Farmers await OKs for trade

October 11, 2011

Farmers and meatpackers in Iowa could be getting a glimpse of the future under three trade agreements nearing approval in Congress.

Taken together, the three agreements could add about $163 million a year to Iowa's $21 billion farm economy when fully implemented, with the biggest impact by far on pork producers, according to the American Farm Bureau Federation.

Prices for pork have been soaring in recent months, and many U.S. producers have been expanding production, partly because South Korea has temporarily lifted its duty on U.S. imports. The Koreans are trying to hold down domestic pork prices after an outbreak of foot and mouth disease struck the nation's farms.

The 25 percent duty will return once Korean farms return to normal, but the tariff would eventually go away for good under the pending trade agreement between the U.S. and South Korea.

The Korean agreement is expected to be a boon to the U.S. pork industry once the agreement is implemented, according to economists.

The pork industry "has the opportunity to expand because of the exports," said Iowa State University economist Dermot Hayes, who has been advising the National Pork Producers Council on the trade deals. "That's exactly what's happening right now."

Most U.S. pork can enter South Korea duty-free in 2016, if the trade deal is approved. South Korea's 40 percent tariff on beef will be phased out over 15 years.

An agreement with Colombia also would benefit U.S. farmers, but the biggest impact by far would come from the deal with South Korea, one of Asia's largest economies, according to economists. The third agreement, with Panama, would have a relatively modest impact.

The House is scheduled to start debating the three agreements today . The pacts are also set for votes in the Senate Finance Committee today.

The overall economic impact would appear relatively small, but the surge in pork exports to South Korea this year illustrates the impact that removing trade barriers can often have on exports and the farms and business that produce the products.

Pork exports to South Korea jumped 130 percent from January to July over the same period a year earlier to 107,085 metric tons. The Korean market surpassed Canada to become the third-largest U.S. export destination by volume for the period after Japan and Mexico, the U.S. Meat Export Federation said.

Pork export sales overall were up 15 percent for the period, to 962,575 metric tons. Farmers made about 40 percent more on pork in August than they did a year ago. Farms nationwide have expanded production about 1 percent, according to USDA.

President George W. Bush's administration first negotiated the three trade deals. President Barack Obama reopened the agreements to seek new concessions and then delayed sending the final versions to Congress for ratification until congressional Republicans agreed to extend a program that retrains U.S. workers who have lost jobs because of foreign competition.

The agreements now have overwhelming support in the House and Senate, although some Democrats still object to one or more of the deals.

The House Populist Caucus, led by Rep. Bruce Braley, D-Ia., wrote Obama last week, citing concerns with all three deals that hadn't been addressed to the lawmakers' satisfaction. Among the problems they listed: continued violence against trade unionists in Colombia and rules that could allow Korean exports to be made with parts from other countries with cheaper labor.

Farm organizations, however, have been vocal proponents of the agreements. The National Pork Producers Council is so eager to see the Korean agreement implemented that the group agreed to a delay ending the pork tariffs so that the Obama administration could win Korean concessions on other issues.

A side effect of the trade deals is that the U.S. will likely be shipping slightly less corn to South Korea for farmers to use as feed. More corn will instead be needed to feed expanding U.S. herds, according to the Farm Bureau.

That's just fine with Scott VanderWal, a corn grower near Volga, S.D., who is president of the South Dakota Farm Bureau.

"Anytime we can use that raw material here and add value by feeding it to livestock and producing the meat, that's a good thing because it creates jobs for people here," VanderWal said.

Grain sales to Colombia could increase, even though meat exports there also are expected to rise as a 15 percent duty is eliminated. U.S. corn sales fell from 3 million metric tons in 2007 to 703,000 in 2010 after Colombia made a tariff-lowering trade deal with Argentina and Brazil. U.S. exporters hope to regain much of that lost market, said Floyd Gaibler, trade policy director with the U.S. Grains Council.

Meanwhile, pork sales could reach 100,000 metric tons in Colombia, or about one-fourth as much as the potential Korean market, said Hayes, the ISU economist. "They eat almost no pork because it's so expensive," Hayes said.

-Source: PHILIP BRASHER, The Register

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