Stalled Trade Deals Could Lead to Loss of Market Share

Buckeye Farm News

After years of being a leader in world trade negotiations, the United States is now sitting on the sidelines.

Congress still has not taken up any of the hard-fought free trade agreements that were negotiated years ago. Instead of waiting for the United States to finalize its preferential agreements, other countries have started to negotiate their own agreements. The United States will be at a disadvantage and lose market share and opportunities if its competitors have their agreements in place before the United States does, said Adam Sharp, Ohio Farm Bureau’s senior director of legislative and regulatory policy.

“The Obama administration says it wants to expand trade but in Congress, they are still sitting on important trade agreements for agriculture,” he said. “We haven’t been able to ratify free trade agreements with Colombia, Panama and South Korea and now our competitors are moving forward with their own negotiations and some are close to being finalized. It’s critical that we get those agreements ratified.”

In November 2006, the United States signed a free trade agreement with Colombia, known as the Colombia Trade Promotion Agreement or CTPA. Colombia is the United States’ largest market in South America. Under the agreement, Colombia would immediately eliminate duties on 53 percent of current U.S. trade upon implementation, according to the U.S. Department of Agriculture.

Two years after that agreement was signed, Canada and Colombia signed a free trade agreement that would lower barriers to trade between the two countries. Last March the government of Canada introduced legislation to implement that free trade agreement. If it goes into effect before the CTPA, Canadian exporters will gain a significant competitive advantage over the United States in the Colombian market for products such as beef, pork, wheat, barley, apples, peaches and berries, according to American Farm Bureau Federation.

Canada is not the only country that is currently negotiating with Columbia. The European Union has concluded a free trade agreement that could go into effect as early as 2012.

The U.S. corn market share in Colombia has already started to drop because the South American country implemented a free trade agreement last year with Mercosur, a South American regional trade group that includes Argentina, Brazil, Paraguay and Uruguay. Because the United States’ tariff rate is now higher than that of Mercosur, the U.S. corn market share has dropped from 80 percent in 2008 to 37 percent last year, according to AFBF. Under the CTPA, U.S. corn exports would immediately face a tariff of zero percent, allowing the United States to regain and maintain some of its lost agricultural market share.

“We are seeing our competitors negotiating FTAs and preferential agreements and so increasingly they are moving into markets that we once held and unless we are more aggressive, we will find that our share continues to drop around the world,” said Rosemarie Watkins, AFBF’s director of international policy.

In June 2008, the United States signed free trade agreements with both Panama and South Korea. Under implementation of the Panama Trade Promotion Agreement, U.S. exporters would receive duty-free treatment on products accounting for more than 60 percent of current trade, with tariffs on most remaining agricultural products phased out within 15 years. Last year Canada and Panama completed negotiations of a free trade agreement that if in place before the United States would give Canada a competitive advantage in the Panamanian market for products such as beef, frozen potato products, beans, lentils, pork, malt and other processed foods.

U.S. Trade Representative Ron Kirk has said that if the U.S-South Korean agreement (KORUS-FTA) is approved, it would be “the United States’ most commercially significant free trade agreement in more than 16 years.” The U.S. International Trade Commission estimates that the reduction of Korean tariffs and tariff-rate quotas on goods alone would add $10 billion to $12 billion to the annual U.S. Gross Domestic Product and around $10 billion to annual merchandise exports to Korea, according to Kirk’s office.

Last year the European Union signed a free trade agreement with Korea that is similar to that negotiated with the United States. The European Union agreement would eliminate 82 percent of Korea’s tariffs immediately and 94 percent in five years. In comparison, KORUS-FTA would eliminate 94 percent of tariffs in three years and virtually all tariffs in 10 years.

“In Korea many of our competitors are negotiating agreements or looking to finalize agreements,” Watkins said. “We have overall gone from the No 1 exporter to Korea to No. 4.”

AFBF releases proposal on how to double U.S. exports in 5 years

American Farm Bureau and two other groups released a comprehensive proposal last month on how to double U.S. exports in five years, one of President Obama’s key goals.

The recommendations were to:

  • Enact pending trade agreements with Colombia, Panama and South Korea.
  • Pursue new trade agreements.
  • Reduce non-tariff barriers.
  • Improve competitiveness with investments in infrastructure and trade facilitation initiatives.
  • Pursue a Doha Round agreement that expands world trade.
  • Improve export promotion efforts and financing policies.