Agriculture in Pending U.S. Free Trade
Agreements with Colombia, Panama, and
South Korea
Remy Jurenas
Specialist in Agricultural Policy
February 14, 2011
Congressional Research Service
7-5700
www.crs.gov
R40622
CRS Report for Congress
P
repared for Members and Committees of Congress
Agriculture in Pending U.S. Free Trade Agreements
Summary
The 112th Congress is expected to consider separate free trade agreements (FTAs) signed by the
Bush Administration with South Korea, Panama, and Colombia. If and when submitted, these
trade agreements will be debated under trade promotion authority, or fast-track rules, designed to
expedite congressional consideration. Liberalizing trade in agricultural products, particularly the
pace of expanding market access for the more sensitive agricultural commodities, was one of the
more challenging areas that trade negotiators faced in concluding each of these FTAs. In each
instance, issues dealing with food safety and animal/plant health matters (technically not part of
the FTA negotiating agenda) were not resolved until later.
Of these three pending agreements, the U.S.-South Korea (KORUS) FTA would be the most
commercially significant for U.S. agriculture since the North American Free Trade Agreement
(NAFTA) took effect with Mexico in 1994. Because Colombia, one of the largest markets in
South America, imposes a high level of border protection on agricultural imports, the Colombia
FTA has the potential to noticeably increase U.S. agricultural exports. Though Panama is a
relatively small market, U.S. exporters would have opportunities to make additional sales.
Many U.S. commodity groups, some general farm organizations, and many agribusiness and food
firms support these three trade agreements. They argue for quick approval to secure the benefits
of additional agricultural exports once all three are fully implemented (estimated to range from $2
billion to $4 billion). They contend that the timely approval of these FTAs will protect or enhance
the U.S. competitive position in these three markets. Their focus has shifted from not simply
securing the gains already negotiated, to ensuring that the United States moves before other major
agricultural exporting countries (e.g., the European Union, Australia) lock in preferential access
under their FTAs negotiated with South Korea, Colombia, and Panama.
During 2010, the Obama Administration’s objective was to address outstanding issues of concern
to some Members of Congress before submitting these FTAs to Congress for consideration. In
December, U.S. and South Korean negotiators agreed to changes in the KORUS’ auto provisions
sufficient enough for the President to call now for its quick approval. Though the Administration
and some Members of Congress sought a full opening of South Korea’s market to U.S. beef (i.e.,
slaughtered from all cattle, irrespective of age), Korean negotiators succeeded in deflecting this
issue off the table. Recent movement by Panama on a bilateral tax information sharing treaty and
labor rights issues could influence the U.S. timetable for taking up the Panama FTA. Colombia’s
handling of labor union violence and human rights is viewed by the Administration and some
Members as the main issues that still need to be resolved before that FTA is submitted to
Congress for a vote.
Some Members disagree with the Administration on the timing of when Congress should take up
these trade agreements. Republican leaders argue that all three FTAs should be either voted on as
one package or in quick succession. Some also have suggested that their support for other trade
programs awaiting congressional renewal depends on the White House making clear its strategy
for moving these agreements. The Administration has stated it will submit the KORUS FTA soon
in order to secure congressional approval by mid-2011, and will forward the Panama and
Colombia FTAs when the pending issues are resolved.
