June 15, 2010

Study proves trade agreements beneficial to US agri exports

A new study has indicated that bilateral and multilateral trade agreements directly increase US agricultural exports, farm gate prices and job growth, but the US risks falling behind its more aggressive competitors, according to the US Wheat Associates (USW).

"There is a lot of talk about trade right now and this study offers proof that existing trade agreements are working for American agriculture," said Rebecca Bratter, director of policy for USW, the primary organisation among 12 sponsors of the study, "Analysis of the Effects of Trade Agreements on US Agricultural Exports and US 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 modelling, the study evaluated trade agreements between the US and other countries and trade agreements independent of the US.

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

Under the Uruguay Round Agreement on Agriculture (URAA), the export value of all commodities studied also increased. In addition, world grain prices, soy complex prices, and meat and dairy prices are 4%-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 soymeal 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 US producers," said 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 US-Colombia free trade agreement (FTA) as an example. Colombia is traditionally the largest South American market for US wheat with market share of up to 70%. However, US wheat market share could easily drop to 30% or lower if Canada and the EU implement their own agreements with the Colombian government allowing their wheat to enter Colombia duty-free, with about US$100 million in annual sales at stake. The study confirms that the situation with Colombia has a direct impact on US wheat producers.

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