They say when trade works, the world wins. In that case, the president’s signing of Free Trade Agreements with Colombia, Panama and South Korea on Oct. 21 was a long-awaited victory for all parties.
Global access is imperative to maintaining a competitive edge, as foreign markets hold the most growth potential. According to Floyd Gaibler, U.S. Grains Council director of trade policy, the overseas market represents 73% of the world’s purchasing power, 87% of the economic growth and 95% of the world’s customers. The passage of these agreements levels the playing field and gives the United States the same duty-free access our competitors have experienced in all three markets.
In total, the United States stands to gain 250,000 jobs and $13 billion in annual exports, making this the largest trade package passed since the North American Free Trade Agreement. Agriculture exports alone could increase by more than $2 billion annually, according to the USDA.
Leaders of U.S. grower associations, trade promotion organizations and major agriculture companies sat down with Feed & Grain to explain the unique opportunities and challenges each market represents, and discuss why it’s vital for the United States to aggressively pursue open trade and give our producers the opportunity to compete fairly in the global marketplace.
Colombia: making up lost ground
The most notable objective with respect to the Colombian market is regaining the market share lost from 2007 through 2011 while the agreements sat pending.
Historically, Colombia has been one of the top 10 export markets for U.S. corn. During the marketing year of 2007-08, the United States exported 114 million bushels of corn to Colombia, valued at about $627 million, according to Sarah Gallo, National Corn Growers Association director of public policy. By the 2009-10 marketing year, our exports dropped to only 36 million bushels, around $152 million.
“It was an unbelievable decrease in two short years and one of the primary reasons the NCGA was supportive of the Colombia free trade agreement — to get some of that market share back,” says Gallo.
Gaibler attributed the lost market share to Colombia’s trade agreements with other nations.
“Collectively, the U.S. prior to 2008 had nearly 50% of all of the agriculture imports going into Colombia, valued at that point at more than $2 billion,” said Gaibler. “But we’ve seen this market share decline rapidly to less than 25%. Conversely, Argentina’s market to Colombia for total ag imports rose from 8% to 30% over that same time period and Brazil increased from 6% to 9%. That loss of market share can be attributed directly to the fact the U.S. is facing high tariffs, while Brazil and Argentina received duty preference reductions through the Mercosur Agreement.”
Colombia’s implementation of new trade agreements extends beyond South America. In August 2011 a trade agreement with Canada went into effect, despite the fact the FTA was signed nearly two years after the U.S./Colombia FTA was signed.
Meanwhile, U.S. wheat had 73% market share in 2008 and plummeted to around 43% by the end of 2010. Shannon Schlecht, U.S. Wheat Associates director of policy, explains the negative impact Canada’s expedient implementation had on the United States.
“Economic analysis indicated that U.S. farm gate prices could have been $0.10/bushel higher if the U.S./Colombia FTA would have been implemented ahead of Canada’s agreement,” Schlecht says. “Canada’s imports have surged since passing their FTA — doubling in the month of August year on year and again more than doubling in September 2011.”
Devry Boughner, director of international business relations for Cargill, one of the largest marketers of food and agricultural products in the United States, says buyers are looking for competitively priced imports.
“When U.S. export products are priced higher than products from other countries based on trade barriers, U.S. products lose out,” says Boughner.