Trade Agreements and The People Left Behind: A Development Perspective

1. Trade Agreementsand The People Left Behind:A Development Perspective Kristin Penn International Development Division Land O’Lakes, Inc. Partnerships for Prosperity Conference Cancun, Mexico May, 2004

2. Four Topics • Brief Introduction to Land O’Lakes • International Trade and Trade Agreements • The development link • Our Approach to Development • Key tools and how we apply them • Trade-Development Trade-Off

3. About Land O’Lakes, Inc.

4. About Land O’Lakes, Inc. • A U.S.-based, farmer-owned food and agricultural supply cooperative with more than 300,000 members. • Created in 1921 to respond to a cooperative creamery butter-marketing need • Today, our annual sales are more than $6 billion • Our core businesses include dairy foods, eggs, animal nutrition, seed, and agronomy.

5. Land O’Lakes, Inc. Mission: “We are a market- and customer-driven cooperative committed to optimizing the value of our members’ dairy, crop and livestock production.”

6. Land O’Lakes Today • Our VALUES reflect our heritage: • People • Performance • Customer commitment • Quality • Integrity

7. Land O’Lakes Today 2003 Sales (billions) Ag Services $ 3.3 Dairy $ 3.0 Total $ 6.3 • Employees 7,000 • Members 6,056 individual producers 1,273 cooperatives • 24 Board Directors • President/CEO - Jack Gherty

8. About Our Businesses • Dairy Foods • 98% brand recognition • #1 Butter and Deli Cheese market shares • Ag Services • #1 in animal feed in North America • Seed • Plant food and crop protection products • Research and development

9. Land O’Lakes, Inc. Vision: “To be one of the best food and agricultural companies in the world”

10. International Development “Bringing the Land O’Lakes Difference to International Development”

11. International Development Background • Founded in 1981, as a two-person department to deepen Land O’Lakes international perspective • Through the 1980’s, projects related primarily to training and farmer-to-farmer programs • Gradually expanded to more technical assistance within agricultural and food systems • Supported by Board and member owners

12. International 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

13. Why International Development? • To provide meaningful humanitarian assistance (global corporate citizenship) • To develop our international experience • To generate a positive image for Land O’Lakesin current and potential international markets

14. International Trade and Trade Agreements

15. Trade Benefits—What We Know • Trade benefits all participants generally • Widens market access, stimulates investment • Supports increased scale and efficiency of production • Stimulates specialization and increased productivity • Access to wider variety and lower cost goods for consumers • Catalyst for economic growth and development • But, trade reforms mean both winners and losers • Policies needed to insure losers receive consideration • Trade agreements are NOT a social safety net

16. Doha Round: 9th US Led Effort to Liberalize Trade

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

18. US Trade Agenda—Beyond Doha • Now 6 US FTA partners—Canada, Mexico, Israel, Jordan, Chile and Singapore • Agreements completed, awaiting Congressional approval: • Central American Free Trade Agreement (CAFTA), including El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic and Costa Rica • Morocco • Australia

19. US Trade Agenda—Beyond Doha Cont’d • In preparation • Panama, Colombia, and Peru, Bolivia and Ecuador. • Ongoing negotiations--Free Trade of the Americas (FTAA)--34 countries • SACU--Botswana, Lesotho, Namibia, South Africa, and Swaziland • Bahrain • Asia--Thailand • Enterprise for ASEAN Initiative with ASEAN countries • Next Decade • US -- Middle East Free Trade Area

20. US Trade Agreement Importance

21. The Trade and Economic Growth Dynamic • Works through markets equally involved with markets • Some are protected by policies—tariffs, subsidies, investments • Some are isolated by • Distance • Cultures and tradition • Oppression—Racial groups, women, others • Political groups, preferences • Corruption • War • Poor resource quality • HIV/AIDs Pandemic – health of the consumer

22. Fundamental Economic Stress Factors • Within these constraints • Well-designed development systems combined with strong commitment by stakeholders can enhance resource values: • Strengthen market linkages • Expand/improve capacity to invest, individual and community wealth • Improve productivity and production • Increase incomes

