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Tuesday, August 9, 2011

Agriculture in Pending U.S. Free Trade Agreements with Colombia, Panama, and South Korea

Remy Jurenas
Specialist in Agricultural Policy

The 112th Congress is expected to consider separate free trade agreements (FTAs) signed by the Bush Administration with South Korea, Panama, and Colombia. If and when submitted, these trade agreements will be debated under trade promotion authority, or fast-track rules, designed to expedite congressional consideration. Liberalizing trade in agricultural products, particularly the pace of expanding market access for the more sensitive agricultural commodities, was one of the more challenging areas that trade negotiators faced in concluding each of these FTAs. In each instance, issues dealing with food safety and animal/plant health matters (technically not part of the FTA negotiating agenda) were not resolved until later.

Of these three pending agreements, the U.S.-South Korea (KORUS) FTA would be the most commercially significant for U.S. agriculture since the North American Free Trade Agreement (NAFTA) took effect with Mexico in 1994. Because Colombia, one of the largest markets in South America, imposes a high level of border protection on agricultural imports, the Colombia FTA has the potential to noticeably increase U.S. agricultural exports. Though Panama is a relatively small market, U.S. exporters would have opportunities to make additional sales.

Many U.S. commodity groups, some general farm organizations, and many agribusiness and food firms support these three trade agreements. They argue for quick approval to secure the benefits of additional agricultural exports (estimated to range from $2 billion to $4 billion) once all three FTAs are fully implemented. They contend that the timely approval of these FTAs will protect or enhance the U.S. competitive position in these three markets. Their focus has shifted to include not simply securing the gains already negotiated, but also ensuring that the United States does not lose market share to other major agricultural exporting countries. They point to the European Union-Korea FTA, implemented on July 1, 2011, and to the Colombia-Canada FTA, which will take effect on August 15.

Analyses suggest that the market openings could result in U.S. agricultural exports from $2.3 billion to $3.1 billion higher than they would be without these trade agreements. These changes would be concentrated in a few commodity/product sectors. In value terms, U.S. exports of beef, processed food products, poultry, pork, and wheat would be noticeably higher.

The major agricultural issue remaining after these FTAs were signed was the terms of U.S. beef access to South Korea. The Obama Administration and some Members of Congress sought a full opening of South Korea’s market to U.S. beef (i.e., slaughtered from all cattle, irrespective of age). In the last round of supplemental negotiations in late 2010, Korean negotiators succeeded in deflecting this issue. The Administration’s commitment to request consultations on this matter as soon as the KORUS FTA takes effect was welcomed by Members, and cleared another obstacle to moving that agreement forward.

Under the process laid out in trade promotion authority, Congress has taken preliminary action on the draft bills that the Administration plans to submit to secure approval for these three agreements. The timing of each bill’s submission now appears to depend largely on how the Administration and some Members of Congress resolve the contentious issue of whether or not to include the renewal of U.S. domestic trade adjustment assistance programs in one of the FTA implementing bills.

Date of Report: July 15, 2011
Number of Pages: 28
Order Number: R40622
Price: $29.95

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