Pending Trade Agreements Could Bring Millions of Dollars to Arizona
Study conducted for Arizona Farm Bureau also indicates improved job creation if Korea, Colombia and Panama Free Trade Agreements are passed by Congress
By Julie Murphree, Arizona Farm Bureau
All of Arizona has a huge stake in global trade and the current free trade agreements (FTAs) with Korea, Colombia and Panama that are pending before Congress. Combined, the three agreements represent nearly $2.5 billion in U.S. agriculture exports. More than $24 million of that would contribute to Arizona’s economy.
The delay in passing these three agreements has already cost American farmers and ranchers hundreds of millions of dollars in lost market share. Agriculture exports are essential to the prosperity of the overall U.S. economy including rural communities, according to Arizona Farm Bureau President Kevin Rogers.
“The Korea, Colombia and Panama Free Trade Agreements mean an improved U.S. economy which represents a positive impact for all of us,” says Rogers. “Unfortunately, our ability to trade openly in the world marketplace is in jeopardy. These three trade agreements have been stalled in congress for several years. It’s time to move them forward.”
Based on a study conducted for Arizona Farm Bureau by the American Farm Bureau (AFB) and the United States Department of Agriculture (USDA), the three agreements in total are expected to increase exports from Arizona alone by $24.7 million per year. It’s estimated that the increased marketing opportunities for Arizona’s farmers and ranchers will add more than 220 jobs to the Arizona economy. Eliminating tariffs and other barriers on many of Arizona’s agricultural products going into these countries, the agreements will particularly increase trade for a range of Arizona agricultural products, including beef, fruits, vegetables and nuts, and processed food products. For a full report on the impact of these trade agreements on Arizona agriculture go to www.azfb.org.
Rogers adds, “World trade will occur with or without the U.S. As long as Congress fails to act on the pending trade deals our role as a major trading partner diminishes, as well as opportunity for U.S. job creation. We can no longer afford to be left on the sidelines.”
While the Arizona Farm Bureau delegation was in Washington D.C. last month (May 2011) meeting with congressional leaders on this issue, American Farm Bureau Federation President Bob Stallman testified before the Agriculture Committee regarding the pending trade agreements. “These trade agreements are not only important to the bottom line of America’s farmers and ranchers but the economic health of our rural communities and the overall U.S. economy,” said Stallman during testimony. “There is a long supply chain made up of American workers who get products from the farm gate to foreign consumers. A decline in our exports means a decline in work for those who are a part of that supply chain.”
The Agriculture Department estimates that every billion dollars in agricultural exports supports 9,000 U.S. jobs. By passing all three FTAs, up to 22,500 new U.S. jobs could be created.
While the agreements have been stalled for years, a proliferation of trade deals negotiated by U.S. competitors doing business with the three countries has put U.S. agriculture at a disadvantage. Billions of dollars are being lost in exports to U.S. competitors.
“The U.S. government’s inaction has allowed our competitors to move in and displace agricultural product,” said Stallman. “The debate is no longer simply about generating potential export gains but about how to prevent the loss of existing export markets.”
For example, during the 2000-2009 period, Chile’s market share of Korea’s wine imports rose from 2.4 percent to 21.7 percent, while the U.S. share fell from 17.1 percent to 9.8 percent. This is believed to be the direct result of eliminated tariffs on Chilean wine under the Korea-Chile trade agreement. In Colombia, the U.S. overall agriculture market share, which peaked in 2008 at 46 percent, plummeted to 21 percent in 2010, being taken over by competitors Brazil, Argentina, Uruguay and Paraguay whose agreement went into effect in 2009. Arizona’s growing wine market will lose opportunities for export, for example, if we are unable to take advantage of the Korea FTA.
A recently completed Panama trade deal with Canada threatens to give Canadian exporters a significant competitive edge over the U.S. for products such as beef, pork, beans and various processed foods if the Canadian trade deal takes effect before the U.S. agreement.
“Inaction has proven to result in loss of market share and forfeiture of economic growth,” said Stallman. “The U.S. government’s inability to move these agreements benefits our foreign competitors while harming U.S. producers and American workers.”
Arizona’s Commodities Positioned to Earn the Greatest Gains
Arizona beef would realize the greatest gain if all three FTAs passed. According to the AFBF and USDA study, Arizona’s estimated export gains would total more than $5.5 million if the Korea, Colombia and Panama FTAs passed.
Past President of the National Cattlemen’s Beef Association and current First Vice President of the Arizona Cattle Growers Association, Andy Groseta believes these agreements would give us a competitive edge on the global market.
In the September 2010 issue of Arizona Agriculture, Groseta said, “We’re leaving $1.4 billion on the table because we have three pending free trade agreements with South Korea, Panama and Colombia that need to be passed by Congress. We’re losing market share around the world. If we could simply get the Korean FTA approved it would be a huge win for our markets.”
While all Arizona cattle and calves cash receipts have been steady throughout this last decade, according to the USDA, higher feed prices have put a serious crimp in profit margins for the beef industry. More open markets that FTAs like these would create would aid in the beef industry’s continued growth.
Arizona’s fruits, vegetables and nuts are second in line to gain from passage of the three trade agreements. According to the AFBF and USDA study, Arizona’s estimated export gains would total more than $4 million if the Korea, Colombia and Panama FTAs passed.
John Boelts, Arizona Farm Bureau committee chair for the Horticulture & Specialty Crops Advisory Committee and Yuma County Farm Bureau President, sees a range of opportunity with these agreements. “Duties ranging from 27% to 45% will be eliminated in five to 10 years under the Korean agreement. Panama’s tariffs on fruits, nuts, and vegetable products range from zero to 81%. Under that agreement, tariffs will be immediately eliminated on nearly 80% of these product lines, while the rest will receive duty-free treatment within five years.”
Boelts adds, “We need these opportunities in agriculture, not just for farmers but for the Arizona economy in general.”
According to the USDA, the value for most vegetable crops was up, especially head lettuce in some years, but the same challenge as with cattle persists. Profit margins are often tight. Open markets mean more opportunities.
Arizona dairy could also be a big winner. If these agreements pass, a nearly $2 million economic gain could be realized for the state’s dairy farmers. This market has had one of the greatest economic struggles in the last few years.
And while most don’t realize that Arizona dairy has great export opportunities, especially in powered milk, many in the industry see these FTAs as yet another opportunity to leverage their markets on a global basis.
According to the USDA and U.S. Department of Commerce, Arizona’s agricultural exports to all countries, estimated at $626 million in 2009, supported about 5,000 jobs, both on and off the farm. These export sales make an important contribution to Arizona’s farm economy. Layering on these latest FTAs can only mean another financial boost for an already anemic economy in our state.
Editor’s note: At the writing of this article, White House and congressional Republications were in a political standoff over passage of the trade agreements amid a dispute over federal assistance to trade-displaced workers.
