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Free Trade Agreements Work

Although the Trump administration has reversed the involvement of the U.S. in the Trans-Pacific Partnership, we know that free trade agreements are crucial to growing markets and that these agreements do work. Below are two examples.

Colombia

After the Colombia Free Trade Agreement came into effect in 2012, exports to the country have continuously increased, with Colombia ranking the third largest customer for U.S. corn for the second straight year, behind only Mexico and Japan
 
U.S. exports of feed grains in all forms to Colombia reached a record high during the 2015/2016 marketing year, according to data from the U.S. Department of Agriculture and analysis from the U.S. Grains Council (USGC) - a milestone on which the Council is seeking to further capitalize with outreach to buyers who want to take advantage of the favorable trade agreement between their country and the United States.
 
Total feed grains in all forms exports to the country reached a record high of 5.2 million metric tons in corn equivalent, up 6 percent from the previous marketing year, fueled by new export records in U.S. corn, sorghum and distiller's dried grains with solubles (DDGS). The feed grains in all forms calculation also takes into account barley, meats and ethanol.
 
The free trade agreement (FTA) between Colombia and the United States was signed in 2006 but not put into effect for six more years. During that delay, U.S. grain exports decreased due to more favorable duties on products from regional sellers.
 
Once in place, however, the FTA and market development efforts by the Council and its members have fueled dramatic growth in this market.
 
The United States exported more than 4.55 million metric tons (179 million bushels) of corn to Colombia during the 2015/2016 marketing year, claiming a 99.7 percent market share.
 
U.S. exports of DDGS to Colombia totaled more than 163,000 metric tons. The previous record of more than 129,000 metric tons was set in the 2013/2014 marketing year.
 
You can read more here.

Peru

Peru purchased enough U.S. corn to fill its entire duty-free quota this year by March 26.  The quota was negotiated under the U.S. Peru trade promotion agreement (PTPA), which has been instrumental in boosting bilateral trade in food and agricultural products since it went into force on Feb 1, 2009.

In 2015, Peru filled its quota in just seven days, according to U.S. Grains Council Regional Director of the Western Hemisphere, Marri Carrow. 

“The U.S.-Peru free trade agreement has helped maintain an advantage for U.S. corn in the Peruvian market,” said Carrow. “For four of the past seven years, the country has filled its duty-free quota for the U.S. commodity, and this year will make five of eight.”

As of March 26, Peru had imported more than 751,815 metric tons (29.6 million bushels) of U.S. corn. In all of the 2014/2015 marketing year, which ended Aug. 31, 2015, the country bought 2.4 million tons (94.5 million bushels) of the commodity.

Trade continues to be an extremely important market for Illinois corn.  As farmers see prices below the cost of production and farming in the coming years seems bleak, opening up international markets to corn and meat is a very important way to buoy prices.  The Trans-Pacific Partnership is a trade agreement already negotiated and just waiting for congressional approval!

Moving forward, the Council will continue to be engaged in Peru, in partnership the USDA Foreign Agricultural Service’s staff in Lima, to further expand U.S. corn exports. Among other activities, USGC staff will continue hosting face-to-face meetings with Peruvian clients to provide them with market information and demonstrate the advantages of U.S. corn and U.S. grain purchasing processes.

“This market and the United States both benefit from the comprehensive trade agreement we have in place. If further trade liberalization occurs on a global scale, U.S. farmers could potentially reap benefits, like they have found this year in Peru, on a larger scale,” Carrow said.

 
 
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