A U.S. Wheat Associates commissioned report on the impact of U.S. trade agreements on agricultural competitiveness concluded across the board that all current and pending agreements result in increased exports of wheat and can lead to a significant up-tick in farm gate prices.
The study presents quantifiable evidence that U.S. free trade agreements (FTA) are a win-win for U.S. agriculture and for the U.S. economy. The study provides equally concrete data that non-U.S. trade agreements harm U.S. agricultural competitiveness and result in lost sales.
The study offers compelling data on the impact of 16 non-U.S. agreements, eight current and/or pending U.S. agreements and the Uruguay Round on U.S. agricultural competitiveness by modeling trade scenarios with and without the tariff reductions.
For example, as a result of the Uruguay Round Agreement, world grain prices increased by 6-8% and U.S. wheat exports over the 2009 to 2018 period will average 88 million bushels per year greater than with no agreement.
The modeling exercise indicates that U.S. wheat farm gate prices in 2009 are approximately $5.27/bu. with the agreement compared to $4.70 without the agreement. Wheat is the beneficiary of the largest price increase from the U.S./Morocco agreement with significantly higher exports to Morocco as a result of the treaty.
The same model shows U.S. wheat prices in 2009 increase to $5.27 to Morocco compared to $4.84 without the U.S./Morocco FTA. Most compelling, in the context of President Obama's new export initiative is the cost of lost market share due to inactivity on pending FTAs.
Wheat, corn and all other feed grain prices would be higher under a Colombia FTA. According to the economic models used in the report, the farm price for wheat would be 10-11¢ higher with U.S. exports growing as a result of the duty-free treatment provided under the FTA.
Non-U.S. trade agreements harm U.S. agriculture and harm the U.S. wheat industry when competitors obtain preferential market access. Nowhere is this evidence more compelling than the with the Canada/Colombia bilateral agreement that will lead to significant, if not complete, erosion of U.S. wheat market share in Colombia as trade flows adjust based on economic bottom line.
A further disadvantage is conferred on U.S. agriculture as 15 of the 16 non-U.S. agreements examined in this study violate WTO guidelines as they do not include "substantially all trade." WTO guidelines do not accept "carve outs" or exceptions for the most sensitive products and U.S. bilateral and regional agreements are negotiated in accordance with this requirement. All WTO member nations must be held to this same standard.
The study provides U.S. agriculture and the U.S. government with airtight evidence that trade works. U.S. agriculture has remained vibrant throughout the economic downturn and is a consistently competitive sector of the U.S. economy. The U.S. agricultural sector needs trade agreements and eventually a balanced Doha round agreement to remain competitive and to continue to generate the jobs and the billions of dollars that contribute to the engine of the U.S. economy. This report provides the data necessary to break the inertia of the current trade cycle and to motivate the Obama administration to move forward on pending and new trade deal within a definitive and short-term time frame.