Order Code RL30935
Report for Congress
Received through the CRS Web
Agricultural Trade in the
Free Trade Area of the Americas
Updated May 23, 2003
Remy Jurenas
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

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Agricultural Trade in the
Free Trade Area of the Americas
Summary
Leaders of Western Hemisphere countries have agreed to negotiate a Free Trade
Area of the Americas (FTAA) agreement by 2005. FTAA’s objective is to promote
economic growth and democracy by eliminating barriers to trade in all goods
(including agricultural and food products) and services, and to facilitate investment.
If diplomats reach agreement, free trade in the hemisphere could occur by 2020.
FTAA’s negotiating objectives for agriculture call for removing tariffs and other
barriers to agricultural imports in each country, developing disciplines on the use of
export subsidies and other mechanisms that distort agricultural trade, and ensuring
that rules on food safety and animal and plant health are not used as disguised trade
barriers. Following an agreed-upon timetable, FTAA countries are now engaged in
exchanging detailed offers and counteroffers designed to reduce and eliminate tariffs
and quotas on all traded goods. The first phase of this process concludes in July
2003. The agriculture chapter in the second draft consolidated text of an FTAA
agreement issued in November 2001 continues to reflect differences in viewpoints
among countries on various agricultural issues. These differences over how to
consider farm support and export subsidies could affect movement in the market
access component. As a result, negotiations on FTAA’s agriculture component are
expected to be contentious.
Much of U.S. agricultural trade with Canada and Mexico already occurs free of
barriers under the North American Free Trade Agreement. Accordingly, an FTAA
would primarily affect U.S. agricultural trade with the countries of South America,
Central America, and the Caribbean. Sales to these three markets currently account
for a small share (8%) of U.S. farm product exports. Agricultural imports from these
three regions, by contrast, account for 17% of all such U.S. imports.
A 1998 U.S. Department of Agriculture analysis finds that U.S. agriculture
would benefit to some degree with U.S. participation in an FTAA that eliminates all
tariffs throughout the region. According to this analysis, U.S. farm income would be
$180 million (1%) higher than without an agreement, U.S. agricultural exports would
increase by $580 million (1%), and U.S. agricultural imports would rise by $830
million (3%). This study found that U.S. wheat sales would increase to Brazil.
Exports of U.S. corn, soybeans, and cotton throughout the region would see gains.
Little impact is expected on sales of U.S. rice, meat, and dairy products. U.S.
producers of sugar and orange juice would face increased competition.
Product sectors expecting to gain from increased sales appear to be ambivalent
about the FTAA initiative, preferring instead that the Bush Administration place
more emphasis on liberalizing agricultural trade on a multilateral basis under the
WTO. Producers of import-sensitive food products (i.e., sugar and orange juice) are
concerned about increased competition. They seek to be excluded from FTAA
coverage or be covered by the longest transition periods possible. Under trade law,
the Executive Branch must follow special consultation procedures with Congress on
import-sensitive agricultural products covered by the FTAA agreement.

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Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S. Agricultural Trade in the Western Hemisphere . . . . . . . . . . . . . . . . . . . . . . . 1
Negotiating Process and Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Key Negotiating Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Market Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Average Agricultural Tariffs in FTAA Area . . . . . . . . . . . . . . . . . . . . . 6
Transition Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S. Market Access Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Export Subsidies and Other Trade-Distorting Policies . . . . . . . . . . . . . . . . . 7
Export Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Domestic Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
State Trading Enterprises (STEs) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Sanitary and Phytosanitary (SPS) Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Other Issues Affecting Agricultural Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Other Issues of Interest to U.S. Farm Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FTAA’s Possible Impact on U.S. Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Role of Congress in FTAA Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Table 1. U.S. Agricultural Trade Balance
with FTAA Countries, by Region, 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 2. U.S. Agricultural Exports to FTAA Countries, 2002 . . . . . . . . . . . . . . . 3
Table 3. U.S. Agricultural Imports from FTAA Countries, 2002 . . . . . . . . . . . . . 3

