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USTR still pursues free trade
By Urban Lehner
DTN Editor-in-Chief
WASHINGTON (DTN)--Political support for free trade may be eroding, but U.S. Trade Representative Robert Zoellick and his chief agricultural negotiator, Allen Johnson, continue to pursue it with a passion.
John Kerry and John Edwards recently competed to be the Democratic presidential candidate, promising to dismantle most free-trade agreements, yet the trade representatives continue to work on new ones.
And while Johnson, in an interview with DTN, said "cynicism" exists among some farmers about free trade, they have benefited in recent years from growing agricultural exports. He said there's no alternative to free trade because American consumers' demand for food cannot keep up with American farmers' increasing ability to produce it.
"The global market is our future," he said.
Since December, Zoellick, Johnson and Co. have successfully negotiated free-trade agreements with Nicaragua, Honduras, Costa Rica, El Salvador, Guatemala and the Dominican Republican through the Central American Free Trade Agreement plus Morocco and Australia. Earlier they had landed free-trade agreements with Singapore, Chile, Jordan and Israel.
And despite uncertainty that Congress will ratify the most recent agreements, the negotiators are working on new deals with Columbia, Panama, Thailand and the South African Customs Union.
Free-trade purists dislike these regional agreements, which they think distort trade by favoring trading partners with lower tariffs. They prefer broad multi-lateral agreements in which a trade concession to one country is a trade concession to all, similar to principles followed by the 146-nation World Trade Organization.
But chief ag negotiator Johnson said the U.S. "won't be held hostage to any one forum."
Not that the USTR has turned his back on broad multi-lateral deals. Earlier this year Zoellick revived the so-called Doha Round of WTO talks, which most observers had thought were dormant. Along with sending an exhortatory letter to all WTO member countries' trade ministers, Zoellick traveled 33,000 miles soliciting other governments' support for a renewed commitment to the Doha rounds.
In the interview with DTN, Johnson offered a broad-ranging defense of free trade generally and free-trade agreements in particular. He made these points:
--While it hasn't always been easy opening overseas markets to U.S. agricultural exports, progress has been made. China, for example, has been a challenge for the U.S., but between 2002 and 2004, U.S. agricultural exports to China jumped to $5.4 billion from $1.8 billion.
"Those are big numbers," Johnson said, "but if you asked a farmer about them, he would remember that we had problems. Bad news travels fast, good news sometimes doesn't travel at all."
Overall, exports represent 28 percent of total U.S. agricultural cash receipts, with the percentage being 49 percent for wheat, 37 percent for soybeans, 72 percent for cotton and 9 percent for pork. Pork is especially interesting, Johnson said, because 12 years ago the U.S. was a net importer of pork and 10 years ago exports represented only 2 percent of cash receipts.
--The U.S. market cannot absorb all the food the U.S. produces. According to U.S. Department of Agriculture statistics, Johnson said, the capacity for growth in domestic production is 2 percent a year while the capacity for growth in domestic demand is only 0.8 percent a year.
--Population and income are growing rapidly in countries such as China and India, and as they do, the diets in those countries change in ways that plays to U.S. strengths.
"We produce meats pretty well, and as incomes grow in China, they move toward things we produce well," Johnson said.
The result is rising demand for U.S. poultry and livestock and increased consumption of grains by the animals we produce for the Chinese market.
--While Zoellick has revived the Doha round talks, progress must be made by the end of July if anything concrete is to be accomplished this year, Johnson said.
"The U.S. position (on agricultural subsidies, one of the main sticking points in the talks) has been very practical," he said. "If you want us to get rid of our subsidy program, we have to see other markets get closer to ours" in their openness to foreign products.
While Johnson thinks other countries understand the U.S. position, a well-placed Capitol Hill source thinks it will take three years for the talks to reach a final agreement.
--The eight countries with which the U.S. has reached regional and bilateral agreements since September have a combined population of 100 million people and combined economic output of $530 billion dollars a year, which Johnson said equals the combined population of the 34 least-populated American states and the economic output of the 16 American states that combine to have the lowest economic output.
The combined entity would be the 10th-largest economy in the world, larger than Korea, Brazil or India. Johnson cited a Farm Bureau analysis that said the Central American Free Trade Agreement would increase U.S. agricultural exports by $1.5 billion with a net of $100 million of increased agricultural imports.
And while conventional wisdom says the Bush administration won't dare send CAFTA or other recently struck trade deals to Congress for ratification in an election year, Johnson said "there's a good chance we'll get some of these through."
--If the U.S. doesn't strike bilateral and regional deals, other countries will, which could result in foreign competitors taking markets from U.S. farmers.
In Chile, for example, U.S. farmers were losing the market to Canadian farmers, whose Wheat went into Chile at a lower tariff under a 1997 free-trade arrangement before the U.S. reached its own free-trade agreement with Chile in 2003.
"The world doesn't stop because we don't participate," Johnson said. "Our objective is to keep pushing the envelope to get these things done so our farmers aren't disadvantaged by others."
"You'll see a pretty good correlation in growth between good years in agriculture and exports. We're trying to create good times."
Date: 4/29/04
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