Trade AgreementsTrade Agreementsand The People Left Behind:and The People Left Behind:A Development PerspectiveA Development Perspective

Kristin PennKristin Penn

International Development DivisionInternational Development DivisionLand O’Lakes, Inc.Land O’Lakes, Inc.

Partnerships for Prosperity ConferencePartnerships for Prosperity ConferenceCancun, MexicoCancun, Mexico

May, 2004May, 2004

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Four TopicsFour Topics

1.1. Brief Introduction to Land O’LakesBrief Introduction to Land O’Lakes

2.2. International Trade and Trade Agreements International Trade and Trade Agreements The development linkThe development link

3.3. Our Approach to Development Our Approach to Development Key tools and how we apply themKey tools and how we apply them

4.4. Trade-Development Trade-OffTrade-Development Trade-Off

About Land O’Lakes, About Land O’Lakes, Inc.Inc.

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About Land O’Lakes, Inc.About Land O’Lakes, Inc. A U.S.-based, farmer-owned food and A U.S.-based, farmer-owned food and

agricultural supply cooperative with more than agricultural supply cooperative with more than 300,000 members.300,000 members.

Created in 1921 to respond to a cooperative Created in 1921 to respond to a cooperative creamery butter-marketing needcreamery butter-marketing need

Today, our annual sales are more than $6 Today, our annual sales are more than $6 billionbillion

Our core businesses include dairy foods, eggs, Our core businesses include dairy foods, eggs, animal nutrition, seed, and agronomy.animal nutrition, seed, and agronomy.

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Land O’LakesLand O’Lakes, , Inc.Inc.Land O’LakesLand O’Lakes, , Inc.Inc.

Mission:Mission:

“ “We are a market- and customer-driven We are a market- and customer-driven cooperative committed to optimizing the cooperative committed to optimizing the value of our members’ dairy, crop and value of our members’ dairy, crop and

livestock production.”livestock production.”

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Land O’Lakes TodayLand O’Lakes Today Our VALUES reflect our heritage:Our VALUES reflect our heritage:

PeoplePeople

PerformancePerformance

Customer commitmentCustomer commitment

QualityQuality

IntegrityIntegrity

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Land O’Lakes TodayLand O’Lakes Today

2003 Sales (billions)2003 Sales (billions)AgAg Services Services $ 3.3$ 3.3DairyDairy $ 3.0$ 3.0

TotalTotal $ 6.3$ 6.3

EmployeesEmployees 7,0007,000 MembersMembers 6,056 individual producers6,056 individual producers

1,273 cooperatives1,273 cooperatives 24 Board Directors24 Board Directors President/CEO - Jack GhertyPresident/CEO - Jack Gherty

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About Our BusinessesAbout Our Businesses

Dairy FoodsDairy Foods• 98% brand recognition98% brand recognition• #1 Butter and Deli Cheese market shares#1 Butter and Deli Cheese market shares

Ag ServicesAg Services• #1 in animal feed in North America#1 in animal feed in North America• SeedSeed• Plant food and crop protection productsPlant food and crop protection products

Research and developmentResearch and development

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Land O’Lakes, Inc.Land O’Lakes, Inc.Land O’Lakes, Inc.Land O’Lakes, Inc.

Vision: “To be one of the best food and agricultural

companies in the world”

International International DevelopmentDevelopment

““Bringing the Land O’Lakes Bringing the Land O’Lakes Difference to International Difference to International

Development”Development”

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International Development International Development BackgroundBackground

• Founded in 1981, as a Founded in 1981, as a two-person department to two-person department to deepen Land O’Lakes deepen Land O’Lakes international perspectiveinternational perspective

• Through the 1980’s, Through the 1980’s, projects related primarily projects related primarily to training and farmer-to-to training and farmer-to-farmer programsfarmer programs

Gradually expanded to more technical assistance Gradually expanded to more technical assistance within agricultural and food systemswithin agricultural and food systems

Supported by Board and member ownersSupported by Board and member owners

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International DevelopmentInternational Development

• Manages agricultural and food-related projects in more than 30 developing countries around the world:

Projects funded by USAID, USDA and other donors

Project portfolio - $100 million

Over 300 employees based domestically and overseas; consultants and volunteers

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Why International Development?Why International Development?