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Agricultural Trade in the
Free Trade Area of the Americas
Background
In 1994, at the first Summit of the Americas, the leaders of the 34 countries in the
Western Hemisphere agreed to negotiate a Free Trade Area of the Americas (FTAA).
FTAA’s stated objective is to reduce and eliminate barriers to trade in goods (including
agricultural commodities and food products) and services, and facilitate cross-border
investment, allowing all countries to trade and invest with each other under the same
rules.1 At their second Summit in 1998, they formally initiated negotiations to create a
hemispheric free trade area by the year 2005. At the third Summit in Quebec City in April
2001, leaders assessed progress to date by nine negotiating groups, agreed to conclude the
negotiations by January 2005, and to bring the FTAA into effect no later than December
2005.
Following the timetable agreed upon in Quebec City, FTAA countries currently are
in the process of exchanging detailed offers and counteroffers designed to reduce and
eliminate tariffs and quotas on traded goods. In November 2002, trade ministers released
the second draft consolidated text of an FTAA agreement covering all issue areas.
Substantial differences in viewpoints continue to be reflected in the chapter on
agriculture. Many note that negotiating free trade in agricultural products could prove to
be one of several difficult issues in the FTAA talks, as was the case in the negotiations
between the United States and Mexico on the agricultural provisions of the North
American Free Trade Agreement (NAFTA).
U.S. Agricultural Trade in the Western Hemisphere
Hemispheric trade liberalization would directly affect U.S. agricultural trade with the
countries located in South America, Central America, and the Caribbean (except Cuba).
Trade in most agricultural products with Canada and Mexico already is, or will within a
few years become, free under NAFTA’s terms.2 Also, a large portion of the agricultural
1See CRS Issue Brief IB95017, Trade and the Americas, updated regularly; CRS Report
RS20864, A Free Trade Area of the Americas: Status of Negotiations and Major Policy
Issues; and CRS Report 98-840, U.S.-Latin American Trade: Recent Trends, for broader
context.
2Tariffs and quotas on most agricultural products traded between the United States and
Mexico disappeared on January 1, 2003. Protection on the few remaining products will end
(continued...)

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CRS-2
products imported from outside the NAFTA trade bloc already enter the United States
duty free under various trade preference programs. Imports from the Caribbean and
Central American countries arrive under the Caribbean Basin Initiative. Those from
Bolivia, Colombia, Ecuador, and Peru enter under the Andean Trade Preference Act.
Imports of certain agricultural products from other countries in the hemisphere are eligible
to enter free under the Generalized System of Preferences (GSP). Countries that take
advantage of these programs, though, are not required to offer tariff concessions on
agricultural or other products imported from the United States.
The United States in 2002 recorded a $2.8 billion deficit in agricultural trade with
the non-NAFTA countries of the Western Hemisphere. Deficits occurred in two-way
trade with the South American and Central American countries. Agricultural trade with
the Caribbean nations generated a noticeable surplus (Table 1).
Table 1. U.S. Agricultural Trade Balance
with FTAA Countries, by Region, 2002
REGION
EXPORTS
IMPORTS
BALANCE
million $
South America
1,788
4,704
- 2,915
Central America
1,251
1,960
- 709
Caribbean
1,202
353
849
FTAA (excluding NAFTA)
4,242
7,017
- 2,775
NAFTA (Canada & Mexico)
15,905
15,866
39
Total, FTAA
20,147
22,883
- 2,736
Source: Derived from Tables 1 and 2
U.S. agricultural exports to the FTAA countries in the hemisphere (excluding
Canada and Mexico) totaled $4.2 billion last year (Table 2). Sales represented 8% of
worldwide U.S. agricultural exports, or 21% of farm exports to the region. Farm and food
exports to both NAFTA partners totaled $15.9 billion (accounting for 30% of worldwide
sales, or 79% of exports to the other 33 FTAA countries).
U.S. agricultural imports from FTAA countries (excluding NAFTA partners) totaled
$7.0 billion in 2002 (Table 3). Entries accounted for 17% of all U.S. agricultural imports,
or 31% of imports from the region. Food imports from Canada and Mexico totaled $15.9
billion (representing 38% of worldwide purchases, or 69% of such imports from the other
33 FTAA countries).
2(...continued)
in 2008. With a few important exceptions (sugar, dairy products, poultry), there already is
free trade in agricultural products between the United States and Canada.