23. Where Market Links are Weak • 1.25 billion people live on less than $1 per day • 70% are rural • Most depend on farming, forestry or fishing • Of these, 841 million people suffer under-nutrition or hunger. • Hunger mainly due to lack of resources except in times of war, natural disaster or politically-imposed famine • Lack education, health resources, and economic capital • 3 billion people (half the global population) live on less than $2 per day • These people and the regions where they are concentrated are Land O’Lakes development targets

24. $1 per Day—1.25 billion people

25. $2 per Day—3 billion people

26. Trade and Development

27. Land O’Lakes ApproachThe Business of Food, Farming and People • 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”

28. Economic Development Approach • Value chain market driven approach. • Animal Productivity; breeding, husbandry, nutrition, feed conservation, animal health. • On-farm milk handling, quality improvement. • Animal feed production; private sector feed industry development. • Crop Productivity; adoption of improved technologies.

29. Economic Development Approach • Coop & Association development; milk bulking and cooling; marketing crops; accessing inputs. • Linking small-scale producers to markets. • Business development; coops & associations, small businesses, processors; linking clients to financial markets. • Improving business performance and profitability; • Processing; large- and small-scale, quality assurance, new product development, packaging.

30. Economic Development Approach • Promotional activities; increase consumption/sales. • Developing export markets; linking buyers and sellers. • Policy; working with local governments on: • Agricultural policy issues • Agricultural sector and sub-sector Master Plans and Strategies • Regulatory issues, consumer safety • Reviewing and revising laws governing coops

31. Cooperative 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

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

33. Land O’Lakes Development Review—Latin America(Colombia, Guatemala, Honduras, Mexico, and Nicaragua) • Setting • Moderate income • Mixture of modern and outmoded agriculture • Strategies: • Organize producers • Strengthen cooperatives and farm-to-market system • Improve production, processing, marketing and policy advocacy

34. Mexico Worked primarily in Chiapas and Tabasco: • Coffee • Established 1000-member cooperative • Organic certification • Rainforest protection • Direct international sales • Cocoa • Established 8 producer cooperatives • 2 cooperative processing centers • Direct marketing • Developed quality and quantity needed to access the world market with volunteers from an international chocolate maker and cocoa buyer • Rice • Cooperative established • Processing established • Marketed locally and at international organic company food expo

35. Master Plan for Rural Developmentin Madagascar • Develop Market-driven Agriculture, Livestock and Traditional Fisheries Systems • Focus Extension and Applied Research on Market-driven Approaches • Establish a More Supportive Enabling Policy Environment for Rapid and Sustainable Rural Development • Create Alliances to Leverage Resources and Business Opportunities for Rural Development

36. The Trade-Development Trade-Off

37. Worries About Those Left Behind • Most isolated groups threatened by all development processes, not just trade • Trade agreements and trade don’t damage isolated producers • But, they will build around them • Fill markets that could have been supplied by better organized locals • Trade systems will move into such markets, and create still others • Trade Capacity Building of Stakeholders is Critical!

38. Worries About Those Left Behind • Sustainable development always involves sound business principles • Market orientation— • Information systems • Consumer orientation • Competition to improve efficiency • A strong marketing chain that adds value throughout • Supportive government policies (investing in human resources, infrastructure, sound macroeconomics, support for private property, stable currencies, transparency, etc.) • Even low-value resources benefit from these principles/approaches

39. Trade Supports Development—Essential for Sustained Development • Strategy for the longer-term • Help producers increase value of their resources • Technical assistance – people empowerment! • Stronger market linkages • Help them build their own capital—internally or externally • Capacity building all along the value chain • Trade stimulates change and growth • Provides/supports longer-term investment essential to development

40. Trade Agreement Provisionsto Minimize Exclusion Trade Capacity Building – not just physical but HUMAN Infrastructure! • Strong Government Commitment • Coordination of Foreign Assistance • Engagement of the Private Sector • Retailers • Processors • Producer Groups

41. Country Initiatives to Minimize Exclusion • Develop a Master Plan for Rural Development • Market Orientation • Business-based • Organize Producer Base • Profitability-driven • Government Commitment • Not just talk – action….and $$ • Leverage the Private Sector and donors to follow your rural development agenda!!!

42. Misaotra Betsaka!