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Monday, October 17, 2011

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

Remy Jurenas
Specialist in Agricultural Policy

On October 3, 2011, President Obama submitted the free trade agreements (FTAs) with South Korea, Colombia, and Panama to the 112th Congress for consideration. The bills to implement these agreements will now 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 under that agreement.

Many U.S. commodity groups, some general farm organizations, and many agribusiness and food firms support these three trade agreements. They argue for their approval to secure the benefits of additional agricultural exports 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 not only to securing the gains already negotiated, but also to 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 took 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. Agricultural imports under these FTAs would be slightly higher compared to maintaining the status quo.

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 since then to request consultations on this matter as soon as the KORUS FTA takes effect was welcomed by Members, and removed the last remaining obstacle to moving that agreement forward.

Under the trade promotion authority process set into motion, Congress has 60 days to consider the bills to implement each FTA transmitted by the Administration (South Korea—H.R. 3080/S. 1642; Colombia—H.R. 3078/S. 1641; Panama—H.R. 3079/S. 1643). The House Ways and Means Committee on October 5 favorably reported all three bills, which the House will consider in mid-October. The Senate Finance Committee has scheduled its markup on October 11, with Senate floor action expected shortly thereafter.

Date of Report: October 6, 2011
Number of Pages: 33
Order Number: R40622
Price: $29.95

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