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Table 2. U.S. Agricultural Exports to FTAA Countries, 2002
REGION
VALUE
SHARE OF WORLD
SHARE OF FTAA
million $
%
%
South America
1,788
3.4
8.9
Central America
1,251
2.4
6.2
Caribbean
1,202
2.3
6.0
FTAA (excluding NAFTA)
4,242
8.0
21.1
NAFTA (Canada & Mexico)
15,905
29.9
78.9
Total, FTAA
20,147
37.9
100.0
Source: USDA
Imports of agricultural products from the hemisphere that compete with the output
of U.S. domestic producers accounted for 80% of the total. Non-competitive products not
produced domestically (such as bananas and coffee) represented 20% of these imports.
Table 3. U.S. Agricultural Imports from FTAA Countries, 2002
REGION
VALUE
SHARE OF WORLD
SHARE OF FTAA
million $
%
%
South America
4,704
11.2
20.6
Central America
1,960
4.7
8.6
Caribbean
353
0.8
1.5
FTAA (excluding NAFTA)
7,017
16.7
30.7
NAFTA (Canada & Mexico)
15,866
37.8
69.3
Total, FTAA
22,883
54.6
100.0
Source: USDA
Negotiating Process and Timetable
Discussions on how to proceed to eliminate border protection and other barriers to
agricultural trade have occurred primarily in two of the nine formal negotiating groups
created for FTAA negotiations. These are the Negotiating Group on Agriculture
(NGAG), and the Negotiating Group on Market Access (NGMA). Their focus has been
on identifying the key issues and formulating the rules to be followed in negotiating
hemispheric free trade in agricultural and food products. Their work resulted in the

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consolidation by the end of 2000 of a “bracketed” FTAA draft agreement.3 Two chapters
laid out text on agricultural provisions and guidelines on how market access for
agricultural products should be negotiated. Trade ministers released a second
consolidated draft text in November 2002.4 Its agriculture chapter reportedly differs little
from the text in the first draft, continuing to reflect the wide range of positions between
individual countries, or groups of countries.
Seeking to keep to the timetable adopted at the April 2001, Quebec City summit,
trade ministers in August 2002 reached agreement on the “methods and modalities” (the
procedures, formulas, targets, rules, and timetables used to put negotiating objectives into
practical terms) to be followed to make tariff reductions (see Market Access below for
background). This provided the basis for each country to prepare for the process of
exchanging tariff and other market access concessions on a product- or sector-specific
basis. Trade ministers agreed that all countries (except CARICOM members –
comprising most Caribbean islands, Belize in Central America, and Guyana and Suriname
in South America) could start tariff cuts from current applied rates rather than from the
higher bound rates that all WTO members adopted in the last multilateral negotiating
round.5 CARICOM countries will be allowed to identify those agricultural and other
products where the maximum bound rate could be used as the reference point for reducing
tariffs. The November 1, 2002, meeting of trade ministers in Ecuador finalized the
negotiating pace and process to be followed over the 2003-2004 period. These final
stages of the FTAA negotiations are being co-chaired by Brazil and the United States. All
FTAA countries met the February 15, 2003 deadline for presenting their initial tariff
reduction offers (see U.S. Market Access Offer for information on what U.S. negotiators
tabled). Each country will respond to these in the form of market access requests, due by
June 15, 2003. Revised offers will then follow this “request-offer” process by July 15,
2003.
For the United States, the Office of the U.S. Trade Representative (USTR) is the lead
agency involved in negotiating the FTAA. Other departments, particularly the agencies
of the U.S. Department of Agriculture (USDA), provide input to USTR and have assigned
staff to serve as experts to lead negotiators. USDA representatives have also been
actively involved in developing the U.S. positions in relevant areas.
3This refers to the text that each country proposes be included in the FTAA agreement.
Because the language from the 34 participating countries includes both areas of agreement
and disagreement, the convention is to lay out each country’s text within brackets. Because
of the wide range of views, the chapters on agriculture and market access are heavily
“bracketed.”
4The second draft of the Chapter on Agriculture can be accessed at
[http://www.ustr.gov/regions/whemisphere/ftaa2002/tnc-w-133-04of12-eng.pdf].
The Chapter on Market Access can be viewed at
[http://www.ustr.gov/regions/whemisphere/ftaa2002/tnc-w-133-07of12-eng.pdf]
5A “bound” tariff rate represents the maximum that a country agrees to impose on imports
of a particular product, and is based on the outcome of negotiations under the last
multilateral negotiations (the Uruguay Round). These bound rates are incorporated as an
integral component of a country’s schedule of concessions or commitments to other World
Trade Organization members. However, for various reasons, a country may decide to
impose a lower, or “applied,” tariff rate.

