While the United States sits on the sidelines, competition for market share in Colombia heats up as U.S. competitors negotiate free trade agreements (FTA).
Canada recently ratified a FTA with Colombia and the European Union is expected to complete an agreement this summer. According to the U.S. Grains Council, the continued delay in ratifying the U.S-Colombia Trade Promotion Agreement (CTPA) is having a profound impact on U.S. agriculture.
“Despite the fact Colombia has been the largest market for U.S. agriculture exports in South America and the third-largest market in the Western hemisphere, behind only Canada and Mexico, we have lost significant market share in just a short period,” said USGC Chairman Rick Fruth.
U.S. exports of agricultural commodities declined sharply from $1.6 billion in 2008 to $907 million in 2009, a 46 percent decline.
“This lack of an agreement cost the U.S. corn sector alone $314 million in 2009. The U.S. market share of Colombia’s feed grain imports dropped from 96 percent in 2007 to 38 percent in 2009,” said Fruth, who farms corn just outside of Holgate, Ohio.
U.S. agricultural products continue to face a 15 percent import tariff and Colombia’s price band system which imposes a variable charge on top of the regular import duty. Meanwhile, Argentina and Brazil continue to enjoy the advantages from the MERCOSUR agreement with Colombia, facing only a 6.9 percent tariff.
“The tariff for MERCOSUR countries will be completely phased out by 2018. This will result in the United States being only a residual supplier to Colombia, at best. Ratification of the CTPA will eliminate both the import tariff and price band system, allowing a level playing field,” said Floyd Gaibler, USGC director of trade policy.
According to the American Farm Bureau Federation, a ratification of CTPA would result in U.S. agricultural export gains of more than $815 million per year at full implementation.
“The ability of the U.S. agricultural sector to remain competitive in the long-term will rely on our collective ability to supply the global markets with growing demand for feed and food products,” Gaibler said. “That can only happen if the United States endorses the trade agreements we successfully negotiate and fully re-engage in negotiating bilateral, regional and multi-lateral trade agreements around the world.”