USA Rice Federation officials say passage of the Dominican Republic-Central American Free Trade Agreement could mean the shipment of 400,000 metric tons of U.S. rice to those countries duty-free soon after the agreement is implemented.
Under CAFTA-DR, as most abbreviate the agreement, each of the Central American countries and the Dominican Republic would establish tariff rate quotas for rough and milled U.S. rice. No duties would be charged to imports within the tariff rate quotas, according to the USA Rice Federation.
“The 400,000 metric tons would be a floor and not a ceiling,” said Bob Cummings, USA Rice's international trade specialist. “The tariff rate quotas would then increase by a certain percentage each year, depending on the country and type of rice.”
USA Rice leaders say the opportunity to sell rice to CAFTA members without import duties of 20 to 45 percent now in effect is why the organization will support CAFTA-DR when it is submitted to Congress, possibly next month. The Bush administration is trying to line up more votes for the agreement before testing the waters in the House and Senate.
The rice industry group was one of more than 50 commodity and general farm organizations rallying behind CAFTA-DR in events in Washington on April 11.
“Support for CAFTA-DR means more jobs for rural America, healthier farms, and greater stability in a budget environment in which agriculture, especially rice farming, is severely challenged to remain viable,” said USA Rice Federation Chairman Lee Adams, a rice miller from Texas.
“Members of Congress not yet favoring this agreement must step beyond protectionist interests and support the efforts of Agriculture Secretary Mike Johanns and Ambassador Allen F. Johnson, the chief U.S. agriculture negotiator.”
Adams said the CAFTA-DR countries — Costa Rice, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic — represent one of the top five regional markets for U.S. rice exports, with current annual sales to the region at about 700,000 tons.
However, the CAFTA-DR countries heavily limit imports to rough rice, denying consistent and meaningful access for U.S. milled rice. “CAFTA-DR provides for immediate guaranteed market access for all types of U.S. rice and duty free access over an 18- to 20-year period,” he said.
“CAFTA-DR maintains a huge market for U.S. rice, but it also improves the access of Central American and Dominican Republic consumers to a wider variety of high-quality U.S. rice,” Adams said.
Cummings said the initial tariff rate quotas will be for 400,000 metric tons of rice. Shipments over the 400,000 will be assessed according to the duties in effect Jan. 1, 2003 (20 percent to 35 percent on paddy rice, and 30 percent to 45 percent on milled rice).
Tariff rate quotas for milled rice will increase 5 percent per year, except in the Dominican Republic, where growth will range from 3 percent to 6.5 percent annually. Tariff rate quotas for rough rice will increase 2 percent annually in Costa Rica, El Salvador and Honduras; 3 percent in Nicaragua; and 5 percent in Guatemala.
Leaders of farm organizations such as the American Farm Bureau Federation say CAFTA-DR would yield nearly $1.5 billion in agricultural exports to those countries signing the agreement.
Agriculture Secretary Mike Johanns and other administration officials participated with Farm Bureau and more than 50 other organizations comprising the Agriculture Coalition for CAFTA-DR in a rally at the Ronald Reagan International Trade Center in Washington April 11.
“When you look at the aggregate, CAFTA-DR is a net positive for agriculture,” said AFBF President Bob Stallman. “The agreement will generate millions of dollars annually by eliminating tariffs on U.S. agricultural goods.”
Tariffs on almost all U.S. products exported to CAFTA-DR nations will decrease to 0 percent after full implementation. Otherwise, U.S. agriculture products entering the region without the agreement could be subject to up to 60-percent tariffs.
“The United States has already paid for this agreement due to the existing Caribbean Basin Initiative, implemented in the 1980s,” said Stallman. Under the CBI, 99 percent of the agricultural exports from the CAFTA-DR region are already entering the United States duty free.”
American Soybean Association said CAFTA-DR would immediately eliminate tariffs on all soybean products and expand access for pork and poultry products to the five CAFTA countries and the Dominican Republic.
“Exports of U.S. soybeans, soybean meal and soybean oil to these countries currently account for more than $260 million in annual sales,” said ASA board member Scott Fritz, a soybean producer from Winamac, Ind. “CAFTA will improve and enhance trade opportunities, solidify our position as the preferred supplier of soybeans and soybean products, and open new opportunities for exports of U.S. livestock products to these Central American nations.”
Fritz said members of the World Trade Organization are watching the CAFTA ratification process as a barometer of U.S. support for conclusion of the Doha Round of the WTO negotiations.
“More than 96 percent of the world's consumers live outside U.S. borders,” Fritz said. “As a result, U.S. soybean farmers are heavily dependent on expanding demand for protein, vegetable oil and livestock products in global markets. Fully 50 percent of annual U.S. soybean production is exported. Expanding demand and reducing tariffs and non-tariff barriers is key to preserving our opportunity for profitability.”
While CAFTA would immediately eliminate tariffs imposed on the exportation of U.S. soybeans, soybean meal and soybean flour, tariffs on U.S. exports of soybean oil bound for these countries will be reduced over a 12- to 15-year period. These actions are expected to improve and facilitate the exportation of U.S. soybeans and soybean products to CAFTA countries, which may assist in keeping out competitive soybean products.
Duty-free quotas on all pork and pork products will increase each year, and tariffs also will be eliminated. Although it will take 15 years, U.S. pork exports to CAFTA nations will become completely duty-free in 2019. Domestic swine production accounts for 23 percent of all U.S. soybean meal consumption.
National Corn Growers Association President Leon Corzine also spoke at the rally, stressing the importance of the Central American and Dominican Republic free trade agreement to the nation's corn growers.
“The next generation of corn growers and farmers need markets to be viable in the future,” said Corzine. “U.S. farmers want to be a supplier of choice — first choice — not residual. CAFTA-DR does this for us.”
According to USDA's Economic Research Service, agriculture exports to the CAFTA-DR regions were valued at more than $55 billion in 2004 with corn exports reaching 43 million metric tons valued at nearly $5.3 billion.
“CAFTA countries have open access to U.S. markets. I want the same for products from U.S. farms,” Corzine said. “What is good for our family farms is good for rural America and all of the United States. Removing trade barriers puts all of us on the path to economic prosperity.”
Officials with the National Farmers Union also issued a statement, disputing the farm organizations' claims and saying CAFTA-DR would be detrimental to the livelihoods of American family farmers and ranchers.
“We've heard these promises of prosperity of trade agreements in the past,” said National Farmers Union President David Frederickson. “For a variety of reasons they never seem to come true. I do not see what makes this one any different. CAFTA resembles the failed trade policies of the past that further encourage a ‘race to the bottom’ for producer prices.”
Frederickson said CAFTA proponents “overestimate the agreement's potential benefits, often ignoring the fact that nations included in CAFTA represent small populations with low purchasing power.”
CAFTA countries have a combined population of 31 million people with limited income for purchasing agricultural products, he said, noting that U.S. exporters already supply 94 percent of all grain consumed by the six CAFTA countries.