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Key Negotiating Issues
FTAA trade ministers in 1998 agreed on several objectives to be followed in
negotiating hemispheric free trade in agricultural products. These have guided the work
of the NGAG and the NGMA. The pertinent objectives call for:
! eliminating those measures that countries use to restrict the entry of agricultural
products into their markets,
! developing disciplines on the use of export subsidies and other mechanisms that
can distort trade in agricultural products, and
! ensuring that rules to protect food safety and plant and animal health will be based
on science, and not applied on a discriminatory basis or as a disguised trade
restriction.
FTAA negotiators were also instructed to incorporate progress made in the current
multilateral negotiations on agriculture sponsored by the World Trade Organization
(WTO),6 and the results of the review of WTO’s multilateral agreement on the application
of food safety and agricultural health rules in international trade.
These FTAA objectives are elaborated on below, with relevant background. For
each issue, the U.S. position, and the positions or views of other countries when known,
are summarized.7 The USTR noted in 2001 that “U.S. agricultural negotiators
[participating in the NGAG] will continue to work with the agricultural community to
address appropriately import sensitivities and export interests.” These positions are
reflected in USTR’s October 2002 notification to congressional leaders of the U.S.
negotiating objectives in the FTAA negotiations.8
6For background and discussion of key issues, see CRS Report RS21085, Agriculture in
WTO Negotiations.
7This report’s description of the U.S. position is based on the “Public Summary of U.S.
Position” relative to the FTAA Negotiating Group on Agriculture and the FTAA Negotiating
Group on Market Access, issued by USTR, January 17, 2001, and referred to in press release
01-06. These two U.S. position summaries are available at
[http://www.ustr.gov/regions/whemisphere/agri.html] and
[http://www.ustr.gov/regions/whemisphere/mkt.html].
Additional information at USTR on the FTAA negotiations is found at
[http://www.ustr.gov/regions/whemisphere/ftaa.shtml].
8 USTR Ambassador Robert Zoellick letter to House Speaker J. Dennis Hastert and Senate
President pro Tempore Robert C. Byrd, October 3, 2002, available at
[http://www.ustr.gov/releases/2002/10/2002-10-03-ftaa-house.PDF].

