Huge export losses expected for wheat growers
U.S. wheat sales to Colombia would likely drop by more than 50 percent if Congress fails to soon ratify the U.S.--Columbia free trade agreement, say Colombian wheat buyers and millers in Washington DC during mid-July. According to U.S. Wheat Associates, that would cost U.S. wheat producers more than $87 million in annual sales. U.S. Wheat Associates is the U.S. wheat industry's export market development organization.
Once ratified, the U.S.--Colombia FTA, formally titled the U.S.--Colombia Trade Promotion Agreement signed Nov. 22, 2006, would immediately eliminate most tariffs on U.S. exports, including wheat, with all remaining tariffs phased out over time, according to the Office of the U.S. Trade Representative. This fall, Canada expects to ratify its own FTA with Colombia. That would give a major wheat-exporting competitor an immediate price advantage over U.S. wheat exports, USW says. U.S. wheat in Colombia currently has a nearly 70 percent share, the equivalent of more than 27 million bushels of wheat. Of that, 13 million bushels are Hard Red Winter wheat.
"If importers are forced to pay duties on U.S. wheat and not on Canadian wheat, our members believe U.S. market share is likely to fall to as low as 30 percent," says Jaime Jimenez, executive director of FEDEMOL, the Colombian millers association. "We have long-standing ties with the U.S. wheat industry and we prefer U.S. wheat, but the difference in price in that situation would be impossible to ignore."
Jimenez, along with Francisco Cabal, general manager of Molino Santa Marta S.A., and a FEDEMOL board member, and Felipe Laserna, president of wheat importer CIGSA, are meeting this week with members of Congress and the Obama administration to stress the benefits of the pending FTA not only for U.S. exporters--including wheat producers--but also for their enterprises and the Colombian economy.
Wheat would not be the only commodity hurt if the U.S.-Colombia FTA is not ratified. In 2008, the United States exported a record $1.67 billion of agricultural products to Colombia, according to the USDA. The USDA notes that current tariffs between the United States and Colombia allow 99.9 percent of Colombian food and agricultural exports to enter into the United States duty-free, while no U.S. agricultural exports to Colombia currently receive duty-free treatment.
Argentina enjoys advantages from the Mercosur agreement allowing for duty-free access, which already puts U.S. wheat producers at a disadvantage. Colombia also anticipates signing a trade agreement with the European Union that will also give wheat growers there duty-free market access to the Colombian market.
Chet Edinger, a South Dakota wheat farmer who visited Colombia in 2008 as part of a U.S. Wheat-sponsored trade team, says, "Ratifying this FTA is the right thing to do for all American farmers and the right thing to do for the people of Colombia, who I know are working hard to establish a strong, legitimate economy."
Edinger will host the Colombian team on his farm near Mitchell, South Dakota in mid-July.