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Korean trade in flux, NAFTA debate starts

WASHINGTON, D.C. — U.S. trade agreements remain in focus after President Donald Trump discussed withdrawing from an agreement with South Korea this month, and renegotiations for the North American Free Trade Agreement (NAFTA) recently began.

Mexico and Canada are among the largest of U.S. agriculture’s trading partners and ag groups largely view NAFTA among the three countries as a key cause for increased U.S. ag exports. Needed updates to the agreement regarding health and safety and scientific discovery were part of the Transpacific Partnership the U.S., Mexico and Canada almost finalized with about 10 Asian countries a year ago.

“Trade is so important to U.S. agriculture, farm income, rural employment and economic growth in rural parts of the country,” said Jason Hafemeister, USDA’s acting deputy under secretary for Trade and Foreign Agriculture Affairs.

Hafemeister said he is being kept abreast of NAFTA trade discussions. A meeting occurred in D.C. and in Mexico in the last month, with a third scheduled to take place in Canada at the end of September. The USDA had an 11-member team in Mexico and the department is determined to protect the agricultural interests of U.S. farmers.

The changes to the agreement may be finalized by December, but a timeline for changes to take effect is difficult to judge. Any changes need to be presented to lawyers, then to Congress. Laws may need to be enacted in each of the countries involved.

Hafemeister said Trump understands the need for trade agreements for agriculture and credited Trump with reopening the Chinese market to American beef, though the announcement of the Chinese decision was made in October of last year, prior to his election.

He said South Korea is just one of the many countries in Asia where U.S. agriculture benefits from trade. Even without an agreement, many agricultural products are exported to Japan, but trade to Japan would increase if a trade agreement came into effect and tariffs on U.S. products decreased.

Asian countries have seen an increase in the middle class, which results in more purchases of meat and dairy products, a benefit to U.S. farmers. According to the National Corn Growers Assoc. (NCGA), South Korea is the third-largest importer of U.S. corn and distillers dried grains with solubles (DDGS) and the strongest export market for the previous five years.

“South Korea is a mature market, but one that is still growing significantly," said Cary Sifferath, NCGA senior director of global programs. "Demand for U.S. coarse grains and co-products continue to grow steadily year after year.”

She said the trade teams introduce U.S. corn producers to South Korean customers. It allows the producers to talk about how the products are handled on the farm to the point of sale, then onto the markets in Korea. Buyers in Korea are conscious of both quality and price, making trade agreements important to maintaining U.S. exports.

Important Korean market

The 2012 U.S.-Korea Free Trade Agreement (KORUS) provides duty-free access for U.S. corn, sorghum, DDGS and ethanol exports. The U.S. Grains Council released a statement that withdrawal from KORUS would cause immediate losses in sales. Exports from the 2016/17 marketing year to South Korea are expected to generate $7 billion in total U.S. economic activity, supporting 56,000 U.S. jobs in farming, processing, marketing and related industries.

“Trade helps our country, Mr. President, and withdrawal from KORUS would hurt us all. As soybean farmers, we benefit greatly from exports, which contribute a $2 billion annual surplus to our nation’s balance of trade. Trade makes our local businesses and our communities stronger,” said Ron Moore, American Soybean Assoc. president, addressing Trump.

“Yet whether it's South Korea, Mexico and Canada, or our neighbors on the Pacific Rim, we once again find ourselves fighting to communicate the value of trade to farmers.”

He said the United States supplies 1.3 million tons of soybeans, about half of the soybeans imported by South Korea. The rest of its imported soybeans are from Argentina and Brazil. If the U.S. withdraws from KORUS, those countries will start to take the market share.

“The idea that we're the only game in town when it comes to selling soybeans or other agricultural products abroad is false. So is the notion that there’s always another country that will buy our commodities,” Moore said. “Furthermore, even the threat to withdraw from this or any trade agreement is a dangerous course of action. Repeatedly walking our trade relationships to the brink, or actually breaking them, only weakens our standing abroad.”

He demanded the U.S. remain in KORUS and start negotiating new trade agreements rather than retreat from existing agreements.

A bipartisan letter from Congress to Trump is being drafted, said U.S. Rep. Ron Kind (D-Wis.), that stresses the importance of the Korean trade agreement. “We need to get back into negotiations with the Pacific Rim,” he said. “They’re striking deals with other countries to our detriment.”

He said he has been in contact with the Trump trade team to discuss Asian trade agreements and NAFTA. “We’re still not clear about what the negotiating objective is (for NAFTA),” Kind said, adding the team needs to work closely with Congress if it’s going to be successful at renegotiating.

Many of the changes wanted with NAFTA were included in the TPP, including enhanced labor standards, environmental standards and cross-border protection. He said trade agreements are critical to the United States and focusing on the trade deficit is not productive.

“The knee-jerk reaction is that all trade agreements are bad … We only have trade agreements with 20 of 193 countries in the world. It’s the countries where we don’t have trade agreements that cause the race to the bottom,” Kind said. “Trade agreements level the playing field.”

He has seen an increase in manufacturing jobs in his district, and not just in his district in Wisconsin; in the state, he said 53 percent of manufactured goods are exported.

Hafemeister said NAFTA is a success across the board, with the removal of tariffs, but some farmers have run into issues where farmers from competing countries have the same growing season. Those issues are among topics that will be addressed in negotiations.

Also needing addressed are specialty crop farmers’ concerns about Mexican imports and the dairy agreement with Canada, he added.