To provide meaningful To provide meaningful humanitarian humanitarian assistance (global assistance (global corporate citizenship)corporate citizenship)

To develop our To develop our international international experienceexperience

To generate a positive To generate a positive image for Land O’Lakesimage for Land O’Lakesin current and potential in current and potential international marketsinternational markets

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International Trade International Trade and and

Trade AgreementsTrade Agreements

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Trade Benefits—What We KnowTrade Benefits—What We Know Trade benefits all participants generallyTrade benefits all participants generally

• Widens market access, stimulates investmentWidens market access, stimulates investment Supports increased scale and efficiency of productionSupports increased scale and efficiency of production

• Stimulates specialization and increased productivityStimulates specialization and increased productivity• Access to wider variety and lower cost goods for consumersAccess to wider variety and lower cost goods for consumers• Catalyst for economic growth and developmentCatalyst for economic growth and development• But, trade reforms mean both winners and losersBut, trade reforms mean both winners and losers

Policies needed to insure losers receive considerationPolicies needed to insure losers receive consideration Trade agreements are NOT a social safety netTrade agreements are NOT a social safety net

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Doha Round: 9Doha Round: 9thth US Led Effort to Liberalize Trade US Led Effort to Liberalize Trade

Year Name Coverage Countries1947 Geneva Tariffs 121949 Annecy Tariffs 131951 Torquay Tariffs 381956 Geneva Tariffs 261960-61 Geneva (Dillon) Tariffs 261964-67 Geneva (Kennedy) Tariffs & anti-dumping 621973-79 Geneva (Tokyo) Tariffs, non-tariff measures, framework agreement 1021986-94 Geneva (Uruguay) Tariffs, non-tariff Measures, rules, services 123

intellectual property, dispute settlement, textiles,agriculture, creation of WTO

2001- Doha Development All goods and services, tariffs, nonptariff measures, 147Agenda antidumping and subsidies, intellectual property,

environment, dispute settlement

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Multi-Lateral Agreements Not the Only Multi-Lateral Agreements Not the Only Game in Town—187 Regional Trade Game in Town—187 Regional Trade Agreements in Force, More ComingAgreements in Force, More Coming

0

20

40

60

80

100

120

140

160

180

200

1948 1953 1958 1963 1968 1973 1978 1983 1988 1993 1998 2003

Num

ber

of R

TA

s

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US Trade Agenda—Beyond DohaUS Trade Agenda—Beyond Doha

Now 6 US FTA partners—Canada, Mexico, Israel, Jordan, Chile Now 6 US FTA partners—Canada, Mexico, Israel, Jordan, Chile and Singaporeand Singapore

Agreements completed, awaiting Congressional approval:Agreements completed, awaiting Congressional approval:

• Central American Free Trade Agreement (CAFTA), including Central American Free Trade Agreement (CAFTA), including El Salvador, Guatemala, Honduras, Nicaragua, the Dominican El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and Costa RicaRepublic and Costa Rica

• MoroccoMorocco

• AustraliaAustralia

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US Trade Agenda—Beyond Doha Cont’dUS Trade Agenda—Beyond Doha Cont’d In preparationIn preparation

• Panama, Colombia, and Peru, Bolivia and Ecuador. Panama, Colombia, and Peru, Bolivia and Ecuador.

• Ongoing negotiations--Free Trade of the Americas (FTAA)--Ongoing negotiations--Free Trade of the Americas (FTAA)--34 countries34 countries

• SACU--Botswana, Lesotho, Namibia, South Africa, and SACU--Botswana, Lesotho, Namibia, South Africa, and SwazilandSwaziland

• BahrainBahrain

• Asia--ThailandAsia--Thailand

• Enterprise for ASEAN Initiative with ASEAN countriesEnterprise for ASEAN Initiative with ASEAN countries Next DecadeNext Decade

• US -- Middle East Free Trade AreaUS -- Middle East Free Trade Area

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US Trade Agreement ImportanceUS Trade Agreement Importance Agreement Agricultural Forestry Fishery Total Status Products Products Products Value

US/Israel FTA Total Trade Value Effective 1985 554.6 11.2 7.1 572.9 US Exports to Israel Renegotiating Ag 435.5 10.7 6.9 453.1

