Free Trade Agreements and the High Price of Delay

Panama FTA 

Prior to the FTA, more than 99 percent of Panamanian exports to the U.S. have entered duty-free. Panama’s average ag tariff rate is 15 percent, but many U.S. export products have faced much higher tariffs. Tariffs on U.S. soybeans, soybean meal and crude vegetable oils, among other ag products,
will be removed immediately
upon enforcement of the FTA.

In addition, ISA Director of Market Development Grant Kimberley says, “Perhaps even more profound than the impact on direct sales of soybeans and soybean products will be the impact of all three FTAs on the sale of U.S. meat products, which also benefits soybean farmers.”

Issues Impeding Implementation

In the years since they were negotiated, various points of contention were raised regarding the three FTAs. In the case of Colombia, the issues have been human rights, especially for labor leaders in that country. A concern with the Korean agreement was it didn’t provide enough access for U.S. automobiles and beef. Though the Panama FTA had less baggage, one issue related to weak regulations making Panama a haven for U.S. tax evaders.

Other debates have involved whether to link the three FTAs or approve them separately, how to compensate for cost of lost tariffs and whether cheap imports would kill U.S. jobs.

Most recently, the chief controversy revolved around Trade Adjustment Assistance (TAA), an assistance program for American workers hurt by trade. 

With Democratic support, the White House was emphatic it would not submit the three FTAs until Republican leaders agreed to renewing a “robust” TAA. 

Though TAA and FTAs have been linked in the past with NAFTA and other agreements, Republicans opposed linking the three pending FTAs to TAA. 

Iowa Senator Chuck Grassley said, “TAA is a spending bill that should be debated and voted on its merits. It’s a violation of the process to put a program like this in an implementing bill.”

Late in the summer, a bipartisan compromise plan was announced, including a complex legislative process for handling the TAA.

The Cost of Delayed Approval

While Congress was waiting to ratify these FTAs, other nations have been negotiating and ratifying trade agreements. Beside the three FTAs currently in the news, the United States has just 11 FTAs in force and one in negotiation. China also has 11 in FTAs in force, but is in negotiation with 14 countries. The European Union has 56 FTAs in force or pending implementation, plus ongoing negotiations with 63 other nations. 

Colombia is an example of what happens when competitors get an advantage. Total U.S. soybean exports to Colombia went down 51 percent in 2009 from 2008 and an additional 26.8 percent in 2010 from 2009. In 2008, the U.S. sold close to $99 million in soybean meal to Colombia. In 2010, we sold only $15 million.

Lorena Alfaro, of the governmental relations firm Gordley Associates, says, “Our largest competitors for soybean meal in Colombia are Argentina and Bolivia. Both are part of separate trade agreements with Colombia, which have given them an advantage over the U.S.”

Ag Needs FTAs

“The reality is 95 percent of the world’s consumers live outside the U.S. Agriculture needs to continue working on FTAs because we produce more than we can consume in the U.S. To prosper, we must export,” says Kimberley. “Other countries are not sitting idly by. They are negotiating FTAs while we debate them. Once lost, it is hard to get markets back.”