Free trade agreements with South Korea, Panama, and Columbia recently were passed by Congress with great applause from agriculture and signed into law. They were tentatively signed three years ago, but final details needed to be worked out prior to Congressional approval. The agreements were overwhelmingly approved on Capitol Hill. But does US agriculture really benefit from exports?
Livestock producers were particularly interested in the South Korea agreement, because its tariff on U.S. beef, now 40%, or $200 per head, will be lifted by 2026 and the tariff on US pork, 25% will be eased until it’s lifted in five years. In Columbia, the tariff on US beef is 80%. Panama will phase out its 40% tariff on corn and its 20% tariff on soybeans and products over 15 years. Implementation of the three agreements will mean additional $2.3 billion in exports and support 20,000 US jobs according to USDA.
U.S. Agricultural exports have more than doubled in the past decade from $51 billion in 2000 to nearly $116 billion in 2010. Writing in the electronic magazine Choices, economists from Cal State and Texas A&M analyze the impact of agricultural trade on various sectors of the U.S. Ag exports surpass ag imports and help the US balance of trade to a small degree. In 2010, ag exports comprised 9.1% of all U.S. exports, and ag imports made up 4.3% of all U.S. imports. Statistically, agriculture has a nearly $34 billion trade surplus compared to non agricultural trade which has a $668 billion trade deficit.
The economists report that in 2009, ag exports were $98.4 billion, but those were supported by $280.5 billion in other sectors in the economy. They say, “Every $1 billion in U.S. agricultural exports generated 15,811 jobs. Employment resulting from agricultural exports included direct farm employment of 742,966 jobs and nonfarm related employment of 812,852 jobs for a total of 1.6 million jobs. The jobs resulting from agricultural exports reflect the output that is stimulated as farmers purchase inputs for production, and as commodities are harvested, transported and stored.” In other words, for every bushel of grain or head of livestock we export, there has to be seedsmen, crop protection chemical distributors, livestock feed millers, farm equipment mechanics and many other occupations and products.
The northeast sector of the U.S. only recorded $7.7 billion in exports in 2009, but the Midwest had $86 billion in output and 410 thousand jobs were tied to agricultural exports. Nationally, 1.5 million jobs were tied to farm exports, with 48% on the farm, 29% in services, and the balance in food processing, manufacturing and transportation. The economists reported, “The dominant position of the Midwest in overall output generated and number of jobs related to exports reflects in large part the importance of feed grain and oilseed production in the region. In 2009, over 30% of the total value of all agricultural exports was accounted for by feed grain and oilseed products, in large part originating from the Midwestern region. Along with the host of other Midwestern products finding their way to international markets the economic stimulus from trade related activities is greatest for this region.”
As the US attempts to increase its employment, farm exports will provide a key to achieving that. The researchers say, “Employment attributed to exports is about evenly split between the Midwest and South, followed by the West and Northeast. Important too is that these economic gains associated with exports are not just accruing to the farm sector. In fact, in most regions of the country, the non-farm sectors of food processing, services, and trade and transportation receive an equal share of both output and employment.”
Agricultural exports have provided significant income for agriculture and employment for the rest of the nation as well. Recent approval of more trade agreements will increase not only employment but also provide added commodity sales for grain and livestock producers.