NAFTA Total Trade Value Entered in 1994 32,805.1 12,939.8 3,254.0 48,998.9 US Exports to Mexico Being implemented 7,429.0 370.2 65.6 7,864.8 US Exports to Canada 8,185.7 1,632.8 588.3 10,406.8

US/Jordan FTA Total Trade Value Effective 2001 126.7 1.9 0.0 128.6 US Exports to Jordan 125.5 1.8 -- 127.3

US/Chile FTA Total Trade Value Effective 2004 963.8 522.0 493.6 1,979.4 US Exports to Chile 99.7 14.4 0.4 114.5

US/Singapore FTA Total Trade Value Effective 2004 312.6 22.2 69.6 404.4 US Exports to Singapore 229.1 6.2 5.2 240.5

CAFTA Total Trade Value Negotiations Done 3,485.8 100.6 353.9 3,940.3 US to CAFTA Req Cong. Approv 1,029.4 24.7 6.3 1,060.4

US/Dominican Republic Trade Value Under Negotiation 923.4 54.3 48.5 1,026.2 US Exports to Dom. Rep. To be in CAFTA 497.0 52.1 47.0 596.1

US/Australia Total Trade Value Negotiations Done 1,900.3 55.7 95.5 2,051.5 US Exports to Australia Req Cong. Approv 291.6 36.3 29.8 357.7

US/Morocco FTA Total Trade Value Negotiations Done 129.4 1.7 19.9 151.0 US Exports to Morocco Req Cong. Approv 90.3 0.9 0.0 91.2

FTAA Total Trade Value Under Negotiation 53,498.1 15,104.7 5,812.9 74,415.7 US Exports to FTAA 19,726.9 2,240.2 735.5 22,702.6

US/SACU TA Total Trade Value Under Negotiation 731.0 49.1 82.4 862.5 US Exports to SACU 105.7 17.6 1.3 124.6

US/Thailand Total Trade Value Under Negotiation 1,219.4 166.1 1,497.5 2,883.0 US Exports to Thailand 567.7 25.1 31.2 624.0

US/Bahrain Total Trade Value Under Negotiation 29.9 0.8 1.2 31.9 US Exports to Bahrain 29.9 0.8 1.2 31.9

Source: UN Trade Statistical Office

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The Trade and Economic Growth The Trade and Economic Growth DynamicDynamic

Works through markets equally involved with marketsWorks through markets equally involved with markets• Some are protected by policies—tariffs, subsidies, investmentsSome are protected by policies—tariffs, subsidies, investments• Some are isolated bySome are isolated by

DistanceDistance Cultures and traditionCultures and tradition Oppression—Racial groups, women, othersOppression—Racial groups, women, others Political groups, preferencesPolitical groups, preferences CorruptionCorruption War War Poor resource qualityPoor resource quality HIV/AIDs Pandemic – health of the consumerHIV/AIDs Pandemic – health of the consumer

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Fundamental Economic Stress FactorsFundamental Economic Stress Factors

• Within these constraintsWithin these constraints

Well-designed development systems combined with strong Well-designed development systems combined with strong commitment by stakeholders can enhance resource values:commitment by stakeholders can enhance resource values:

• Strengthen market linkagesStrengthen market linkages• Expand/improve capacity to invest, individual and Expand/improve capacity to invest, individual and

community wealthcommunity wealth• Improve productivity and productionImprove productivity and production• Increase incomesIncrease incomes

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Where Market Links are WeakWhere Market Links are Weak

1.25 billion people live on less than $1 per day1.25 billion people live on less than $1 per day• 70% are rural70% are rural• Most depend on farming, forestry or fishing Most depend on farming, forestry or fishing • Of these, 841 million people suffer under-nutrition or hunger.Of these, 841 million people suffer under-nutrition or hunger.

