Having helped negotiate the Trans-Pacific Partnership (TPP) trade deal, Ambassador Darci Vetter arrived in Arkansas in late March to explain the agriculture side of the pact. Vetter, the United States’ chief agricultural trade negotiator, is in a unique position to help push the deal prior to it being taken up by Congress.
On March 29, invited by the University of Arkansas’ National Ag Law Center, Vetter spoke at the William H. Bowen School of Law in Little Rock. A day later, she gave a presentation at Arkansas Farm Bureau’s inaugural Arkansas Farm Policy Summit.
“The TPP is a free-trade agreement negotiated among 12 Asia Pacific countries,” said Vetter at the law school. “Forty percent of global GDP is around the TPP table. It’s the highest standard trade agreement in history – both the level of tariff or trade liberalization in the reduction of tariff barriers and also the highest standard of rules we’ve negotiated.
“If you think of TPP and all the products we gain access to it’s essentially like giving a tax cut to 18,000 different tariff lines. For U.S. farmers and ranchers that provides unprecedented access to markets in the region; importantly, a region increasingly filled with middle class customers.”
Vetter repeatedly mentioned that the TPP region will support two-thirds of the world’s middle class by 2030 and not passing the bill would hamper the U.S. economy.
“The TPP is more than an economic agreement. It’s a core part of (the United States’) presence in the Asia Pacific and our foreign policy. The TPP is really the cornerstone of the pivot to Asia, one of the most dynamic regions of the world both economically and politically.”
The agreement covers every good and service from the United States – not just agricultural but the manufacturing economy and service providers.
“Again, 40 percent of our exports already go to TPP nations. If you assume (the TPP) just cuts taxes and we didn’t export a penny more, it would put more money in our pocket. We’d keep a bigger portion of the $898 billion.
“Similarly, proportionally in agriculture 44 percent of our ag exports already go to TPP partners.” Vetter, trying to be diplomatic, claimed all the countries involved “are reliable, trusted partners” but even so “we still must navigate through a lot of barriers to get into their markets.”
The TPP would provide an interesting mix of customers. “On one hand, you have access to really high-value economies like Canada and Japan. Japan has never included all the ag sector in a free trade agreement before. It usually exempts it because it’s too hard politically. But with TPP everything is on the table.
“We couldn’t get Canada to open supply managed sectors of dairy, poultry and eggs though NAFTA. But in order to be a part of TPP, we said ‘those have to be on the table.’ … One principle of TPP was ‘every tariff line without exception must be addressed and liberalized in some way.’”
Vetter then nodded towards countries in the TPP like Malaysia and Vietnam, “part of the fastest-growing and emerging economies in the region. The middle-class consumption that comes with that is so important for U.S. agriculture. When you go from subsistence to middle class the first thing you change is the way you eat. You no longer have to worry about the number of calories you’re eating, you suddenly make decisions on the quality of those calories. There is particularly a focus on eating more protein.
“That’s great news for the U.S. exports. We already sell to these markets a lot of basic commodity inputs: soybeans, wheat and feed grains, skim milk powder. But as these countries join the middle class – there are 90 million people in Vietnam alone – they’ll demand more protein. So, we won’t just feed their livestock but we’ll ship more protein. We expect volume, value and variety of what we ship to those countries to increase exponentially over the next few years.”
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With Brunei, Japan, Malaysia, New Zealand and Vietnam the United States “is getting a market access deal, a tariff reduction deal, for the first time. They’ll eliminate duties on 93 percent of all their ag tariff lines. Seventy percent of those will be eliminated immediately. The day the TPP is in force, those tariffs are at zero.
“The remaining products in the seven percent that don’t go to zero still are liberalized. Either high tariffs come down to low levels or a quota is established and a certain volume of products can come in cheaper.”
Vetter said the TPP also sets high standard rules for agriculture, better rules on sanitary and phytosanitary issues. “Those regulations on plant and animal health are now often used as trade barriers or implemented in ways that don’t provide (proper) safety.”
How much is the TPP worth to U.S. agriculture?
“If you look at the value of these (TPP) rules and tariff cuts, the American Farm Bureau Federation did an economic analysis and found that $4.4 billion would be generated annually as farm income. ‘Farm income’ is money in your pocket after the trade deal – that’s a direct gain for farmers.”
She then pivoted to Arkansas specifically. “In Arkansas, there were $3.7 billion in ag exports in 2014. That’s up from $3 billion in 2009. Some 30,000-plus jobs in the state are supported by agricultural exports. For Arkansas, TPP (when fully implemented) would mean $41 million annually for rice, $14 million for soybeans and $16 million for poultry.”
In Vietnam and Japan, all tariffs on poultry will be eliminated within 13 years. Some of those tariffs are now at 40 percent.
Among other benefits in the deal:
- Building on WTO sanitary and phytosanitary rules to ensure transparent, science-based decisions based on risk, encouraging other countries to move toward high U.S. standards.
- Building on “technical barriers to trade” rules to promote open, transparent standards settings, with specific commitments in important U.S. exports sectors.
- Establishing rapid response mechanisms to address non-tariff measures to resolve goods and agricultural issues.
“If you’re shipping an ag product and it is stopped at the port, you have a problem. … With the TPP, if a product is stopped the importer and exporter must be notified as soon as possible but no later than seven days.
“Sounds simple, sounds like common sense but that doesn’t always happen in global trade. This is particularly important for agriculture. If you have a shipment of tomatoes that’s stopped, in seven days you have tomato soup.”
- Affirming U.S. standards to ensure that U.S. food safety and plant and animal health standard will not be changed.
“One thing that’s thrown around the media a lot is rogue treaty negotiators go and make deals in back rooms. I don’t do that. I sit with APHIS officials, with FSIS officials, who must implement our food safety laws. They tell me how we can negotiate rules that are scientifically fair and that will allow us to operate our food safety system in a strong, transparent way. So, we affirmed U.S. standards through this agreement.”
- Biotech and organics are included in the trade agreement for the first time ever to ensure coordination on key issues affecting trade.
“For the first time ever there is a biotech annex saying the TPP countries will make their decisions on whether to approve biotech based on science. We know that isn’t always how it’s been done in other countries and has caused trade problems.”
The TPP countries “will share safety information on biotechnology. In the event of detection of a low-level presence (of a biotech trait) – perhaps approved in the United States but not in another – the countries will commit to quick sharing of information to avoid a trade problem.”
What happens if Congress doesn’t approve TPP?
Vetter said the AFBF study estimates the United States “will forego $5.8 billion in additional cash receipts from TPP annually. The Peterson Institute has looked at the overall economic gain of TPP and says failure to pass it will mean the loss of $94 billion. That translates to $700 per U.S. family every year.”
And Vetter warned the global trade situation won’t remain static. “If we fail to implement TPP, the other countries will continue to negotiate trade deals. Our standing won’t remain the status quo but will decline compared to the advantageous deals others are negotiating. … The world isn’t standing still; (countries) are lowering their tariffs with each other and we’re standing outside.”