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Trade agreement leads Colombian conversationsBy Jennifer M. Latzke
As the U.S. Wheat Associates (USW) Board Members and Media Team visited with millers and wheat purchasers in Bogota, Colombia, March 26 and 27, one topic led the conversation. Why hasn't the United States Congress passed the negotiated Colombian Trade Promotion Authority? Background on the agreement On the first stop of the Colombian leg of the tour, the team met with Richard (Todd) Drennan, U.S. Agricultural Attache with the U.S. Embassy in Colombia. Drennan provided the group with some background information on the Colombian TPA, or free trade agreement, as it's commonly called. "The Colombian side is done," Drennan said. "The hold up is in the U.S. Congress." Drennan explained that sending the legislation for the agreement to a Democrat-led Congress is tricky. First, the administration doesn't have enough votes right now to pass the trade agreement, so it faces a battle in finding the numbers for approval. Second, the administration risks a "no" vote on the agreement, in which case the U.S. and Colombia have to go back to the table to re-hash an agreement. This is further complicated by Canada's free trade agreement negotiations with Colombia. If Canada has a chance to pass its own agreement with Colombia, which includes zero tariffs on wheat, it could very well strip the United States of its majority market share in the wheat trade. The hang up for U.S. Democrats is on the labor situation in Colombia. In the past, labor leaders have faced challenges to their lives and their careers for standing up for workers' rights. U.S. labor leaders, which are large supporters of the Democrat party, have pressured the Democrats to vote no on any trade agreement with Colombia. This is despite the market access it will provide for U.S. products and the support such an agreement will have in Colombia's and the United States' war on the drug trade. Drennan explained that Colombia, on the whole, is turning itself around politically and sociologically. "Colombia's positive growth will continue and there are great opportunities in agricultural production with or without an agreement," Drennan said. "Except, if Canada gets its agreement signed with zero tariffs, we'd be at a disadvantage." Canada is nearly there, with all reports pointing to an agreement by the middle of May 2008, with the first loads of Canadian wheat into Colombia under the tariff-free agreement by 2009. "An agreement with Canada and not the U.S. could be a losS of 17 to 20 percent of U.S. market share to Canada," explained Alvaro de la Fuente, USW South American Region vice president. Meeting with FEDEMOL The trade team then met with FEDEMOL, the Colombian Millers Association, during its annual board meeting. Jaime Jimenez, president of FEDEMOL, welcomed the trade team to Bogota and offered some statistics on the importance of U.S. wheat to the Colombian milling and baking markets. He explained that foreign investment from the U.S. has given Colombia the chance to grow its economy by 7.1 percent in recent years, and to stabilize the economy. Unemployment in the country in 2007 was at about 10 percent or lower, compared to 16 percent in 2000. A stronger economy translates into a growing middle class, which means more wheat consumption. The United States has the lion's share of the imported wheat market in Colombia, with 54 percent. Following with a close second is Canada, at 34 percent, and then Argentina trails with 19 percent. In total, the Colombian wheat market consumes about 1.3 million metric tons of wheat, with about 1.15 million metric tons destined for flour production. Besides discussing the effect a Colombian trade agreement would have on the country, the FEDEMOL directors shared some of their concerns with the trade team about U.S. wheat supplies and quality. High wheat prices across the globe have affected Colombian millers, who want to continue to buy wheat from the U.S. because of its reliability and its free market system. One miller explained that he buys U.S. wheat because the U.S. is the last to run out of wheat supplies, and he appreciates that the market in the U.S. is free, unlike Canada or other countries where the government controls wheat markets. However, the consensus among the FEDEMOL millers was that the United States has a long way to go toward marketing clean wheat. "The cleanliness of your wheat is a factor, and is something in favor of Canada," said Carlos Paz, chairman FEDEMOL, and general manager of the Harinera del Valle. "We know that the U.S. is trying to clean its wheat, especially in the Pacific Northwest. But, it's senseless to pay duties on rocks and hay." In addition, he explained that transportation costs have risen, and to pay $65 per ton freight to bring in 5 percent waste doesn't make sense. Paz's company imports on average 280,000 metric tons of U.S. wheat each year, and has 25 percent of the Colombian market share. High prices trickle down The price of wheat also affects the price of bread for Colombian consumers, Paz explained. At a time when 40 percent of Colombians still live on $2 per day a 10-cent loaf of bread is a concern. "The structure of our bread industry is different than in the United States," Paz explained. "Sixty percent are artisan bread makers, who suffer because of the price situation. This concerns us as companies because accounts receivable and profits suffer." Interestingly, Colombian consumption of bread is mostly tied to the breakfast meal. Also, Colombian breads have higher fat contents because the Colombian lard industry has historically taught bakers to use 15 to 16 percent fat content in breads. Currently, USW is working with Colombian bakers to show how decreasing fat content in bread can lead to higher consumption. Less fat, explained de la Fuente, means consumers can eat more bread without feeling so full after one roll. Wheat consumption in Colombia is also tied to its culture and economy. More people living in cities, such as Bogota with its population of 8 million, means more wheat breads are consumed, explained one miller. Also, many Europeans have immigrated into Colombia, with their taste preferences for wheat breads. Like American farm families, Colombian millers and bakers are also faced with a younger generation that is turning from the family business. This means more smaller, family-owned businesses are dealing with transition issues. "We have had a long friendly relationship with the United States," Paz said in conclusion of the meeting. "We appreciate the work of wheat farmers of the United States and we like the free enterprise markets. "It's very important for us to get the support of your Congress and from wheat producers in the states for the Colombian free trade agreement," he continued. "Colombia has the potential for consumption to grow." He added a trade agreement would lower the duties Colombian millers pay for imports of U.S. wheat. But, if the U.S. is not on board, he added, a treaty with Canada and not the United States could mean U.S. producers could lose an important market for their wheat. 
Jennifer M. Latzke can be reached by phone at 620-227-1807, or by e-mail at jlatzke@hpj.com. This is the first in a series of articles from Jennifer's recent trip to Latin America with members of the board of U.S. Wheat Associates. Future articles will feature the tour's stops in Lima, Peru; San Jose, Costa Rica; and Mexico City, Mexico. To view her online blog of the trip, visit www.hpj.com. 4/21/08
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