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Agriculture in Pending U.S. Free Trade Agreements
Contents
Recent Developments.................................................................................................................. 1
Background ................................................................................................................................ 1
Key Agricultural Issues in FTAs.................................................................................................. 3
South Korea ................................................................................................................................ 4
Overview of Agricultural Trade............................................................................................. 4
Agricultural Provisions ......................................................................................................... 6
Geographical Indications for Dairy Products ......................................................................... 7
Potential Impact on U.S. Agricultural Trade .......................................................................... 8
Korea’s Rules for U.S. Beef Imports ..................................................................................... 9
Outlook for Congressional Consideration ............................................................................ 10
Panama ..................................................................................................................................... 11
Overview of Agricultural Trade........................................................................................... 12
Agricultural Provisions ....................................................................................................... 13
Potential Impact on U.S. Agricultural Exports ..................................................................... 15
Sanitary and Phytosanitary Agreement ................................................................................ 15
Outlook for Congressional Consideration ............................................................................ 15
Colombia .................................................................................................................................. 16
Overview of Agricultural Trade........................................................................................... 16
Agricultural Provisions ....................................................................................................... 18
Potential Impact on U.S. Agricultural Trade ........................................................................ 19
SPS Side Letter ................................................................................................................... 20
Outlook for Congressional Consideration ............................................................................ 20
Figures
Figure 1. U.S. Agricultural Trade with South Korea..................................................................... 5
Figure 2. U.S. Agricultural Trade with Panama.......................................................................... 12
Figure 3. U.S. Agricultural Trade with Colombia....................................................................... 17
Tables
Table 1. Composition of Agricultural Trade with South Korea, 2009............................................ 5
Table 2. Composition of Agricultural Trade with Panama, 2009................................................. 13
Table 3. - Composition of Agricultural Trade with Colombia, 2009 ........................................... 17
Contacts
Author Contact Information ...................................................................................................... 21
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Agriculture in Pending U.S. Free Trade Agreements
Recent Developments
On February 9, 2011, U.S. Trade Representative Ron Kirk testified that President Obama “has
directed [him] to immediately intensify engagement with Colombia and Panama with the
objective of resolving the outstanding issues as soon as possible this year” so that both FTAs can
be brought “to Congress for consideration immediately thereafter.”1
On January 25, 2011, the President in his State of the Union address, noting that his
Administration had just finalized the U.S.–South Korea Free Trade Agreement (KORUS FTA),
asked “Congress to pass it as soon as possible.” He added his intent is to “only sign [trade] deals
that keep faith with American workers, and promote American jobs … as we pursue agreements
with Panama and Colombia …”
On January 25, 2011, Senator Johanns introduced S.Res. 20 expressing the sense of the Senate
that the United States should immediately approve the FTAs with Korea, Colombia, and Panama.
S. 98, introduced by Senators Portman and Lieberman, expresses the sense of Congress that the
President submit these three agreements and renew existing trade promotion authority through
mid-2018 with respect to trade negotiations already underway and to those yet to be begin.
On January 25, 2011, the House Ways and Means Committee held a hearing on the three pending
free trade agreements with Colombia, Panama, and South Korea. Among those that testified, Bob
Stallman, President of the American Farm Bureau Federation—a general farm organization, noted
that the additional trade generated by these three FTAs would benefit U.S. agriculture.
On January 24, 2011, a coalition of agricultural groups and food companies in a letter to
congressional leaders urged Congress to approve the KORUS FTA “at the earliest possible
opportunity.” They emphasized the “extremely serious” risks for U.S. agriculture if this trade
agreement is not implemented, stating that if rejected, the United States will “relinquish export
sales” to other countries that have implemented, or soon will, their FTAs with South Korea. The
letter highlighted the prospect of U.S. agricultural exports being “put … at a severe [competitive]
disadvantage” when Korea’s FTA with the European Union takes effect in mid-2011 if the United
States fails to implement the KORUS FTA.
Background
The 112th Congress may consider free trade agreements (FTAs) with Colombia, Panama, and
South Korea. The timing of the White House submission of each agreement will depend on the
resolution with each country of outstanding issues (e.g., labor protections, tax reporting,
automobile provisions). Some of these are not directly related to the signed text of an FTA. While
the terms of U.S. beef access to South Korea’s market may receive continued attention from some
policymakers, the agricultural provisions in each FTA largely have been received positively by
most U.S. agricultural organizations and food industry associations.
1 USTR, “Testimony of Ambassador Ron Kirk Before The House Ways and Means Committee,” February 9, 2011,
available at http://www.ustr.gov/about-us/press-office/speeches/transcripts/2011/february/testimony-ambassador-ron-
kirk-house-ways-an.
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U.S. farmers and ranchers, agribusiness firms, and food manufacturers view efforts to expand
commodity and food exports as vital to improving farm income and business profitability. For
this reason, many U.S. policymakers since the mid-1980s have viewed negotiating trade
agreements as a way of creating opportunities to increase agricultural sales overseas, primarily by
seeking to lower and/or eliminate other countries’ trade barriers (e.g., tariffs and quotas). To
accomplish this, the United States has had to reciprocate by lowering similar forms of border
protection on farm and food products imported from prospective trading partners. Because of the
import sensitivity of some U.S. commodity sectors (e.g., beef, dairy, and sugar, among others) to
the prospect of increased competition from foreign suppliers, the executive branch has had to take
the concerns of producers of these commodities into account during negotiations, in order to
secure congressional approval of concluded trade agreements.
