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Friday, February 19, 2010

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

Remy Jurenas
Specialist in Agricultural Policy

The 111th Congress could consider free trade agreements (FTAs) signed by the Bush Administration with Colombia, Panama, and South Korea under trade promotion authority, or fast-track rules, designed to expedite congressional consideration of these agreements. Liberalizing trade in agricultural products, particularly the pace of expanding market access for the more sensitive agricultural commodities, was one of the more difficult 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. 

While U.S. negotiators sought to eliminate high tariffs and restrictive quotas imposed on U.S. agricultural exports to these three country markets, they also faced pressures to protect U.S. producers of import-sensitive commodities (beef, dairy products, and sugar, among others). FTA partner country negotiators faced similar pressures. One Bush Administration policy objective was for FTAs to be comprehensive (i.e., cover all products). For the more import-sensitive agricultural commodities, negotiators agreed on long transition periods, temporary additional protection in the case of import surges, or indefinite protection of a few commodities. To illustrate the latter, because of political sensitivities for the United States or its partners, negotiators agreed to retain in perpetuity quantitative import limits and prohibitively high tariffs on some of the most import-sensitive commodities. In one exception, though, the United States agreed to Korea's insistence that rice be completely excluded from their FTA. 

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

Conversely, each pending FTA partner would have additional access to the U.S. market for those agricultural commodities that are now protected by restrictive U.S. import quotas. Of these, the U.S. sugar sector would face some competition from increased imports of sugar from Colombia and Panama. The small increase in additional imports from South Korea would likely be in the form of primarily ethnic foods. Also, because these three countries consume most of the beef and dairy products that they produce, any additional export sales to the United States would likely be accommodated by the large U.S. market with little effect. 

The Obama Administration has signaled its intent to address outstanding issues of concern to some Members of Congress before submitting these FTAs to Congress for consideration. Officials during 2009 stated their intent to work with Members of Congress to develop "benchmarks" to use to determine when these agreements might be sent to Capitol Hill for debate, but little apparent movement occurred. With the White House pursuing health care and financial sector reforms (among other issues) as its legislative priorities, indications are that these FTAs might not be submitted to Congress until after the 2010 fall elections or sometime during 2011. 

Date of Report: February 4, 2010
Number of Pages: 21
Order Number: R40622
Price: $29.95

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