May 3, 2000 | By: Aimee D. Heald

The United States is the largest agricultural exporter in the world. The U.S. also is the largest market for agricultural products. Trade agreements such as the North American Free Trade Agreement and the creation of the World Trade Organization have impacted agriculture by opening up new markets for U.S. products.

U.S. Department of Agriculture, Under Secretary for Marketing and Regulatory Programs, Michael Dunn related the free-trade agreements to Kentucky on a recent visit to the Bluegrass.

"We feel that free, fair, and open trade would help U.S. producers," Dunn said. "We have the ability in the U.S. to produce a great deal." Dunn said an important issue now is opening up normalized trade in China, which is a prelude to that country becoming a member of the WTO.

"A crop that's very important in Kentucky is tobacco, but China has said that since blue mold is a problem in Kentucky, you cannot bring tobacco into China," Dunn added. "Now if China was a member of the WTO, we'd be able to get tobacco in."

A new trade agreement currently is being negotiated by 34 countries in the Western Hemisphere. The Free Trade Area of the Americas seeks to break down trade and investment barriers within the Americas by eliminating tariffs or taxes charged on goods that enter a country.

Economists may disagree on a wide variety of subjects, but most agree that more free trade benefits consumers by providing more products and often at lower prices." Larry Jones, agricultural economist for the University of Kentucky College of Agriculture, said.

Jones said trade between the U.S. and other countries in the Americas has doubled over the last 10 years. He pointed out that any lowering of trade barriers in the Americas, particularly in South and Central America, should result in more exports to those regions. The Economic Research Service of the USDA shows U.S. agricultural trade should increase from six to eight percent per year for the next 15 years.

More exports, with all things constant, leads to higher incomes for U.S. agriculture and its producers.

"A second benefit of these type of agreements is that we generally see a gain in productivity in countries as they open their markets," Jones added. "These gains in productivity result in more products being demanded by a country's consumers.

Jones said the ultimate impact on specific sectors of agriculture is mixed. The ERS estimates that corn, soybeans, wheat and cotton likely would benefit from increased exports. There would be little impact on rice, meats and dairy.

"Sugar and orange juice sectors would lose market share as tariffs on imported products were reduced," Jones said. "The peanut sector, with its quota program could suffer, as they have increased difficulty competing at world prices."

Jones said that a big concern of any trade agreement is that any product entering the U.S. is safe and sanitary for consumers. Before barriers can be broken down, certain standards have to be followed for safe and sanitary handling of imported products.

The FTAA process began in 1994, but formal negotiations began in 1998. Jones said a final trade agreement hopefully will be reached by 2005. Agriculture is one of nine areas being negotiated in the agreement.


Larry Jones 859-257-7289