Tuesday Talks with Dr. Patterson

March 10, 2015

Looking for an Agreement on Trade

The United States reached a record $150 billion in agricultural exports during 2014, which is estimated to support about one million jobs in the United States (FAS).  In an effort to create more export opportunities for U.S. goods and, hence, more jobs, the Obama administration has been engaged in negotiations on the Trans-Pacific Partnership (TPP).  To expedite the successful completion of these trade talks, the administration has sought Trade Promotion Authority (TPA) from Congress.  While progress is being made on the TPP, efforts to gain TPA have been thwarted by members of the President’s own political party.  Meanwhile, broad segments of U.S. agriculture are very supportive of successful completion of the TPP and urge Congress to grant TPA.

 The Obama administration announced in 2009 its intentions to participate in negotiations with 11 other Pacific nations, including Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam, to form the Trans-Pacific Partnership.  These countries account for 40 percent of the world’s GDP and are already important trading partners for the United States (FAS).  However, improved market access and increased trade could be achieved in these markets.  Across the TPP countries, U.S. poultry faces import tariffs as high as 240 percent, which would be cut under the agreement.  In 2014, the United States exported $3 billion in poultry and poultry products to the TPP region.  Similarly, the TPP region accounted for $1 billion in U.S. cotton exports, even though the U.S. faced import tariffs as high as 10 percent on cotton.  TTP countries also imported $5.5 billion of U.S. soybeans and soybean products in 2014.  Japan alone imported $1 billion worth of U.S. soybeans, despite imposing a 20 percent import tariff on soybeans.  U.S. exports of beef to TPP countries summed to $4 billion in 2014 with Japan, the United States’ largest beef importer, accounting for $2 billion.  Across the TPP countries, the U.S. faces import tariffs as high as 50 percent on beef.  Improved market access could be significant for U.S. agriculture, including Alabama.  Alabama’s leading agricultural exports in 2013 were broiler meat ($571 million), cotton ($227 million), soybeans ($123 million), and beef ($43 million) (FAS).  U.S. efforts to bring a successful completion to the negotiations over TPP depend in part on the administration obtaining TPA.

 Trade Promotion Authority, sometimes referred to as fast-track authority, restricts the Congress to taking an up or down vote on a negotiated trade agreement.  It does not allow Congress to amend or modify the agreement.  TPA is a tool that provides the administration a stronger negotiating position and expedites the negotiation process.  Negotiating partners like to see the United States establish TPA, since they then know that the terms reached through negotiation will not be subject to subsequent manipulation by Congress.  Japanese negotiators have already expressed the sentiment that they expect TPA to be granted for the trade talks to move to completion (Agri-Pulse).  It is Congress itself that must approve TPA, thereby placing restrictions on its trade treaty approval process.  Typically the Senate takes in the lead in developing legislation to provide TPA.  Senate Republicans are ready to offer TPA and are generally supportive of the TPP.  Senate Democrats, however, have expressed opposition to both.  As a result, the TPA has yet to move through the Senate.  Some Senate Democrats are skeptical of the benefits of trade agreements and argue that they could ultimately be injurious to U.S. workers.   Some have also expressed concern that the TPP may harm the environment and result in weaker financial regulations in the United States (Davis).

 The U.S. history with trade agreements have shown them to increase U.S. export opportunities, grow jobs, and strengthen the economy.  For the agricultural sector, increasing export opportunities in the coming years will be important.  Expanded sales will help to partially offset the significant decline we have seen in commodity prices, thereby supporting farm income.  Furthermore, the United States is facing increased competition in global agricultural markets.  Gaining improved access to the TPP nations would enhance the competitive position of the United States in these markets.  While trade negotiators feel an agreement could be reached this year, and possibly as early as this spring, the administration will need some help from Congress, notably members of President Obama’s own political party.  The administration is looking for an agreement on trade at home and abroad.

 

References

Agri-Pulse.  “Senate Talks Continue on Obama’s Trade Promotion Authority.”  Agri-Pulse Newsletter, February 25, 2015.

 Davis, J.H.  “Democrats Step Up Efforts to Block Obama’s Trade Agenda.”  New York Times, January 8, 2015.  (Accessed March 5, 2015): http://www.nytimes.com/2015/01/09/business/democrats-step-up-efforts-to-block-obama-on-trade-promotion-authority.html?_r=0

 Foreign Agricultural Service.  The Trans-Pacific Partnership Benefits for U.S. Agriculture.  USDA, February 2015.  (Accessed March 5, 2015): http://www.fas.usda.gov/sites/default/files/2015-03/tpp_agriculture_fact_sheet.pdf

 

Dr. Paul Patterson is Associate Dean for Instruction for the College of Agriculture and Professor of Agricultural Economics.