Colorado's supporting role on the global business stage
The state is a notable player in international commerce, from livestock to tourists
Aspen and Yuma, though both in Colorado, inhabit different universes. Aspen, located about 175 miles west of Denver, has multi-millionaires at every turn, conferences that draw prime ministers and presidents, and nose-bleed real estate prices that result in nearly half the permanent population living in deed-restricted affordable housing. Locals unflinchingly vote for Democrats. You can, of course, see mountains from Aspen.
Yuma lies 175 miles east of Denver and no, you can’t see the mountains from there. It’s along the Republican River, and that parallels local political sensibilities. If there are a half-dozen places to eat, don’t press your luck too long past dark. It’s true that a high-level U.S. official can often be found. That would be U.S. Sen. Cory Gardner. He grew up in Yuma.
Wheat is big in Yuma. From the local CHS grain elevator, the town’s tallest structure, 110-car trains get loaded methodically and dispatched to distant ports, this year mostly to Houston/Galveston.
Eighty percent of Colorado wheat gets exported internationally. Much goes to Japan, Korea and China, but also the Middle East and Africa. Mexico, too. The North American Free Trade Agreement, or NAFTA, has been good for Colorado wheat growers, says Darrell Hanavan, formerly the executive director for 34 years of the Colorado Wheat Administrative Committee.
“Mexico is one of the top markets for Colorado and U.S. wheat, and it continues to expand,” he says.
Globalization was a theme in the presidential campaigns. Donald Trump argued that ordinary Americans have suffered from trade agreements. Hillary Clinton firmly supported globalization before swiveling to oppose the still-unratified Trans-Pacific Partnership. Campaign rhetoric, though, seemed to entirely bypass Colorado’s situation. Colorado never had giant auto plants and textile mills. It mostly bounced out of recession. Globalization has benefited most Coloradans.
“Exports are really important for both rural and urban Colorado,” Brian Lewandowski, associate director of the business research division at the University of Colorado, Boulder’s Leeds School of Business. Lewandowski describes different forms of exports.
In agriculture, we export goods, things you can touch and eat. Beef is big, but think also of Colorado’s craft breweries. You can, at a certain pub in London, choose from several Colorado beers. With international tourism, we import visitors to Aspen, Breckenridge and other resorts, but export experiences, picking up money along the way.
Then there’s the knowledge-based economy. Colorado is thick with engineers and others who travel frequently to other countries to lend their expertise. Even software engineers who never leave the state can be part of global trade without actually putting anything on a train, plane or ship. With the internet, a new program can simply be downloaded by somebody in Russia or Paraguay.
So different in many ways, Yuma and Aspen are similarly integrated into the global economy. Aspen Skiing Co. says that up to 30 percent of its visitors come from outside the U.S. in any given winter. They typically linger for lengthy periods, a week or sometimes more, and sometimes spend lavishly.
In agriculture, NAFTA has expanded trade with both Canada and Mexico, our No. 1 and No. 2 markets. Tom Lipetzky, director of the marketing programs and strategic initiatives for the Colorado Department of Agriculture, says agriculture exports have tripled in the last decade. They topped out at about $2 billion in 2014 before dipping last year because of the strong dollar, which make U.S. products more expensive.
Much of Colorado’s agriculture economy is focused around animal protein, especially hogs and cattle. Cattle are fattened at giant feedlots around Yuma, Greeley and other towns before being dispatched to giant slaughter houses, such as Cargill’s plant at Fort Morgan and the plant in Greeley owned by JBS, a Brazilian company.
Some of these cattle are imported from Canada and Mexico as well. Once the killing is done, the hides go to China, for manufacturing of purses and other goods. Japan and Korea, more affluent than China, are major markets for beef. Expanded sales to Korea resulted from a free-trade agreement several years ago. “We have continued to see increases in our exports to Korea ever since,” says Lipetzky. Beef exports to all countries from Colorado are worth about $1 billion a year, one of the state’s top export products.
Barriers to Colorado agriculture exports remain. China, for example, bans the import of U.S. beef.
“That’s not to say some beef isn’t getting into China through Hong Kong or Vietnam,” says Lipetzky. He speculates that China will, as it becomes wealthier, be more open to U.S. beef. Korea and Japan allow U.S. beef, but impose tariffs.
The Trans Pacific Partnership would reduce tariffs on beef from 38.5 percent to around 9 percent. The TPP would also reduce tariffs on Colorado wheat. “These are the sorts of things I think would be positive for Colorado’s ag industry,” Lipetzky says.
