Trade agreement changes could spell trouble for ag exports in Colorado
February 17, 2017
Days after his inauguration, President Donald Trump retracted the U.S.'s participation in the ratification of the Trans-Pacific Partnership. An agreement between 11 other countries to increase trade and lower costs of American exports to the Pacific Rim and Asian-Pacific countries, opening up market access for agricultural products.
Japan was included in the TPP negotiations, and is a key destination for agricultural exports for both the U.S. and Colorado, said Amanda Countryman, assistant professor in the department of agricultural and resource economics at Colorado State University.
"By walking away from the TPP, it will be important to find new ways to increase and enhance trade relationships with the Asia-Pacific region," Countryman said. "In this agreement, Japan had granted unprecedented market access for agriculture, which they had never done in the past."
"Growing up in Yuma, a small town on the Eastern Plains of Colorado, where my family has owned a farm implement dealership for over a century, I understand just how important agriculture is to rural communities across Colorado and the United States," said Sen. Cory Gardner, R-Colo. "Access to foreign markets for Colorado's agriculture products is important for our farmers and ranchers to succeed, and that's why I support robust trade."
Within the parameters of the TPP, Japan agreed to reduce their tariffs on U.S. beef imports, from an average of 38 percent down to 9 percent, Countryman said.
"Our beef exports and cattle markets are probably under some additional pressure after taking the TPP off the table," said Charles Burenheide, Senior Vice President of Grand Valley Bank and cattle producer in Grand Junction, Colo. "It is hard to quantify how much pressure we are now under and how it has depressed the market."
Burenheide said he is analyzing long-term implications and strategies for helping Colorado producers sell and export their products.
"If President Trump is going to get rid of our (trade) agreements, he has to have another one to go in place of it," Burenheide said. "We are currently facing an oversupply of cattle, which makes this pretty critical for producers."
Mike Newbanks, a grain and cattle producer in Yuma, Colo., is also concerned about the future of these trade agreement changes. He believes the short-term impact will slow down the possibility of a rally for agricultural market prices, which are currently below the break-even point for these operations.
"If these trade agreements are renegotiated, it could benefit us long term by having a better agreement," Newbanks said. "If (Trump) does away with (an agreement) or modifies something, his true intent is to make it better for the U.S. economy and producers."
Trump is now looking to either renegotiate or eliminate the North American Free Trade Agreement.
Enacted in 1994 by the Clinton administration, this legislature removed or lowered almost all tariffs on traded goods between Canada, Mexico and the U.S. This allowed producers to move production facilities to Mexico and ultimately lower costs for consumers of most industry sectors.
"Continuing to provide for increased market access for Colorado products abroad is incredibly important for the agricultural sector in the state and country," Countryman said. "Now that we are looking at a renegotiation of NAFTA, it is important to maintain market access in the region."
In 2015, the U.S. Department of Commerce reported $1 billion in Colorado products were imported by Mexico, specifically from the beef industry. Mexico is the second-highest export market for Colorado producers, with their top exports including beef, potatoes and corn.
"Mexico is more important to us than a lot of people think," Burenheide said. "Not just from a beef and pork standpoint but for vegetables also. We import a lot from there but it is surprising how much we ship down there."
Countryman said approximately 50 percent of all potatoes exported from the U.S. to Mexico come from Colorado producers.
"NAFTA was intended to allow the potato sector full access to the Mexican market," Countryman said. "But we are limited to only doing business within 26 kilometers of the U.S. border."
GOOD FOR COLORADO
If the potato sector of NAFTA was negotiated to allow full access to the Mexican market, Colorado exports of potatoes would be increased significantly, Countryman said.
"We need a good export agreement and we need to be able to ship beef into those (Asian-Pacific) countries," Burenheide said. "At the same time, we need to be able export corn and wheat. I'm hoping he doesn't use agriculture as a pawn in his negotiations with other countries to get other deals done."
Beef and cattle by-products are the largest agricultural export sector for Colorado, Countryman said. Even though grain exports are not a main concern in these trade agreements, they will be affected depending upon what happens in the cattle market.
"The industry is doing a good job of trying to move forward now that we have walked away from TPP," Countryman said. "It is important to look forward to how we can maintain or increase our competitiveness abroad and that will be through additional bilateral and multilateral agreements."
Only time will tell how changes to these agreements will impact Colorado agricultural producers, Newbanks said.
"Farmers and ranchers are the only people who get told what they are going to take for their products," Newbanks said. "Manufacturers and builders set their own prices." ❖
— King is a freelance writer from Oakland, Neb., and is a graduate student at Oklahoma State University in Stillwater. She can be reached at firstname.lastname@example.org.
“Our beef exports and cattle markets are probably under some additional pressure after taking the TPP off the table. It is hard to quantify how much pressure we are now under and how it has depressed the market.”