NCPA - National Center for Policy Analysis

PENDING TRADE AGREEMENTS = PENDING JOBS

June 9, 2010

Trade agreements directly increase U.S. agricultural exports, farm gate prices and job growth, according to a study by U.S. Wheat Associates.  However, the study also underscores that U.S. farmers risk losing out in foreign markets while Washington hems and haws over pending trade agreements.  

In fact, for many American farmers, these agreements could mean the difference between profit and loss: 

  • 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 percent 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 percent to 18 percent higher under the URAA than they would be without the agreement.
  • Trade agreements with Dominican Republic-Central America Free Trade Agreement, Chile, Australia, Peru and Morocco all pushed farm gate prices up with the exception of soybean meal prices in one of those markets. 

With volume increasing almost across the board, it is clear these agreements are resulting in greater profits and opportunities for U.S. producers, says United States Wheat Associates President Alan Tracy.  Unfortunately, the study also found that trade agreements between our competitors and other countries have cut into our sales or threaten our market share. 

Consider the pending U.S. - Colombia free trade agreement: 

  • Colombia is traditionally the largest market for U.S. wheat in South America with market share of up to 70 percent.
  • However, U.S. wheat market share could easily drop to 30 percent or lower if Canada and the European Union implement their own agreements with the Colombian government allowing their wheat to enter Colombia duty-free.
  • About $100 million in annual sales are at stake, and the study shows there is a personal side to the situation. 

There are currently at least 126 foreign free trade agreements under negotiation or in planning stages between nations and regions that do not include the United States.  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. 

Source: John Murphy, "Pending Trade Agreements = Pending Jobs," U.S. Chamber of Commerce, June 8, 2010.

 

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