Pending Trade Agreements = Pending Jobs

Jun 8, 2010

U.S. Wheat Associates has released a new study showing that trade agreements directly increase U.S. agricultural exports, farm gate prices, and job growth. 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:

“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 U.S. Wheat Associates (USW), the primary organization among 12 sponsors of the ‘Analysis of the Effects of Trade Agreements on U.S. Agricultural Exports and U.S. Market Development Programs’ study. “We hope this new information will finally end the delay on pending free trade agreements and spur a push for new agreements.”

  • Under the North American Free Trade Agreement, between 1994 and 2008 the value of U.S. exports of all commodities studied (1) increased more than 300 percent or by more than $12 billion (2). 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 four percent to 18 percent 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 volume increasing almost across the board, it is clear these agreements are resulting in greater profits and opportunities for U.S. producers,” said USW 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.” Tracy points to the pending U.S - Colombia free trade agreement as an example. 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.

“The results showed I could sell my wheat at 10 cents more per bushel if the U.S.-Colombia FTA were in effect today,” said Montana wheat producer Dale Schuler, a Past President of the National Association of Wheat Growers (NAWG) and current Chairman of the NAWG/USW Joint International Trade Policy Committee. “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. Without the agreement, our profits are literally on the line today.”

“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 said. “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. Ag Secretary Vilsack recently said that every $1 billion increase in exports creates up to 9,000 U.S. jobs. That is true,” Bratter said, “but we stand to lose those jobs if we do not aggressively pursue all opportunities to expand market access for U.S. commodities around the world. Trade works for the economy, for jobs, and for the world.”

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