In addition to being one of the more capital-intensive industries, agriculture is also one of the more export sensitive sectors of the U.S. economy. To that end trade deals are typically viewed with some warmth. But while World Trade Rules have reduced non-tariff trade barriers, and the NAFTA agreement has expanded trade north and south of the U.S., not all sectors of agriculture or for that matter the economy have benefited.
Yet economic developments this week underscore the need for the American agriculture community to keep an eye on the ebb and flow of factors that can redefine export markets. A case in point this week is Europe.
Plagued by downturns in the French and German economies, the Euro has moved to six-month lows, dimming U.S. export prospects and hurting American businesses that rely on European sales. The weak currency means profits earned by U.S. companies in Euros lose value when they are converted back into dollars. And while Bush administration officials dismissed speculation the Euro was on the verge of collapse, they did warn of an impact on export-sensitive industries, like U.S. agriculture.
Robert Zoellick: "If it did collapse, I mean to answer the hypothetical, you'd have the United States in a worse trade position because our goods would be more expensive than their goods." 1:56:02
U.S. farm interests are troubled by the prospect of cheap and export-subsidized European grain flooding the world market. In addition, countries where currencies have dramatically devalued often respond by raising tariffs, further crimping export opportunities.
The U.S. Trade Representative made his remarks at a congressional hearing this week on the Free Trade Area of the Americas, or FTAA. The White House is pushing for U.S. participation in the FTAA, which would expand free trade rules to 34 democratic nations in the Western Hemisphere. Supporters say U.S. farms and businesses would gain access to 450 million consumers in Central and South America.
Anne Veneman: "These consumers, with rapidly rising disposable incomes, represent a strong demand for imported food products." 1:08:35
The USDA forecasts U.S. agriculture stands to gain $1.5 billion in annual exports, mostly in wheat and feed grains. Backers argue the FTAA also would reduce trade barriers. U.S. wheat, for instance, draws an 8 percent higher tariff in Chile than Canadian wheat. Of the world's 130 preferential trade agreements, the U.S. is party to only two.
Wythe Willey: "Our message to those countries is pure and simple. They need to clean up their act."
Critics, citing their experience with the North American Free Trade Agreement, say the FTAA will impose the same hardships – lost jobs, lost income, and unsafe imported products.
In April the USDA launched a new system for reporting market prices. But complaints from cattle producers provoked a review that now reveals the system may have understated prices of choice beef by as much as two percent.
The intent behind the implementation of the reporting system was to provide more transparency to a marketplace that is becoming more reliant on contracts that are pegged to prices reported by the USDA.