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Market Access
Countries use tariffs and tariff-rate quotas (TRQs)9 to protect certain economic
sectors or specific products against import competition. To address this practice, one
major FTAA objective is “to progressively eliminate, tariffs, and non tariff barriers, as
well as other measures with equivalent effects, which restrict [agricultural] trade between
participating countries.” Trade ministers agreed that “all tariffs will be subject to
negotiation,” but allow for flexibility in negotiating “different trade liberalization
timetables.” Further, negotiations on market access for agricultural products are to be
conducted “to facilitate the integration of smaller economies [i.e., the Caribbean and
Central American nations] and their full participation in the FTAA negotiations.”
The U.S. proposal called for formulating market access rules that apply similarly to
both agricultural and non-agricultural products. In other words, trade in agriculture is not
to be treated any differently than trade in manufactured goods. The U.S. position is
reported to advocate procedures that “ensure that the benefits of free trade are broadly
distributed,” and proposed that most tariffs be rapidly reduced. USTR stated, with likely
implications for agricultural trade, that the details of the U.S. position take into account
“product sensitivities in a framework that is fully consistent” with WTO disciplines.
Average Agricultural Tariffs in FTAA Area. Average tariffs on agricultural
imports are lower in the Western Hemisphere compared to many other regions around the
world. The global average tariff on such imports is 62%, compared to the U.S. average
(12%). For regions covered by the FTAA, the average bound tariff is 25% for North
America, 39% for South America, 54% for Central America, and 86% for the Caribbean
Islands.10 However, applied tariffs can be considerably lower than bound rates. For
example, applied tariffs for agricultural products averaged between 11% and 17% for
Central and South America during the 1995-99 period. These regional averages mask
the range of protection between commodities in any country, and do not fully reflect the
use of TRQs by many countries in the Western Hemisphere (including the United States),
many of which apply prohibitive tariffs on above-quota imports. Reflecting FTAA’s
objective, the target would be to reduce tariff levels to zero and to eliminate TRQs by the
end of the agreed-upon transition period, likely to be about 2020. This part of the
negotiating process will be a difficult process, as some countries seek exceptions for
specific commodities or products that currently receive protection under restrictive TRQs.
Transition Periods. The U.S. proposal on FTAA’s timetable and pace of tariff
elimination is based in part on WTO rules, which require countries in a free trade area to
eliminate tariffs and other forms of protection on most of their trade within 10 years.
Some FTAA participants, though, acknowledge that some politically-sensitive agricultural
products may need to be allowed a transition of up to 20 years to adjust to competition
before tariffs or quotas disappear. They refer to the precedent set in NAFTA, which
provided for a 15 year transition to free trade on the most sensitive agricultural products
scheduled to enter Mexico and the United States (i.e., frozen concentrated orange juice,
9TRQs allow zero or low-duty access for specified amounts of a commodity or product.
Imports above the quota amount may still enter, but face a very high tariff rate.
10USDA, Economic Research Service, Profiles of Tariffs in Global Agricultural Markets,
January 2001, pp. iv, 11.

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CRS-7
peanuts, and sugar imported into the United States from Mexico; and corn, dry beans,
milk powder, and sugar imported by Mexico from the United States).
U.S. Market Access Offer. USTR’s Ambassador Robert Zoellick, on February
11, 2003, laid out the scope of the U.S. tariff reduction offer on agricultural and other
products. In unveiling this offer, he said that the United States is prepared to grant
immediate duty-free access on 56% of the agricultural products that enter from
non-NAFTA countries once the agreement takes effect. On politically-sensitive farm
products, Ambassador Zoellick stated that the United States proposes to eliminate tariffs
with specific timetables that would differ between countries or regional groups.
Transition periods could be 5 or 10 years, or even longer, depending upon a country’s size
and its level of economic development, and on the type of agricultural product. He
indicated all agricultural products are on the table and subject to negotiation (i.e., no
exclusions), and that the United States will move forward with other countries willing to
take the same position.
Export Subsidies and Other Trade-Distorting Policies
Governments use various mechanisms to support their farm sectors and to facilitate
agricultural exports. The Uruguay Round’s Agreement on Agriculture (URAA) lists
those determined to distort agricultural trade, and requires that countries now follow some
disciplines on their use. The Agreement, among other things, spelled out commitments
and a timetable for governments to reduce export subsidies and domestic support. Other
mechanisms (i.e., export credits, activities of state trading enterprises) claimed to distort
trade were identified for future trade talks, are on the agenda of the WTO multilateral
negotiations now underway, and have surfaced in the FTAA debate.
Export Subsidies. Though the WTO Agreement introduced some discipline on
the use of export subsidies, WTO rules still allow countries to subsidize exports of
commodity surpluses. As a result, export subsidies continue to distort international trade
in agricultural and food products by giving a price advantage to the exporter. Though
subsidized sales reduce the price an importing country pays, the price that other exporting
countries receive for the same product sold into other markets frequently is less than
would be otherwise.
Two FTAA negotiating objectives agreed to by hemispheric trade ministers in their
1998 San Jose Declaration address this issue. One calls for the elimination of “agricultural
export subsidies affecting trade in the Hemisphere.” The other requires agricultural
negotiators “to identify other trade-distorting practices for agricultural products, including
those that have an effect equivalent to agriculture export subsidies, and bring them under
greater discipline.”
The U.S. position reaffirms the FTAA’s goal of eliminating the use of export
subsidies within the hemisphere, and proposes that the FTAA countries at the same time
“establish mechanisms to prevent agricultural products from being exported to the FTAA
by non-FTAA countries with the aid of export subsidies.” This is likely aimed at the
European Union, which heavily subsidizes its agricultural exports and actively promotes
such sales to Latin American markets. The U.S. proposal states that the United States
does not consider export credits, credit guarantees, insurance programs, and international

