Cattlemen support expanding export opportunities for U.S. beef and are grateful to Congress for ratifying and President Obama for signing the free trade agreements with South Korea, Panama and Colombia. NCBA has been working for five years to bring these agreements to fruition and established its reputation in Washington as a key player on the trade agreements. On Oct. 12, 2011, the House and Senate voted overwhelmingly in support of all three trade agreements. All three agreements were signed into law by President Obama on Oct. 21, 2011.
Summary of Free Trade Agreements
The free trade agreements offer great potential to increase market share in key markets for U.S. beef in Asia and South America. In fact, according to the International Trade Commission, the three agreements translate into 250,000 jobs. For cattlemen, the trade agreements increase beef demand and profitability. CattleFax reports the average per head value of exports to live cattle to exceed $200.The agreement with South Korea could result in a more than $1 billion market for U.S. beef once implemented. Now that the free trade agreements have been signed with Colombia and Panama, the U.S. will ultimately have free trade for U.S. beef with approximately two-thirds of the population in the Western Hemisphere.
South Korea
- Demand for U.S. beef is skyrocketing in Korea. U.S. beef sales in Korea exceeded $518 million in 2010, and increase of 140 percent from 2009.
- Unfortunately, beef from the United States is slapped with a 40 percent tariff before it reaches Korean markets, which represents the greatest hindrance for U.S. beef sales in Korea.
- U.S. beef exports to South Korea added $25 in value to each of the 26.7 million head of steers and heifers produced in 2010.
- According to U.S. International Trade Commission, annual exports of U.S. beef are expected to increase as much as $1.8 billion once the agreement is fully implemented.
- Implementation of the KORUS FTA would phase out over 15 years South Korea’s 40 percent tariff on beef imports, one of the highest in the world, with $15 million in tariff benefits for beef in the first year of the agreement alone and about $325 million in tariff reductions annually once fully implemented.
Competing for Korean Market Share
- The United States is not the only country negotiating a free trade agreement with Korea.
- Korea reached an agreement with the European Union that took effect July 1, 2011.
- U.S. beef’s biggest competitor in the Korean market is Australia. In 2010, Australia had 53 percent of Korean market share compared to 32 percent by the United States.
- Should the U.S.-South Korea agreement take effect before an Korea-Australia agreement, our beef producers will have a 2.67 percent competitive advantage over Aussie beef for 15 years allowing Korean consumers to buy U.S. beef at a lower price.
- Korea may open its market to Canadian beef by the end of 2011.
Colombia
- Colombia is an important market for U.S. beef and beef variety meat exports. Unfortunately, Colombia places an 80 percent tariff on U.S. beef imports today, making it one of the highest tariffs U.S. beef faces anywhere in the world.
- Once the CTPA is implemented, this agreement immediately provides duty free access for high quality U.S. beef, reduces tariffs on all other beef and beef products over 15 years, and for the first time ever, puts American beef on a competitive footing with beef imports from Brazil and Argentina.
- In 2009, the United States exported approximately $436,000 of beef and beef products to Colombia, a paltry sum considering the 80 percent duties.
- Another important part of the CTPA is this agreement provides assurances for a stable export market through plant inspection equivalency. It also fully reopens the Colombian market to U.S. beef by assuring that Colombia adheres to the World Organization for Animal Health (OIE) guidelines related to BSE.
Competing for Colombian Market Share
- Other countries are also competing with the United States for market share in Central and South America.
- Canada’s free trade agreement with Colombia took effect on August 15, 2011.
Panama
- The United States and Panama concluded negotiations on a free trade agreement on Dec. 19, 2006. Panama agreed to accept imports of all U.S. beef and beef products.
- Additionally, the 30-percent tariff on prime and choice cuts would be immediately eliminated and the duties on all other cuts would be phased out over 15 years.
- Like the CTPA, the agreement with Panama provides assurances for a stable export market through plant inspection equivalency and Panama also modified its import requirements related to BSE to be consistent with international standards.
1 comment:
Canada is losing out to the U.S. in terms of the beef market. The U.S. has already signed deals with three countries regarding lowering tariffs and increasing the import of U.S. beef. South Korea banned Canadian beef after the outbreak of Mad Cow Disease. However, it has not yet lifted the ban. Its demand for beef created a $518 million beef sales for the U.S. which could be money invested in Canada. Now with agreements with the U.S., this figure is likely to rise. Canada has fierce competition in the South Korean market and it is unlikely that it will ever resume and be as successful as before. The Columbian market is also going to phase out its tariffs on U.S. beef which will further increase beef imports. Canada has made a free trade agreement with Columbia in August. However with the U.S. entering the market, Canada will have serious competition. In Panama there is no competition. America now has access to Panama’s market that has already made promises to eliminate tariffs. This could possibly harm the beef exporting industry in Canada if left without a trading deal. Canadian government needs to be more proactive if they want growth and prosperity for the beef industry. The United States has already made many agreements which unfortunately leaves little room for Canadian beef producers.
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