Hunger mainly due to lack of resources except in times of Hunger mainly due to lack of resources except in times of war, natural disaster or politically-imposed faminewar, natural disaster or politically-imposed famine

• Lack education, health resources, and economic capitalLack education, health resources, and economic capital

3 billion people (half the global population) live on less than $2 3 billion people (half the global population) live on less than $2 per dayper day

These people and the regions where they are concentrated are These people and the regions where they are concentrated are Land O’Lakes development targetsLand O’Lakes development targets

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$1 per Day—1.25 billion people$1 per Day—1.25 billion people

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$2 per Day—3 billion people$2 per Day—3 billion people

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Trade and DevelopmentTrade and Development

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Cooperate to:• increase farm productivity and efficiency• reduce investment constraints—invest

and grow • add value• enhance quality• build markets• reward stakeholders • build practical business solutions• Focus on consumers

“Cooperation = Strength”

Land O’Lakes ApproachLand O’Lakes ApproachThe Business of Food, Farming and PeopleThe Business of Food, Farming and People

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Economic Development ApproachEconomic Development Approach

Value chain market driven Value chain market driven

approach.approach.

Animal Productivity; breeding, Animal Productivity; breeding,

husbandry, nutrition, feed husbandry, nutrition, feed

conservation, animal health.conservation, animal health.

On-farm milk handling, quality On-farm milk handling, quality

improvement. improvement.

Animal feed production; Animal feed production;

private sector feed industry private sector feed industry

development.development.

Crop Productivity; adoption of Crop Productivity; adoption of

improved technologies. improved technologies.

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Economic Development ApproachEconomic Development Approach Coop & Association development; Coop & Association development;

milk bulking and cooling; marketing milk bulking and cooling; marketing

crops; accessing inputs.crops; accessing inputs.

Linking small-scale producers to Linking small-scale producers to

markets. markets.

Business development; coops & Business development; coops &

associations, small businesses, associations, small businesses,

processors; linking clients to processors; linking clients to

financial markets. financial markets.

Improving business performance Improving business performance

and profitability;and profitability;

Processing; large- and small-scale, Processing; large- and small-scale,

quality assurance, new product quality assurance, new product

development, packaging.development, packaging.

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Economic Development ApproachEconomic Development Approach Promotional activities; increase Promotional activities; increase

consumption/sales.consumption/sales.

Developing export markets; Developing export markets;

linking buyers and sellers.linking buyers and sellers.

Policy; working with local Policy; working with local

governments on: governments on:

• Agricultural policy issuesAgricultural policy issues

• Agricultural sector and sub-Agricultural sector and sub-

sector Master Plans and sector Master Plans and

Strategies Strategies

• Regulatory issues, consumer Regulatory issues, consumer

safetysafety

• Reviewing and revising laws Reviewing and revising laws

governing coopsgoverning coops

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Cooperative PerspectiveCooperative Perspective

Cooperation• Old idea--around for thousands of years• Applied in many forms

Benefits based on contributions Membership=ownership Joint buying power=lower costs Joint sales=greater returns Every transaction

• Delivers value• Builds rewards for members

Services must yield added value for customers

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Land O’Lakes in Action: ExamplesLand O’Lakes in Action: Examples Albania:Albania: Reorganizing dairy production Reorganizing dairy production Uganda:Uganda: Value for consumers and farmers Value for consumers and farmers Montenegro:Montenegro: Better services, more efficiencyBetter services, more efficiency Malawi:Malawi: Better animals, increased efficiencyBetter animals, increased efficiency Macedonia:Macedonia: Building quality builds marketsBuilding quality builds markets Madagascar:Madagascar: Master Plan for Rural DevelopmentMaster Plan for Rural Development

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Land O’Lakes Development Review—Latin Land O’Lakes Development Review—Latin AmericaAmerica

(Colombia, Guatemala, Honduras, Mexico, and Nicaragua)(Colombia, Guatemala, Honduras, Mexico, and Nicaragua)

SettingSetting• Moderate incomeModerate income

• Mixture of modern and outmoded agricultureMixture of modern and outmoded agriculture Strategies:Strategies:

• Organize producersOrganize producers

• Strengthen cooperatives and farm-to-market systemStrengthen cooperatives and farm-to-market system

• Improve production, processing, marketing and policy Improve production, processing, marketing and policy advocacyadvocacy

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MexicoMexicoWorked primarily in Chiapas and Tabasco:Worked primarily in Chiapas and Tabasco: CoffeeCoffee

• Established 1000-member cooperativeEstablished 1000-member cooperative• Organic certificationOrganic certification• Rainforest protectionRainforest protection• Direct international salesDirect international sales