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food aid “to constitute an export subsidy.” The U.S. position reflects the use of the same
definition of agricultural export subsidies (i.e., direct subsidies) as is used in the URAA.
Domestic Support. Some South American countries have placed the issue of
domestic farm support on the FTAA negotiating agenda. This refers to government
program spending to support commodity prices and raise incomes of agricultural
producers. These countries argue, with the United States and enactment of the 2002 farm
bill in mind, that such spending encourages farmers to produce commodity surpluses, that
when exported into world markets, depress the price that their producers receive for the
same products. They view some forms of domestic support as more distorting of
agricultural trade than tariffs or other border measures, and want to include this issue in
the negotiations. The impetus behind their call appears to be concern that the access they
gain to the U.S. market under FTAA liberalization will not result in much benefit to them,
since the level of U.S. protection on agricultural imports is already quite low. Therefore,
these countries’ strategy appears to be to offer to lower their higher level of border
protection on agricultural products only if the United States agrees to reduce its level of
domestic farm support.
U.S. negotiators continue to reject this linkage. The U.S. position is to seek a
recognition by other FTAA countries that commitments to reduce domestic support levels
can only be achieved in the WTO multilateral negotiations. The U.S. proposal calls for
a hemispheric agreement to work together in the WTO arena to substantially reduce and
more tightly discipline trade-distorting domestic support.
State Trading Enterprises (STEs). The United States “calls for the staged
elimination of exclusive export rights granted to state trading enterprises engaged” in
agricultural exports. The aim is to “permit private traders to participate in, compete for,
and transact for” exports in countries where they exist. This position appears to be aimed
at changing the character of, for example, the Canadian Wheat Board, which is that
country’s sole exporter of wheat to several Latin American countries. If the United States
persuades other countries to include its position in the FTAA, U.S. agribusiness and
commodity exporting firms would have the opportunity to expand operations in countries
where STEs exist to compete with them in selling agricultural commodities for export.
Sanitary and Phytosanitary (SPS) Rules
One FTAA agricultural negotiating objective adopts the WTO’s SPS Agreement’s
principle that SPS measures not be applied “in order to prevent protectionist trade
practices and facilitate trade in the hemisphere.” It declares that the use of such measures
(consistent with this Agreement) to protect “human, animal or plant life or health, will be
based on scientific principles, and will not be maintained without sufficient scientific
evidence.” The objective further calls for negotiations to follow this Agreement to
identify and develop measures “needed to facilitate trade.”
As background, most countries have policies to ensure food safety for humans and
to protect animals and plants from diseases, pests, or contaminants. The WTO agreement
referred to in the FTAA objective is the WTO “Agreement on the Application of Sanitary
and Phytosanitary Measures.” It includes understandings or disciplines on how countries
will establish and use these measures, taking into account their direct or indirect impact
on trade in agricultural products. The Agreement requires countries to base their SPS

