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Corn+Soybean Digest

Is FTAA Good For Growers?

U.S. commodity groups apparently are not presenting a united front when it comes to supporting the Free Trade Area of the Americas (FTAA). The trade agreement would create a single free trade area among 34 countries, stretching from the northern-most tip of the U.S. to Argentina.

Steve Censky, chief executive officer of the American Soybean Association, says his organization questions the potential benefits of the agreement. “We already have free trade agreements or we're negotiating with our largest potential customers in the region,” he says.

The U.S. already has NAFTA (the North American Free Trade Agreement) with Mexico and CAFTA (the Central American Free Trade Agreement) with Central America and the Dominican Republic, says Censky. “And we're currently negotiating free trade agreements with the Andean countries — these are the markets that hold the most promise for soybean exports,” he says.

The Andean countries include Colombia, Ecuador, Peru, Bolivia and Chile.

“We're concerned about any free trade agreement of the Americas because that would be entering into an agreement with our largest competitors in the world, mainly Argentina and Brazil. Any such agreement also could possibly damage some of the trade benefits we have negotiated with other countries, such as those in Mexico or Central America,” he says.

Censky says his group hasn't found any direct benefit to growers from the FTAA. “It could potentially dilute some of the preferential trade we already have with some of our key markets and with preferences for U.S. products in markets such as Mexico and South America. That preferential access the United States has negotiated could be diminished or watered down under a FTAA agreement. We haven't been supporters of the agreement because we just don't see the value of it to U.S. growers,” he says.

The agreement has been in the negotiating phase for more than 10 years, and Censky believes that could be due to reluctance on the part of some Latin American countries — specifically Brazil — to open their markets.

“The administration perhaps is sensing that there are certain U.S. agricultural interests that are questioning the value of the FTAA. Brazil, for example, is our largest competitor in many products, including soybeans, poultry, beef, sugar, citrus, pork and cotton,” he says.

The National Corn Growers Association, however, is supporting the FTAA, according to its chairman, Len Corzine of Assumption, IL. “In general, we're in favor of the agreement, but we want to take a look at the final details before we pass judgment completely,” he says.

Corzine says his group recognizes the need for market access for corn and for products made from corn. “We went to the WTO Ministerial Conference in Hong Kong this past December because trade is so important to corn growers and to agriculture in general — we need to have access to the worldwide market. We applaud the efforts of this administration's work on free trade agreements,” he says.

The FTAA, he adds, involves countries that have relatively low tariffs on their products coming into the U.S. but high tariffs on U.S. imports.

“We need to equalize that market access. We were strongly supportive of CAFTA because of what that trade agreement did for new emerging democracies. It was all about removing the tariffs so we could get products into those countries,” says Corzine.

The effects of the FTAA could be as dramatic as CAFTA, he says, because it will also help those in the livestock industry who are the largest customers of U.S. corn.

“We need a two-pronged approach — free trade agreements and the resolution of the WTO. That will help U.S. agriculture for generations to come,” says Corzine.

Cautiously optimistic that the proposed FTAA would be of benefit to U.S. rice growers, the USA Rice Federation supports the agreement.

Bob Cummings, vice president of international policy for the USA Rice Federation, says, “In theory and in principal, we are in favor of a Free Trade Area of the Americas because we have very large markets in parts of the Americas. We also face some substantial trade barriers in those countries included in the proposed agreement.”

However, Cummings says, rice must be included in the agreement. “In our view, there can be no exclusions. Rice is an import-sensitive commodity in most of those countries included in the Free Trade Area of the Americas. It was a sensitive commodity in the CAFTA agreement, and because of that we saw an extremely long 18-20-year phase out in duties before there will truly be free trade in rice,” he says. “We, at minimum, would expect no exclusions in this agreement, and as short a time period as possible to get to free trade.”

The agreement, if written as the rice industry would like to see it written, would reduce trade duties to zero, and would eliminate non-tariff trade barriers. The result, Cummings says, would increase U.S. rice export numbers and build on the logistical advantage U.S. growers have in selling rice in Central and South America.

“We'd like to have better terms of access in these markets, but it would have to be meaningful access,” Cummings says. “The Central and South American region is, on the whole, a net rice importer. There are some exporters there, but they tend to sell to markets other than the United States. Tariffs in the United States for rice now are very little to non-existent, so there is very little we would have to give up. It's almost a one-sided deal for rice, if there's a good agreement.”

As it stands now, he says, the negotiations have gone nowhere. “If they were to conclude now, it's fair to say there would not be a very good market access for rice. There needs to be more work done on market access for rice before we can support the agreement.”

Taking yet another stance on the FTAA is the National Cotton Council.

Gary Adams, vice president of economics and policy analysis for the commodity group, says, “Given the current status of negotiations and lack of a specific agreement, the National Cotton Council does not have a position on the Free Trade Area of the Americas. If and when an agreement is reached, the National Cotton Council will evaluate the agreement based on its ability to enhance the competitiveness of U.S. cotton and cotton textiles.”

The differences of opinion among U.S. commodity groups over the trade agreement illustrate why FTAA talks have faltered.

“It's a very complex issue,” says Cummings. “It's pretty clear these negotiations having been tough going. The mostly off-again negotiations are reflective of the complexity of negotiating a free trade agreement for the entire hemisphere. The negotiations involve many countries and both industrial and agricultural issues, and there are differences of opinion and how to get to the end game.”

“We're stuck,” explains Mississippi State University Economist Bill Herndon.

According to Herndon, the proposed trade agreement has been in a holding pattern, with very few developments, since about November 2003. For the most part, negotiations dropped off in 2004 amid objections to the dominant role of the U.S. in the agreement and some much politicized opposition from selected South American countries, particularly Venezuela.

Discussions have stalled over similar points at the Doha Round of the WTO talks, as developed nations seek expanded trade in services and increased intellectual property rights while less-developed nations seek an end to agricultural subsidies and freer trade in agricultural goods. Similar to the WTO talks, Brazil has taken a leadership role among the less-developed nations while the U.S. has taken a similar role for the developed nations.

FTAA talks began in 1994 with the Summit of the Americas in Miami and were scheduled to be completed by Jan. 1, 2005.

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