By Dalton Henry, USW Director of Policy
As details of the Trans-Pacific Partnership (TPP) continue to garner headlines, there is a lot of speculation about when Congress will consider the agreement. A delay would be very costly and the proof of that is found in the recent history of U.S. free trade agreements. It is worth looking back in recent history to just how costly delays in trade agreements can be.
Nine years ago, on the day before the Thanksgiving holiday the U.S. and Colombia finished negotiations on a free trade agreement that promised lower wheat costs for Colombian millers and greater market access for U.S. wheat producers. The United States dragged its feet on implementing the agreement for nearly six years amid tepid congressional support and the election of a new administration that insisted on renegotiating certain new provisions.
During that delay, Colombia moved to secure agreements with other countries, most notably Canada. With faster approval by the Canadian government, the Canada-Colombia Free Trade Agreement went into effect nine months ahead of the U.S. agreement. It allowed duty free access to Canadian wheat supplies, which in turn put U.S. wheat at a disadvantage. As U.S. wheat growers waited for the U.S. government to act on our FTA, U.S. wheat market share in Colombia plummeted to 27 percent in 2011/12, from the previous three-year average of 55 percent.
A delay in the consideration and approval of the TPP could have similar far-reaching effects for the U.S. wheat industry. Vietnam is a rapidly growing wheat market for quality U.S. supplies, with imports from the U.S. steadily rising over the last decade. The dark side of this comparison lies in the enactment of the recently completed ASEAN-Australia free trade agreement, which gives Vietnamese millers duty-free access to Australian wheat after Jan. 1, 2016. Without equal tariff treatment that would come with TPP’s implementation, U.S. supplies will suffer a $12 to $15 per metric ton (MT) disadvantage. That would likely negate for a time much of the technical and trade service work USW has invested in Vietnam and potentially blocking more than 600,000 MT of U.S. wheat over the next two years from customers who want to import it.
The current timeline scenarios for TPP consideration are troubling. The agreement is a third of the way through a congressionally mandated 90-day public review period. The U.S. International Trade Commission is formally evaluating the agreement in a review expected to last until mid-May 2016. That means congressional consideration would likely not start before mid-2016. Many commentators believe that timeline would put consideration too close to the fall 2016 U.S. elections, giving political cover for those who insist the agreement will have to wait until late 2016. Even more concerning would be a delay demanded by opponents to hold off consideration until a new administration takes office and the next Congress is seated.
We believe the old saying that those who fail to study history are doomed to repeat it applies to our concern about the future of the TPP agreement. Any of these delays will cost U.S. growers and their customers dearly, and that is something worth remembering.
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