CocoaCocoa• Established 8 producer cooperativesEstablished 8 producer cooperatives• 2 cooperative processing centers2 cooperative processing centers• Direct marketingDirect marketing• Developed quality and quantity needed to access the world market with Developed quality and quantity needed to access the world market with

volunteers from an international chocolate maker and cocoa buyervolunteers from an international chocolate maker and cocoa buyer RiceRice

• Cooperative establishedCooperative established• Processing establishedProcessing established• Marketed locally and at international organic company food expoMarketed locally and at international organic company food expo

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Master Plan for Rural DevelopmentMaster Plan for Rural Developmentin Madagascarin Madagascar

Develop Market-driven Develop Market-driven Agriculture, Livestock and Agriculture, Livestock and Traditional Fisheries SystemsTraditional Fisheries Systems

Focus Extension and Applied Focus Extension and Applied Research on Market-driven Research on Market-driven Approaches Approaches

Establish a More Supportive Establish a More Supportive Enabling Policy Environment for Enabling Policy Environment for Rapid and Sustainable Rural Rapid and Sustainable Rural DevelopmentDevelopment

Create Alliances to Leverage Create Alliances to Leverage Resources and Business Resources and Business Opportunities for Rural Opportunities for Rural DevelopmentDevelopment

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The Trade-Development Trade-OffThe Trade-Development Trade-Off

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Worries About Those Left BehindWorries About Those Left Behind Most isolated groups threatened by all development Most isolated groups threatened by all development

processes, not just tradeprocesses, not just trade

Trade agreements and trade don’t damage isolated Trade agreements and trade don’t damage isolated producersproducers• But, they will build around themBut, they will build around them

• Fill markets that could have been supplied by better organized Fill markets that could have been supplied by better organized localslocals

• Trade systems will move into such markets, and create still Trade systems will move into such markets, and create still othersothers

Trade Capacity Building of Stakeholders is Critical!Trade Capacity Building of Stakeholders is Critical!

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Worries About Those Left BehindWorries About Those Left Behind Sustainable development always involves sound Sustainable development always involves sound

business principlesbusiness principles• Market orientation—Market orientation—

Information systemsInformation systems Consumer orientationConsumer orientation

• Competition to improve efficiencyCompetition to improve efficiency

• A strong marketing chain that adds value throughoutA strong marketing chain that adds value throughout

• Supportive government policies (investing in human Supportive government policies (investing in human resources, infrastructure, sound macroeconomics, support for resources, infrastructure, sound macroeconomics, support for private property, stable currencies, transparency, etc.)private property, stable currencies, transparency, etc.)

Even low-value resources benefit from these Even low-value resources benefit from these principles/approachesprinciples/approaches

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Trade Supports Development—Essential Trade Supports Development—Essential for for SustainedSustained Development Development

Strategy for the longer-termStrategy for the longer-term• Help producers increase value of their resourcesHelp producers increase value of their resources

Technical assistance – people empowerment!Technical assistance – people empowerment! Stronger market linkagesStronger market linkages Help them build their own capital—internally or externallyHelp them build their own capital—internally or externally

• Capacity building all along the value chainCapacity building all along the value chain Trade stimulates change and growthTrade stimulates change and growth

• Provides/supports longer-term investment essential to Provides/supports longer-term investment essential to developmentdevelopment

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Trade Agreement ProvisionsTrade Agreement Provisionsto Minimize Exclusionto Minimize Exclusion

Trade Capacity Building – not just physical Trade Capacity Building – not just physical but HUMAN Infrastructure!but HUMAN Infrastructure!

Strong Government CommitmentStrong Government Commitment

Coordination of Foreign AssistanceCoordination of Foreign Assistance

Engagement of the Private SectorEngagement of the Private Sector• RetailersRetailers• ProcessorsProcessors• Producer GroupsProducer Groups

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Country Initiatives to Minimize ExclusionCountry Initiatives to Minimize Exclusion

Develop a Master Plan for Rural DevelopmentDevelop a Master Plan for Rural Development• Market OrientationMarket Orientation• Business-basedBusiness-based• Organize Producer BaseOrganize Producer Base• Profitability-drivenProfitability-driven

Government CommitmentGovernment Commitment• Not just talk – action….and $$Not just talk – action….and $$• Leverage the Private Sector and donors to follow Leverage the Private Sector and donors to follow

your rural development agenda!!!your rural development agenda!!!

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Misaotra Betsaka!Misaotra Betsaka!