Time to Capture Lost Markets Now That FTAs Are Approved

DC Dialogue

Free trade agreements with Colombia, Panama and South Korea offer vast potential for American farmers.

Published on: October 14, 2011

After being sidelined for five years, this week Congress and the Administration finally stepped out to support three major free trade agreements with Colombia, Panama and South Korea. The bills easily passed by both the House and Senate and received sweeping praise from the agricultural community.

Combined, the three FTAs represent nearly $2.5 billion in new agriculture exports for America’s farmers and are expected to create economic growth that could generate support for up to 22,500 U.S. jobs.

The U.S. Grains Council said the agreements are expected to generate roughly $13 billion in additional export revenue, with approximately $11 billion of the total flowing to South Korea.

USGC Chairman Dr. Wendell Shauman and Tom Dorr, USGC president and CEO, will travel to Colombia and Panama in the near future for meetings with private sector and governmental leaders aimed at regaining U.S. grain exports to the region.

U.S. agricultural exports have lost market share in both countries in recent years because other exporting countries have negotiated their own free-trade agreements, excluding the United States, while the U.S. trade agreements remained stalled.

Since the EU-Korea trade agreement went into effect July 1, European exports to Korea have increased 36% from a year earlier. U.S. farmers have already lost more than $1 billion in sales to Colombia in the two years since that country implemented a trade deal with Argentina and Brazil. The Colombia-Canada Free Trade Agreement that took effect August 15 has also put U.S. workers and farmers at a disadvantage, the National Corn Growers Association said.

"With a level playing field, the United States has an excellent chance of winning back these markets," said Shauman. We have a shipping advantage from the Gulf Ports, and we have historically been a trusted partner and preferred provider for grain exports in the Caribbean Basin. It’s great to be back in the game."

Korea

In many ways, the most promising of all the trade agreements is the one with Korea. Korea is the fifth largest market for U.S. agricultural exports. The agreement will increase exports of the major grain, oilseed, fiber, fruit and vegetable, and livestock products by $1.8 billion annually, according to economic forecasts by the American Farm Bureau Federation.

Currently America’s producers face an average tariff of 54% when exporting to Korea. Similar goods from Korea enter the U.S. at an average rate of only 9%. Passing this agreement corrects that imbalance and provides better access to Korea’s 49 million consumers. 

The Korea FTA offers immediate duty-free access to U.S. soybeans for crushing and to U.S. soybean meal. It also opens up South Korea’s food-grade soybean imports to the private sector.

For beef, the deal eliminates the 40% tariff currently placed on U.S. beef imports.

Colombia

Right now, Colombia imposes duties on all American agricultural products. They range from 5 to 20%. Yet the U.S. still sells more than $830 million in agricultural products there.  Under this agreement, Colombia would eliminate tariffs on 70% of U.S. exports. Also, American agricultural products would no longer be subject to tariffs and would become more cost-competitive. The Farm Bureau estimates that the U.S. will see $370 million more in farm exports to Colombia annually. 

The Colombia FTA will create new opportunities for U.S. soybean farmers in the Colombian market by immediately eliminating tariffs ranging from 5-20% on soybeans, soybean meal and soybean flour, and phasing-out the 24% tariffs for crude soybean oil and refined soybean oil over 5 years.

The USGC looks forward to regaining market share in Colombia. In 2007, for example, Colombia imported 3 million tons of corn with the United States enjoying a 95% market share. In 2010, however, imports fell to 700,000 metric tons and U.S. market share shrunk to less than 20%.

Colombia currently imposes tariffs as high as 80% for U.S. beef which would be eliminated under the deal.

Panama

More than 60% of U.S. farm exports to Panama face some sort of duty or tariff. Those tariffs average 15%, but they can be as high as 70% on meat, 90% on grain, and a staggering 260% on poultry. Meanwhile, more than 99% of Panama’s farm exports enter the U.S. duty free. So this agreement not only creates new opportunities for America’s farmers and ranchers, but it levels the playing field for American exporters. 

The Panama FTA will benefit soybean farmers by immediately removing the tariffs on U.S. soybeans, soybean meal, and crude vegetable oils.

Panama has a 30% tariff on beef imports which would be eliminated under the deal.

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  1. Anonymous says:

    Farmers praise passage of 3 FTAs - Why praise incompetence and total disregard of this Administration for farmers? FIVE YEARS Panama has had 90% tariffs on US Grain. And this Administration sat on the FTAs until they could buy union votes through the TAA passage - another tax-payer subsidy for unions. Shame not praise should be the farmer reaction - we have been paying the price as other nations gobbled up our export markets. Too little too late.

  2. Anonymous says:

    find these dumn people that did tese stupid deals years ago and cut there govement pensions out.