2005 Decisive Year for U.S. Trade

Of all world exports, 7% are agriculture exports; 1% of all world exports are U.S. agricultural products. The United States exports more in quantity, value, variety, and to more markets than any other country in the world. But the most decisive year is 2005 for U.S. agriculture.

Jim Gruff, recently retired assistant deputy of international trade policy for Foreign Agriculture Service, says in the coming year the U.S. will be "tested to an unprecedented degree" in its ability to maintain the lead position in world trade.

There are four events that will test U.S. agriculture's strength as a world agriculture competitor, Gruff explains to an audience of farmers at the American Farm Bureau Federation annual convention in Charlotte, N.C.

The first is the Brazil cotton challenge case. On March 3, the U.S. will know the outcome of the case challenging countercyclical, loan deficiency payments, Step 2 cotton programs and export credits. The decision is broken into two parts. If the appellate rules against the U.S. export credit and Step 2 program, U.S. must come into compliance by July 2005. The larger issue of LDP and countercylical payments, which may have an impact on several other commodities, the U.S. will have 15 months to come into compliance, Gruff says.

The other decisive issue is whether or not Congress decides to extend the President's Trade Promotion Authority (TPA) extension. The TPA had a difficult political battle, passing by only one vote in the House. The program, which allows the president to negotiate trade agreements without congressional approval, will be automatically extended unless one of the houses brings it up for a vote. With republican control in both chambers it isn't expected to be a problem.

Gruff expects the Bush Administration to submit the Central American Free Trade Agreement (CAFTA) to Congress during the first half of the year. Gruff says of all of the negotiated agreements in the recent period, this is the "most attractive and most promising" for U.S. agriculture.

The biggest concern is the sugar industry's worries about access to U.S. sugar markets. Gruff explains that CAFTA shouldn't be derailed by sugar concerns, because it's not CAFTA that is the problem. "There are certain aspects of the sugar program that are not consistent with the long-term trade agenda of the U.S.," he says. The market access allowed in CAFTA is only a fraction of what would be allowed if a WTO agreement is agreed upon. Gruff recommends addressing the sugar program now and not make CAFTA an issue.

During AFBF's state delegate policy discussions, AFBF President Bob Stallman says that CAFTA may be brought up again as sugar producers are reevaluating the trade agreement. CAFTA is expected to be one of the closest free trade agreements that have come to Congress so far.

The final weight in the scale is the ongoing Doha Round of world trade negotiations. Quite likely this summer, or no later than the ministerial meeting in Hong Kong in December 2005, the U.S. will have to come forward with specifics on what it is willing to give up on domestic support for market access to other countries, he says.

Gruff says farmers need to be prepared for all of the long-term implications of each of the hot points.