Potato growers also want expanded free trade. Warm summer days, cool nights and scant rainfall in the San Luis Valley make Colorado the nation’s No. 2 producer. About 8 percent of those potatoes get exported, many to Mexico. But Mexico limits U.S. imports to a swath of just 26 kilometers along the border to protect domestic growers. The result is that Mexicans pay about twice as much for potatoes as U.S. consumers, says Jim Ehrlich, executive director of the Colorado Potato Administrative Committee. If Mexico opened up the entire country to trade, he adds, Colorado could easily double its exports to Mexico.
Free trade is absolutely essential for Colorado’s agriculture sector, says Stephen Koontz, ag and resource economist at Colorado State University. “There’s no way we can eat all we produce,” he says. Food products from Colorado gets exported to 114 countries.
Koontz points to financial relationships and communication technology as key to understanding the globalization of agriculture products. “It’s too easy to do business internationally,” says Kootz. “We have the technology where we can communicate easily. We also have the banking relationships. People know they will get paid. It’s not hard. There’s a lot of expertise, and there will be more.”
Doing business internationally isn’t foreign anymore.
Tourism also has a strong international component. Just 1 percent of the 77.7 million visitors to Colorado came from other countries, led by Canada, Mexico, the United Kingdom, Australia and Germany, in that order. But that statistic likely underrepresents the impact of international travelers. They tend to stay longer and spend more money.
“Most view Colorado as the trip of a lifetime,” says Andrea Blankenship, the state government’s director of international tourism.
Along the Front Range, the knowledge-based economy dominates in office parks along I-25, in Boulder and its suburbs. Consider DigitalGlobe, headquartered in an iconic building on 120th Avenue in Westminster, just west of I-25. The company says clients for its high-resolution satellite images include 40 different governments. The images show growth of a volcanic island in Japan in 2013, for example, and flooding in Madagascar in 2014.
Even better known is CH2M, which arrived in metro Denver in 1988 from Boise, Idaho, and now routinely dispatches expertise to countries around the world. Other prominent knowledge-based companies include Level One, StorageTek and IBM, but the list could include hundreds, maybe thousands of companies.
How different from the 1950s. Then, we thought of exports strictly in terms of manufacturing. Colorado actually continued to add manufacturing jobs until the turn of the century. It then lost about a third of manufacturing jobs before a 14 percent uptick in recent years. Think of high-end food products, like you might find at Whole Foods, or high-value products.
Tom Clark, chief executive of Metro Denver Economic Development Corp., defines this globalization of knowledge as the ability to put a week’s worth of work into a suitcase. Implicit is the need for transportation.
“Globalization for us didn’t really take off until we started delivering people non-stop to markets,” he says. The first stop: London, a strong trading partner and arguably still the world’s financial capital. Then came Frankfurt and Munich and a focus on technology, advanced manufacturing and artificial intelligence. Later came Tokyo and Sao Paulo.
The federal laboratories in Colorado – the National Renewable Energy Laboratory, National Oceanic and Atmospheric Administration, and the National Center for Atmospheric Research – also play a role in Colorado’s globalized economy. “We are blessed with laboratories, which had more to do with globalization than anything you can imagine,” Clark says.
Canada, in particular, views the national labs in Colorado as a big deal, NREL in particular. The Trudeau government sees the need to accelerate the development of clean technology and renewables. Stephane Lessard, the consul general in Denver, says his government wants to expand collaborations between Canadian entrepreneurs and the federal labs in Colorado. (See more on Canadian perspective in sidebar)
The broad theme in globalization is the replacement of labor with capital. That can be seen starkly in eastern Colorado, where mechanization and technology have produced ever-more-plentiful farm harvests. Equipment costs a fortune, but requires few people to operate. Ghost towns abound on the Great Plains.
Have trade agreements been good for Colorado? “For computer and telephone guys, they’ve been very good,” says Clark of NAFTA. Others say NAFTA has been good for agriculture. The Department of Agriculture’s Lepetzky adds a nuance. It seems to take a long time to get trade disagreements worked out.
Taking stock of the political rhetoric heard last summer, Koontz concedes that globalization has hurt sectors of U.S. manufacturing. But if you look at the financial services, technological services, the computers and software, the country has benefitted tremendously from participating in international trade. The U.S., he says, is exporting high-value stuff, and also exporting jobs that were not very productive.
Does that benefit Colorado? He thinks so.