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By Kenneth Dierschke
Texas Farm Bureau President
Trade is an issue that is always hotly debated. There is never a guaranteed result of a trade agreement. The proposed Central American Free Trade Agreement (CAFTA) is controversial, and will be no different. However, CAFTA will be extremely positive for both U.S. and Texas agriculture, and the Farm Bureau strongly supports it.
CAFTA is close to being a "no-brainer." Here's why.
U.S. markets are already among the most open in the world. To comply with the terms of CAFTA, the U.S. will not need to make many changes. The Central American signers of the agreement, however, will open their own markets and reduce the sometimes oppressive tariffs designed to keep products out. On a world average, products entering the U.S. market encounter a 12 percent tariff, and U.S. products entering foreign markets face a 63 percent tariff. American agriculture stands to gain an estimated increase in exports of $1 billion.
In 2003, Texas' farm cash receipts were $15.3 billion, and agricultural exports were estimated at $3.4 billion. Approximately 25 percent of each year's production enters the foreign market. Implementation of CAFTA should increase Texas' key exports of agricultural products including:
•Beef—Provides over one-half of the state's farm cash receipts ($7.8 billion) and Texas is the nation's third largest exporter of live animals and meat. CAFTA will bring import tariffs down from as high as 30 percent to zero on prime and choice cuts immediately. Others will be phased out in five to 10 years.
•Cotton—Texas is the nation's top exporter of cotton and provides the state with $1.3 billion in farm cash receipts. CAFTA will lock-in immediately zero tariffs for markets worth over $73.1 million to U.S. cotton producers.
•Poultry—Provides the fourth largest source of state farm cash receipts at over $1 billion. CAFTA will, over time, eliminate tariffs as high as 164 percent on both fresh and frozen products.
•Dairy—Is the fifth largest source of state farm cash receipts and currently faces tariffs as high as 60 percent. CAFTA will eliminate these tariffs within 20 years, with certain dairy products' tariffs eliminated earlier.
•Corn—Texas is the nation's seventh largest exporter of feed grains, which face tariffs up to 35 percent. Yellow corn tariffs will be eliminated immediately in Costa Rica and the Dominican Republic and others will be phased out within 15 years.
•Rice—Provides Texas with $82 million in farm cash receipts. Rice exports face tariffs of up to 60 percent now, but will be eliminated after the passage of CAFTA.
Not all agriculture producers support the CAFTA agreement. Domestic sugar producers will face additional competition from Central America. However, sugar imports from these countries will amount to less than one day's consumption in the United States.
Looking at all of U.S. agriculture, there is no doubt that CAFTA would be a positive step.
Free trade is an ultimate goal because Texas producers can compete on a level playing field. Free trade, unfortunately, is unattainable in today's geopolitical climate. However, fair trade is achievable, and CAFTA is a major step toward that goal.
