As the U.S. Grains Council weathers the storm created by the lack of a farm bill and the partial U.S. government shutdown, an unsettling trade barrier is brewing in Central America. On Sept. 27, 2013, the Panamanian government published the regulations governing quota administration for three products (powdered milk, rice and corn) governed by the auction system as part of the Panama-U.S. Trade Promotion Agreement. Unfortunately, the Panamanian government decided to exploit a loophole in the agreement and closed the imports of U.S. corn for three and a half months (January through April 15, 2014)—a move that is counter to the spirit of the free trade agreement (FTA).
Upon learning of the issue, the Council immediately began working with the U.S. Trade Representative, USDA's Foreign Agricultural Service in Panama, the Panamanian government, and the Panamanian poultry industry to find resolution. While the FTA outlines dispute settlement procedures, everyone is hopeful to find resolution to the issue informally. Unfortunately, due to government furloughs, key employees of the USTR and FAS-Panama are unable to do their job in keeping markets open for U.S. products.
Panama produces approximately 85,000 metric tons (3.3 million bushels) of corn annually with annual imports totaling more than 350,000 tons (13.8 million bushels). Historically, the Panamanian government closed the market each year to imports from January to April to protect local corn producers. It was believed that under the FTA, this pattern of closing the market would no longer be acceptable.
In fact, in 2013 the market was not closed for corn imports. In 2014, however, the government chose to announce the closing of the market.
"This time period coincides with the harvest of the local corn crop and is an obvious effort to subvert the FTA in order to protect local corn producers and force the Panamanian feed industry to buy local corn," said Floyd Gaibler, USGC director of trade policy and biotechnology.
"Not only does this regulation go against the spirit of the FTA, which is intended to open markets and reduce barriers to trade, but it also creates a tremendous burden on the local livestock industry. The FTA was intended to simplify trade, but the Panamanian government has set up several technical barriers which make the situation worse for the feed industry, increasing the cost of importing U.S. corn and actually making U.S. corn less competitive."
Despite the partial shutdown and the difficultly to resolve the issue without the support of the U.S. government, the Council will actively pursue the issue on behalf of its members. However this issue highlights once again the how important USDA and the USTR are to the US agricultural community in helping to protect and enforce existing trade agreements.