Final passage of trade agreements pleases farmers


Issue Date: October 19, 2011
By Ching Lee

It took years in the making, but finally, California farmers and ranchers can celebrate the passage of three free-trade agreements they say will dramatically reduce tariffs and other barriers on California agricultural exports and add much-needed jobs to the state's economy.

Congress approved the long-awaited trade pacts with South Korea, Colombia and Panama last week. The agreements are expected to boost export sales of California farm products by $239 million per year and offer $2.5 billion in additional farm exports for the nation as a whole. President Obama is set to sign the agreements this week.

"Many of our members have reason to celebrate the approval of the three agreements," said Josh Rolph, director of international trade for the California Farm Bureau Federation. "It's hard to believe it has been nearly five years of grassroots effort to get these through, but thanks to our members' efforts at home and in Washington, we now have three markets that will be opened up to much of California agriculture."

The South Korea trade agreement, considered to be the most important of the three, is estimated to expand U.S. agricultural exports by $1.9 billion by reducing or eliminating tariffs on most farm goods, including a wide range of specialty crops.

Under the agreement, about 60 percent of U.S. farm exports to Korea will become duty-free immediately, including cotton, cherries, pistachios, almonds and wine.

"Korea is an important market," said Dennis Balint, CEO of the California Walnut Commission. "Essentially, we're going to see tremendous growth."

The agreement will allow the import duty on shelled walnuts to drop from 30 percent to zero over six years, and over 15 years on in-shell walnuts. Korea is already a leading export market for California walnuts, valued at more than $70 million, he said, "and that number could double when this tariff gets down to zero."

Bob Blakely, director of industry relations for California Citrus Mutual, said even though the 30 percent to 50 percent tariffs on citrus fruit will be phased out over several years, he is pleased that citrus was even included in the deal, as there was initially "a lot of resistance" from the Korean government.

"Korea is our largest export market after Canada," Blakely said. "So this (trade agreement) is certainly going to be helpful."

The Korea agreement, in particular, represents a key victory for livestock producers, said Kevin Kester, a Monterey County cattle rancher and president of the California Cattlemen's Association. Korea was the third-largest market for U.S. beef prior to 2003, when discovery of bovine spongiform encephalopathy in the United States shut down trade on U.S. beef. Korea reopened its market in 2008. Now with approval of the trade agreement, Kester said, "we're incrementally making progress."

Currently the fourth-largest market for U.S. beef, South Korea will reduce its 40 percent duties over 15 years under the trade agreement. That is expected to boost beef exports to Korea to more than $1 billion annually, up from $518 million in 2010, according to the U.S. Meat Export Federation. Ratification of the Colombia and Panama deals is estimated to add about $35 million in beef exports by 2016.

For wheat producers, losing market share in Colombia has been a huge concern, especially with competing countries such as Canada and Argentina making their own trade deals with Colombia, said Janice Cooper, executive director of the California Wheat Commission.

Colombian buyers want to purchase higher-quality U.S. wheat, she said, but government import tariffs make it more expensive. Implementation of the trade agreement will now level the playing field, she added.

Not all agricultural sectors cheered the passage of the trade agreements. California cut flower growers have been particularly concerned about the pact with Colombia, a major exporter of cut flowers.

"We stand as the ag industry most adversely affected by our current and future trade policy with Colombia," said Kasey Cronquist, CEO of the California Cut Flower Commission.

Colombian cut flowers already enter the U.S. duty-free. Now, with the permanent nature of the Colombia agreement, Cronquist said he expects "a future flood of new flower imports."

He said the commission continues to work to earn federal funding for a new California transportation and logistics center that would reduce flower growers' shipping costs and "help level the playing field with our Colombian competition."

California rice farmers were disappointed that rice was excluded from the trade agreement with South Korea, an important market for the medium- and short-grain varieties that California grows, said Tim Johnson, president and CEO of the California Rice Commission.

The state's farmers will benefit indirectly from the trade agreements with Panama and Colombia, both of which buy long-grain rice, Johnson said. Having more market outlets for U.S. rice will ultimately take pressure off markets where California growers compete, he said.

(Ching Lee is an assistant editor of Ag Alert. She may be contacted at clee@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item.