Israel. 

“We have limited resources and we have a limited budget, but we’re going to deploy our resources differently in this next year,” Durham said. “We are going to create a bilateral, formalized relationship with Israel. We’re going to do it probably through the Israel Innovation Authority. It will be where we as a state agree to put up so much money for Iowa companies that want to do joint research.

“The areas where I see the greatest opportunity for growth are certainly within the biosciences,” Durham added. “Precision agriculture is a huge opportunity over there. We met with the bio group and had them pitch ideas to us. From an investment point of view, we could have invested in any of them.”

“They do very little manufacturing and that’s our core, so I could see all kinds of partnerships — precision agriculture, biomedical devices. We have the university researchers there. 

Durham said her department plans appearences at trade shows in Europe this year and there is talk of trade missions to Australia and China next year. Further work in Kosovo and Israel is likely.

NAFTA — Ag in the balance

The Iowa Association of Business and Industry, the Iowa Farm Bureau Federation, the Greater Des Moines Partnership and the U.S. Chamber brought together speakers Feb. 9 to explore the future of NAFTA. There have been rounds of talks to renegotiate the deal for months. The general message was that walking away from NAFTA or watering it down would be a significant blow to agriculture in Iowa and the rest of the U.S. 

Iowa Sen. Joni Ernst issued a statement through an aide: “As the administration’s negotiations (on NAFTA) progress with the threat of withdrawal pending, it’s critical that we recognize how important this agreement is to business, agriculture and manufacturing.” Her goal is to make sure the gains from NAFTA remain “and that any changes do not harm our crop and livestock producers, manufacturers and business and that we are competitive across the nation and the globe.”

Mike Ralston, president of the Iowa Association of Business and Industry, argued for agreements that open trade, not restrict it. “Our mission at ABI is to create economic opportunity for Iowans. I don’t know how people think closing trade or creating barriers helps create economic opportunity, because it does the opposite.” 

Neil Herrington, U.S. Chamber of Commerce vice president for the Americas, said Ralston’s success, and that of many other pro-NAFTA forces, will depend on a groundswell of support. 

“This debate is not going to be won in Washington,” Herrington said. “This debate is going to be won across the U.S.”

Iowa could lose as many as 138,000 jobs that depend on trade with Canada and Mexico, and stands to be the seventh-most-harmed state if the U.S. rescinds NAFTA, the U.S. Chamber said. 

Herrington said nearly half of Iowa’s exports are headed to the NAFTA countries. IEDA’s Durham said the state owes $6.2 billion in trade to NAFTA, based on 2015 figures. 

A lot is a stake.

“The question many stakeholders are asking is just who is the president trying to help with these proposals?” Herrington said. “The president and senior officials say their priorities are to help American manufacturers and workers, create jobs and grow the American economy. All of which are terrific, laudable objectives shared by stakeholders.”

But the administration’s proposals would hurt those constituencies, Herrington said. 

Higher tariffs on American products would raise prices for consumers. 

Mike Naig, who became state agriculture secretary on Monday when Bill Northey resigned to become an undersecretary at the U.S. Department of Agriculture, noted that farmers are struggling with break-even commodity prices and need NAFTA to push prices higher. 

“Trade is critically important to U.S. agriculture, and certainly to Iowans,” Naig said. “Supply has been strong, and we need to keep working on exports.”

If the ag industry’s trade balance is altered, “those impacts will be felt in real time in the marketplace in agriculture, which is a bit different than the other sectors,” Naig added.

Dave Miller, an economist with the Iowa Farm Bureau Federation, said Iowa ranks fourth among the states in the importance of trade on a per-capita basis. Its $5.4 billion in ag exports is second only to California.

Mark Recker, president of the Iowa Corn Growers Association, noted that his Clear View Farms sells corn to a local ethanol plant that depends on exports. “They sell the distillers grains (a byproduct of ethanol production) to Mexico (interests for livestock feed) and ethanol is shipped to Canada. My soybeans go down the Mississippi River on a barge. They end up overseas if they aren’t used domestically. 

“NAFTA has been beneficial to our rural economy, and I don’t think we can overstate the significance of that,” Recker said. 

Tony Hogan is president and CEO of 225-employee Kreg Tool in Huxley, which sells woodworking tools. “NAFTA works,” he said. “One of our key strategies is to grow our international trade. When people bring up trade problems, Canada never comes up and it’s because of NAFTA. 

“There are things that could be tweaked with NAFTA, but the core works,” Hogan added. “It rewards innovation, collaboration and people who are increasing value” of products. “We take NAFTA for granted,” but now are following the debate over changing it, Hogan said. 

About half of Kreg’s exports go to Canada. 

For Durham, who works with trade representatives in Europe (her department has an office in Frankfurt, Germany), Southeast Asia, China and Japan, the obstacles aren’t a roadblock. “We just keep working our business. Iowa is a small state, but we have a big impact around the world.”

Debi Durham trade missions
June 2011: Korea, China
September 2011: Korea, China, Japan
May 2012: China
July 2012: Brazil, Chile
April 2013: China
July 2013: Italy, Kosovo, Germany
September 2013: Japan, India
September 2015: South Korea, Japan 
November 2016: China, Japan
September 2017: Israel