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standards on science, and encourages countries to use standards set by international
organizations to guide their actions. It seeks to ensure that countries will not use SPS
measures to arbitrarily or unjustifiably discriminate against the trade of other WTO
members or to adopt them to disguise trade restrictions.
The U.S. position calls for FTAA countries to agree to strengthen hemispheric
collaboration on matters covered by WTO’s SPS Committee and to work together to
develop international standards, guidelines or recommendations in relevant international
bodies. The U.S. objective is to accept and apply the work and findings of this WTO
Committee, rather than create a separate hemispheric organization, in how FTAA
countries formulate and apply SPS measures.
Other Issues Affecting Agricultural Trade
FTAA trade ministers agreed to assign to the NGMA responsibility for addressing
the rules of origin, customs procedures, and technical trade barriers that apply to
agricultural products. This Group is also charged to develop rules for safeguards, an issue
that will be monitored carefully by those countries with import-sensitive agricultural
products.11
The United States views the rules and disciplines that FTAA negotiators develop in
these areas “critical in determining conditions for market access in agricultural products.”
The objective of the detailed U.S. proposals on these issues is to ensure that sensitive
products receive differential consideration during the transition to free trade, and that the
benefits of free trade accrue to producers in the hemisphere and not to exporters outside
the FTAA bloc who might seek to take advantage of the openings created by the new
hemispheric free trade environment.
Other Issues of Interest to U.S. Farm Sector
Environmental and labor issues continue to be of concern in the wider context of the
FTAA negotiations generally, as well as to U.S. agricultural interests. Environment and
labor provisions have been included in some trade agreements, notably NAFTA and the
U.S.-Jordan Free Trade Agreement, and in side agreements and decisions made relative
to these agreements. However, these issues remain contentious, with some in Congress
expressing the need to include such provisions in the FTAA. Others, though, argue that
these issues do not belong in trade agreements and should be addressed in environmental
or other agreements.
With regard to agriculture, some U.S. farm groups have expressed concern about the
level of environmental, health, and labor standards found in the agricultural sectors of
11Rules of origin specify what is required for a product to be considered to have been
produced or processed in a certain country. They are used in implementing free trade
agreements to determine whether a product may benefit from the duty preferences and other
benefits under the FTA. Safeguards (involving the one-time temporary use of higher tariffs
and/or quotas) allow producers of a covered commodity or product additional time to adjust
to increased import competition.

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Latin American countries. U.S. farmers that produce import-sensitive commodities refer
to these countries’ lower production costs, and their minimal safety and health
requirements. For this reason, their representatives are concerned that complete trade
liberalization would place them in a difficult competitive position, due to increased
imports from countries where farm workers are paid much lower wages and
environmental regulations are lax. Other farm groups, though, are opposed to including
labor and environmental provisions (such as trade sanctions to enforce such rules) in trade
agreements. They support liberalizing trade in a way that promotes sustainable
agricultural development and improves working conditions.
FTAA’s Possible Impact on U.S. Agriculture
U.S. agriculture would benefit to some degree from U.S. participation in an FTAA
that eliminates tariffs throughout the Western Hemisphere, according to a USDA
analysis.12 It found that on an annual basis U.S. farm income (in 1992 dollars) would be
$180 million higher (0.08%), total agricultural exports would increase by $580 million
(1%), and total agricultural imports would rise by $830 million (3%).
This study found that the impact would vary among commodities. Assuming that
the United States and Canada resolve the dispute surrounding Brazil’s application of
restrictive phytosanitary rules to their wheat, both countries would see their wheat market
share increase in Brazil– the U.S. share would likely increase more than Canada’s given
lower U.S. shipping costs to Northeast Brazil. Gains are also expected in U.S. exports of
corn, soybeans, and cotton to the hemisphere. Little impact is seen on sales of U.S. rice,
meat, and dairy products. According to this analysis, complete trade liberalization under
an FTAA would mean increased competition for U.S. sugar and orange juice. It shows
that U.S. sugar prices, production, and exports “could decline significantly, and imports
could increase” from lower-cost producers like Brazil and Guatemala. The study also
notes that the removal of U.S. tariffs “may create incentives to import less-expensive
Brazilian orange juice,” a development that “may displace some Florida juice.”
Role of Congress in FTAA Negotiations
Congress will take up any agreement that results from the FTAA negotiations under
fast track procedures found in Bipartisan Trade Promotion Authority Act of 2002 (Section
2105 of P.L. 107-210). This details the process that Congress must follow to consider
legislation sent to the Hill by the Executive Branch to implement signed trade agreements.
Other provisions state broad objectives for U.S. negotiators to follow in negotiating
agricultural provisions in trade agreements, including those included in the FTAA.13 In
the meantime, the Administration is required to consult with Congress on specific
agricultural issues as negotiations on the FTAA and other trade agreements proceed.
12USDA, Economic Research Service, Free Trade in the Americas, WRS-98-1, November
1998.
13For more information, see CRS Report 97-817, Agriculture and Fast Track or Trade
Promotion Authority, pp. 5-6.

