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Penn serves notice on would-be trade agreement participants

Notice from USDA to countries that aren’t too well heeled but would like to try to negotiate a new free trade agreement with the United States: Don’t bother.

Undersecretary of Agriculture J.B. Penn wasn’t pulling any punches when he spoke on the U.S. objectives for new trade agreements during USDA’s annual Agricultural Outlook Forum in Arlington, Va.

“With respect to the trade agreements, our objectives and ambitions remain exactly the same: We want serious, robust trade agreements,” said Penn, who serves as USDA’s undersecretary for farm and foreign agricultural services.

“We’re not going to enter into a trade agreement just for the sake of getting an agreement. These are too difficult as we saw from our CAFTA-DR experience in getting that passed through Congress. So we are looking for very robust agreements for agriculture and food.”

So what kinds of countries would the United States consider for new trade agreement? Well, South Korea would be a good candidate, according Penn, the No. 3 ranking official in the Agriculture Department behind Secretary Mike Johanns and Deputy Secretary Chuck Conner.

“Just recently, at the beginning of this month, the administration announced it intended to pursue a bilateral free trade agreement with Korea,” he said. “This is a market that should be of great interest to the agricultural and food sector of this country.”

Korea, said Penn, has the largest potential for those sectors of any free trade agreement we have pursued. “Korea is already our sixth largest agricultural market, and its consumers are relatively affluent and (the market is) growing in size.”

The United States has completed free trade agreements with the CAFTA-DR countries — Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic — along with Morocco, Australia, Chile, Singapore, Jordan, Bahrain, Peru and Oman. These countries have a total population of 111 million and income of $1.07 trillion, said Penn.

The U.S. Trade Representative is currently negotiating FTAs with the United Arab Emirates, Colombia, Ecuador, Panama, Thailand and the South Africa Customs Union, which have a combine population of 183 million and income of $627 billion.

Korea has a population of 48 million and income of $1 trillion, and its foreign trade of $2.2 billion is slightly above that of all the countries the United States is currently negotiating free trade agreements with ($2.1 billion) and slightly below the $3 billion of the countries with completed agreements.

Penn says he expects 2006 will be a busy year for Congress on the trade front.

Besides the free trade agreements that are likely to be submitted for approval, Congress will also be asked to approve several extensions of preferential trade agreements and the probable WTO accessions of Ukraine, Russia and Vietnam.

Members of Congress, such as the chairmen of the House and Senate agriculture committees, will also be keeping a close eye on the continuing efforts to complete the Doha Development Round Agreement in the WTO following the Hong Kong Ministerial Conference last December.

“I think there was more significant progress made at that ministerial than perhaps has been widely reported,” said Penn. “But it has provided the momentum that continued to keep the talks going into this year and at the meetings in Geneva and elsewhere.

“We do now have some pretty firm deadlines. The ministers themselves set these deadlines in Hong Kong so they recognize that their creditability is at stake, and I think they are all working very diligently to meet these deadlines.” (Those are: full modalities by April 30, draft tariff schedules by July 31 and a completed agreement by Dec. 31.)

The Bush administration is attempting to present a completed agreement to Congress before the expiration of the president’s trade promotion authority in July 2007. The latter requires Congress to vote such agreements up or down, without amendment.

Penn said the administration’s objectives in the Doha Round also have not changed. It wants to:

• Improve export competition through elimination of export subsidies.

• Improve market access through substantial tariff reductions.

• Substantially reduce trade-distorting domestic subsidies.

He also noted that the United States continues to set new records for agricultural export sales.

“Last year we tied the record of $62.4 billion for the previous year (2004), and we had the major beef markets closed with well over $3 billion in market access denied to us in 2004 and 2005,” Penn said. “In 2006, we’re forecasting sales of $64.5 billion, which will be another record year.”

The latter continues to assume the major beef markets of Japan and Korea will be closed. “So if we can get those open, you can figure we will have an even better year than is currently being forecast.”

The undersecretary also spoke briefly about the president’s budget proposals, which were delivered to Congress in early February.

“We all know that the size and direction of the federal deficit has been and continues to be a large and growing concern,” he noted. “The deficit affects the overall operating environment, interest rates, and the value of the dollar, and it is something I think we all agree has to be addressed sooner rather than later.”

The president’s budget savings reflect some difficult choices, he said. “Those choices were very carefully made and keep us on the path that was laid out last year, which was intended to halve the deficit by 2009.”

Penn reminded the audience that Secretary Johanns has promised to work with Congress to help achieve “responsible” budget savings.

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