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Trade Failures Threaten Ag

A new study shows that bilateral and multilateral trade agreements directly increase U.S. agricultural exports, farm gate prices, and job growth. Yet, the United States risks falling behind its more aggressive export competitors because lawmakers fail to adopt trade pacts.

"There is a lot of talk about trade right now and this study offers proof that existing trade agreements are working for American agriculture," says Rebecca Bratter, Director of Policy for U.S. Wheat Associates (USW), one of 12 sponsors of the study, Analysis of the Effects of Trade Agreements on U.S. Agricultural Exports and U.S. Market Development Programs. "We hope this new information will finally end the delay on ratifying pending free trade agreements and spur a push for new agreements."

Using analysis from several sources and econometric modeling, the study evaluated trade agreements between the United States and other countries and trade agreements independent of the United States. Among other findings, the study indicated that:

• Under the North American Free Trade Agreement, between 1994 and 2008, the value of U.S. exports of all commodities studied increased more than 300% or by more than $12 billion. Wheat exports increased from approximately $100 million to more than $1 billion, and feed grain export value increased by more than $3 billion.

• Under the Uruguay Round Agreement on Agriculture (URAA), the export value of all commodities studied also increased. In addition, world grain prices, soybean complex prices, and meat and dairy prices are 4 to 18% higher under the URAA than they would be without the agreement.

• Trade agreements with CAFTA-DR, Chile, Australia, Peru, and Morocco all pushed farm gate prices up, with the exception of soybean meal prices in one of those markets.

"With export volume increasing almost across the board, it is clear these agreements are creating greater profits and opportunities for U.S. producers," says USW President Alan Tracy. "Unfortunately, the study also found that trade agreements between our competitors and other countries are cutting into our sales or threatening our market share."

Tracy points to the pending U.S. - Colombia free trade agreement (FTA) as an example. Colombia is traditionally the largest South American market for U.S. wheat with market share of up to 70%. However, U.S. wheat market share could easily drop to 30% or lower if Canada and the European Union implement their own agreements with the Colombian government, allowing their wheat to enter Colombia duty-free, with about $100 million in annual sales at stake.

"The study results showed I could sell my wheat at 10 cents more per bushel if the U.S.-Colombia FTA were in effect today," says Montana wheat producer Dale Schuler. "That may not seem like much, but the average profit margin for a wheat producer in the United States is just 10 to 15 cents per bushel so ratifying the FTA could double our profit margin"

There are currently at least 126 foreign FTAs under negotiation or in planning stages between nations and regions that do not include the United States, Bratter says. "The competition is intensifying and if the United States continues to stand on the sidelines, we are likely to see our hard earned sales erode quickly."

According to USDA, every $1 billion increase in exports creates up to 9,000 U.S. jobs.