Among the many voices debating about winners and losers in the Trans Pacific Partnership (TPP) trade agreement, it appears that U.S. agriculture could come out ahead on the deal.
The TPP would remove tariffs on goods and services, erase other types of trade restrictions and synchronize regulations on everything from intellectual property to food safety. It’s estimated that the TPP addresses about 40 percent of U.S. imports and exports. After nearly a decade of secret negotiations between the U.S., Japan, Canada and nine Pacific Rim countries, the TPP was finalized on Oct. 5.
“In terms of agriculture, we should come out ahead overall,” said Brian Williams, an agricultural economist at Mississippi State University. “There’s maybe some potential for a few of our commodities that could lose, but in general the TPP for the majority of our ag commodities is a winning situation.”
U.S. agriculture stands to gain because it is so efficient at producing agricultural commodities on a global scale. The TPP could expand U.S. influence as the world’s most reliable source for these commodities.
“For example, the U.S. is a big producer of wheat, but we have more consistent yields that other countries such as Russia – which is also a major producer of wheat globally,” Williams said. “Their yields are a lot more variable than ours. That’s true of a lot of our commodities. We’re able to more consistently produce a good crop at a lower cost than our competitors.”
Williams has been evaluating the impact of the agreement by analyzing USDA world agricultural supply and demand estimates. He looks at the biggest potential customers for U.S. commodities in relation to the potential impact of removing those tariffs.
“It’s hard to tell for sure at this point without having the entire text to read, but one commodity with a lot of potential is beef exports to Japan,” he said. “Right now Japan is the biggest customer of the U.S beef industry, and it’s planning on eliminating a substantial percentage of tariffs on U.S. beef.”
According to the USDA, Japan has agreed to reduce its beef tariff, currently as high as 50 percent, to 9 percent. Japan would also eliminate duties on 75 percent of tariff lines, including processed beef products. Pork producers are also set to gain. Japan would eliminate duties on nearly 80 percent of tariff lines, including processed pork. Remaining tariffs will be cut and its current “Gate Price” system will be made more favorable to imports. Vietnam will eliminate beef and pork tariffs and Malaysia will freeze those tariffs at 0 percent.
The TPP also might be good for cotton. Vietnam, the third largest importer of cotton behind China and Bangladesh, will eliminate all tariffs within four years.
Corn could be another winner; about half of total U.S. corn exports go to countries included in the agreement.
Of course, while other countries would lower or remove tariffs, the U.S. would be doing the same. A tariff on rice as high as 11 percent would be eliminated. A 4 percent tariff on corn would go away, as well as tariffs as high as 19 percent on soybeans and cotton. U.S. tariffs as high as 26.4 percent on beef and beef products would be eliminated within 15 years.
“It does look like we have the potential of eliminating a lot of tariffs on stuff in the coming years,” Williams said. “I don’t see that as being a real big problem for a lot of our major commodities because for most of them we are a net exporter anyway. I don’t think it will impact us badly in terms of agriculture.”
The U.S. is a net exporter of cotton, corn, rice beef, pork and poultry. Williams doesn’t believe removing beef tariffs is a threat to the U.S. beef industry.
“We export a lot of high value beef, but we import low value cuts of beef,” he said, “so there’s not a lot of direct competition, even for the beef industry.”
For consumers, TPP critics have warned that exporting more U.S. agricultural commodities could drive up food prices at home. Williams doesn’t believe that will be a concern, due to the small role commodity prices actually play in the grocery store price.
Click here to see more...