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Interaction during the period of consultation on negotiating positions and strategies is
intended to lay the groundwork for later congressional consideration of an FTAA
agreement.
Detailed provisions require the Executive Branch to follow special consultation
procedures with Congress before engaging in, and during, trade negotiations that affect
certain agricultural products. Section 2104 provides for extensive consultations on
agricultural trade negotiations between the Executive Branch and the House and Senate
Agriculture Committees (among other congressional committees and the Congressional
Oversight Group). Section 2104 (b)(2) further prescribes special consultation procedures
and a process for USTR to follow before undertaking agricultural tariff reduction
negotiations in the FTAA and in negotiations on other trade agreements, on over 200
"import-sensitive" agricultural commodities and food products.14 It requires USTR to:
! consult with the House Agriculture and Ways and Means Committees, and the
Senate Agriculture and Finance Committees, on whether any further tariff
reductions on any identified product “should be appropriate, taking into account
the impact of any such tariff reduction on the United States industry producing the
product,” on whether any covered product faces “unjustified sanitary or
phytosanitary restrictions, including those not based on scientific principles in
contravention of the Uruguay Round Agreements,” and on whether countries in the
negotiations use export subsidies or other trade-distorting measures on products
that affect U.S. producers of such products,
! request the International Trade Commission to “prepare an assessment of the
probable economic effects of any such tariff reduction on the U.S. industry
producing the product concerned and on the U.S. economy as a whole,” and
! upon completing these steps, notify the four above-identified congressional
committees of those products identified in the first step “for which the Trade
Representative intends to seek tariff liberalization in the negotiations and the
reasons for seeking such tariff reductions.”
After negotiations have begun, this provision requires that if USTR identifies any
other “import-sensitive” agricultural products for tariff reduction, or if a country involved
in the negotiations requests a reduction in the tariff on any other “import-sensitive”
agricultural product, the Trade Representative shall notify the four committees of those
products and the reasons for seeking tariff reductions.
Perspectives
Reflecting the structure of other free trade agreements, hemispheric free trade in
agricultural products could occur by about 2020, assuming negotiators reach agreement
on an FTAA in 2005. The agricultural component of the FTAA negotiating process,
14The statutory criterion requires USTR to develop a list of U.S. agricultural products that
are: (1) subject to TRQs, and (2) that the United States made subject to the minimum 15%
tariff-reduction-over-six-years commitment under the URAA.

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however, could become problematic once negotiators begin to apply negotiating
parameters and timetables to specific commodities and food products that each country
historically has protected. Some Latin American countries, particularly Brazil, seek
increased access to the U.S. market for products that would compete directly with U.S.
producers of citrus, sugar, and beef. U.S. commodity groups and agribusiness seek
additional openings for their products in the growing Latin American market. They also
seek legal assurances that all countries will abide by sanitary and phytosanitary rules with
respect to agricultural imports. Though the United States will emphasize eliminating
tariffs and other barriers to agricultural trade, Brazil and other countries have signaled
they want the negotiating agenda to also address the issue of domestic agricultural support
(i.e., farm price and income support). They have suggested linking their reduction in their
higher tariffs to a concession by the United States on the domestic support issue. The
United States has countered that this issue is not one of the agreed-upon FTAA objectives,
and should instead be addressed jointly by all FTAA countries in the ongoing WTO
agriculture negotiations.
U.S. agricultural interests have had the opportunity through public comment to
present their views and concerns on the FTAA negotiations to USTR officials. Some
have participated in the private sector meetings scheduled alongside those for FTAA trade
ministers. The U.S. agricultural sector, though, appears either lukewarm about FTAA
prospects or opposed to this initiative. There is a widely held view that U.S. agriculture
expects to benefit more, or would have less to lose, from a comprehensive multilateral
WTO agreement compared to an FTAA agreement,
If an FTAA agreement is reached that reflects the objectives agreed to by trade
ministers in 1998, U.S. farm policymakers may have to contend with the repercussions
of opening the U.S. market to import-sensitive farm products. Though final agreement
and implementation of an FTAA agreement would be many years off, this outcome could
prompt interest in developing alternatives to the current sugar program. Some may also
explore whether there might be a need to develop mechanisms to help other commodities
and products that have traditionally not received government support, such as vegetables,
fruit, and orange juice, to offset the effects of increased import competition.

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