The results of a comprehensive new study show 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.
“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 study titled 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 1 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 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 export volume increasing almost across the board, it is clear these agreements are creating 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 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 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, with about $100 million in annual sales at stake. The study confirms that the situation with Colombia has a direct impact on U.S. wheat producers.
“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,” 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 today are literally on the line.”
“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 every opportunity to expand market access for U.S. commodities around the world. Trade works for the economy, for jobs, and for the global market.”
The Analysis of the Effects of Trade Agreements on U.S. Agricultural Exports and U.S. Market Development Programs study was conducted by DTB Associates LLP, Allen F. Johnson and Associates, AgRisk Management LLC, Dan Sumner, William Matthews, and Global AgriTrends under the U.S. Department of Agriculture/Foreign Agricultural Service Global Broad-Based Initiative program. To view an executive summary of the study, visit the USW Web site at www.uswheat.org. To obtain a copy of the entire study, please contact USW at [email protected].
U.S. Wheat Associates is the industry’s market development organization working in more than 100 countries on behalf of America's wheat producers. The activities of USW are made possible by producer checkoff dollars managed by 19 state wheat commissions, in-kind support and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit www.uswheat.org.