Three trade agreements that had been stuck for several years finally made their way out of Congress this week, with both the House and Senate handily approving trade pacts with Colombia, South Korea and Panama.
All three have potential to increase the sale of U.S. agricultural products, from corn to beef.
“Trade is an important component of Nebraska agriculture. It provides good markets for corn and corn products,” said Tim Scheer, chair of the Nebraska Corn Board’s government affairs committee and a farmer from St. Paul, Neb. “Yet it is also critical for livestock producers, as a growing amount of U.S. beef and pork makes its way to markets around the world.”
The Nebraska Corn Board said it appreciates Senators Ben Nelson and Mike Johanns and Representatives Jeff Fortenberry, Lee Terry and Adrian Smith for voting to approve all three trade agreements.
“We appreciate the support of Nebraska’s Congressional delegation,” Scheer said. “Approving these agreements is critical for the competitiveness of Nebraska and U.S. corn and other agricultural products, especially considering that other countries already have trade agreements in place or are negotiating them. We can’t afford to step away from the table and lose market share.”
One place the United States has lost market share is Colombia – U.S. corn exports to Columbia fell significantly over the last three years, in part due to a 15 percent import duty on U.S. corn and trade agreements the country negotiated and ratified with our competitors. When added up, U.S. farmers have lost nearly 2 million tons of corn exports alone in the last three years that equates to more than $400 million. (See this post for more.) The Colombian trade agreement will help reverse that tide.
The example of Colombia is a good one – we can't just stand by when the rest of the world is expanding trade opportunities. It puts us behind the eight ball and at a significant disadvantage, and once markets are lost and trade patterns change, it can be a significant (and expensive) challenge to get them back.
Of course the trade agreement with South Korea is the centerpiece of all three – it's the largest single U.S. trace pact since the North American Free Trade Agreement in 1994.
While South Korea is already one of the top five corn export markets for the United States, it has potential to grow, as the free trade agreement provides that both feed corn and corn co-products receive duty-free treatment. In addition, tariffs on all refined corn products will eventually be phased out, creating new market access for corn sweeteners and corn oil.
Yet more important is the opportunity Korea offers for pork and beef. Significantly improved market access for beef, pork and other livestock products increases opportunities for Nebraska beef and pork producers and all those who raise livestock.
According to the U.S. International Trade Commission, annual exports of U.S. beef to South Korea are expected to increase as much as $1.8 billion once the agreement is fully implemented. Implementation will phase out over 15 years South Korea’s 40 percent tariff on beef imports, with $15 million in tariff benefits for beef in the first year of the agreement alone and about $325 million in tariff reductions annually once fully implemented. The current South Korean duty on pork bellies is 25 percent but will be eliminated on all frozen and processed pork products by 2014.
That's a big deal for Nebraska beef and pork producers – as trade adds about $120 in value to each steer or heifer processed and $40 to each hog.
Panama, meanwhile, is poised for growth in all areas and will be on a more level playing field as its neighbors to the north (Costa Rica, via CAFTA) and south (Colombia) who have trade deals with the United States. It also provide duty-free access for a set but growing amount of U.S. corn each year. It also eliminates a 30 percent duty on prime and choice cuts of beef – and phases out the others over time.
According to U.S. Department of Agriculture figures, Nebraska exported a total of more than $5 billion worth of agricultural products in 2010, including $1.3 billion worth of corn and other feed grains.
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