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Corn+Soybean Digest

Study Confirms Trade Agreements Lift U.S. Farm Exports, More Progress Is Needed

U.S. Wheat Associates (USW) says 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 U.S. 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,” says Rebecca Bratter, director of policy for USW, the primary organization among 12 sponsors of the study, <i>Analysis of the Effects of Trade Agreements on U.S. Agricultural Exports and U.S. Market Development Programs.</i> “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 U.S. and other countries and trade agreements independent of the U.S. 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 increased more than 300% 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.

The study found that 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 4-18% higher under the URAA than they would be without the agreement.

“With export volume increasing almost across the board, it is clear these agreements are creating greater profits and opportunities for U.S. producers,” says 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%. However, U.S. wheat market share could easily drop to 30% 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¢/bu. if the U.S.-Colombia FTA were in effect today,” says Montana wheat producer Dale Schuler, a past president of 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 U.S. is just 10-15¢/bu., so ratifying the FTA could double our profit margin. Without the agreement, our profits today are literally on the line.”

Bratter notes that Secretary of Agriculture Tom Vilsack recently indicated that every $1 billion increase in exports creates up to 9,000 U.S. jobs. “That is true,” Bratter says, “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.”

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