The 1994 Uruguay Round Agreement on Agriculture negotiated under the structure of the
multilateral institution that preceded the World Trade Organization (WTO) created substantial
export opportunities for U.S. agriculture and agribusiness by partially lowering then-existing
trade barriers worldwide. However, the U.S. FTAs that took effect with Canada in 1989 and with
Mexico in 1994 (when both were combined into the North American Free Trade Agreement
(NAFTA)) were more ambitious than the Uruguay Round in reducing barriers to bilateral
agricultural trade. With these two trade agreements setting into motion a process that removed
most forms of border protection by the end of 10- or 15-year transition periods, respectively,
Canada and Mexico have become two of the fastest-growing markets for U.S. agricultural
exports.
The United States has also entered into FTAs with 15 other, smaller trading partners. Most of
these have only taken effect in the last six years.2 Three FTAs negotiated and signed by the Bush
Administration with Colombia, Panama, and South Korea await congressional consideration.
Under the trade promotion authority (TPA) that applies, President Obama has discretion on when
to submit each to Congress for a vote. TPA details the process for submitting implementing
legislation to Congress for these FTAs, and the expedited legislative procedures to be followed
that limit debate, prohibit amendments, and require a simple up or down vote. Before an FTA can
take effect, Congress must approve the implementing bill.3
The timing of when each pending FTA might be submitted by the White House to Congress will
depend on how issues of concern identified by the Obama Administration and Members of
Congress are addressed in bilateral discussions to be held with each country. Accordingly,
agriculture as covered in each pending trade agreement is examined in this report in the order that
Congress may take them up, based upon recent statements made by Obama Administration
officials and Members of Congress.
2 These include, by date of entry, Israel (1985), Jordan (2001), Singapore (2004), Chile (2004), Australia (2005),
Morocco (2006), El Salvador (2006), Honduras (2006), Nicaragua (2006), Guatemala (2006), Bahrain (2006),
Dominican Republic (2007), Costa Rica (2009), Oman (2009), and Peru (2009). For more information on the
agricultural provisions in these FTAs, see archived CRS Report RL34134, Agriculture in U.S. Free Trade Agreements:
Trade with Current and Prospective Partners, Impact, and Issues, by Remy Jurenas.
3 For background, see CRS Report RL33743, Trade Promotion Authority (TPA) and the Role of Congress in Trade
Policy, by J. F. Hornbeck and William H. Cooper.
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Key Agricultural Issues in FTAs
FTAs negotiated by the United States are generally comprehensive in scope. In addition to
addressing market access for agricultural and food products, they cover trade in all other goods
(including textiles and apparel), improved market access commitments for services and
government procurement, and protections for investment and intellectual property rights. They
also include provisions on dispute settlement, labor, the environment, customs administration,
among other matters.
FTAs establish a framework for liberalizing trade in agricultural commodities and food products
between partners within an agreed-upon time period. The primary objective in negotiating an FTA
is to achieve preferential access to each other’s market, to secure a competitive edge over other
countries that sell into either partner’s market. Accomplishing this requires that negotiators work
to reduce and eventually eliminate tariffs and quotas on most agricultural goods. Because the
United States and each prospective FTA partner have some agricultural products that benefit from
high levels of border protection, negotiators spend much of their time wrestling with how to
reduce barriers for these import-sensitive products.4
While U.S. negotiators sought to eliminate high tariffs and restrictive quotas imposed on U.S.
agricultural exports to these three country markets, they also faced pressures to protect U.S.
producers of import-sensitive commodities (beef, dairy products, and sugar, among others). FTA
partner country negotiators faced similar pressures. One Bush Administration policy objective
was for FTAs to be comprehensive (i.e., cover all products). For the more import-sensitive
agricultural commodities, negotiators agreed on long transition periods, temporary additional
protection in the case of import surges, or indefinite protection of a few commodities. To illustrate
the latter, because of political sensitivities for the United States or its partners, negotiators agreed
to retain in perpetuity quantitative import limits and prohibitively high tariffs on some of the most
import-sensitive commodities. In one exception, though, the United States agreed to Korea’s
insistence that rice be completely excluded from their FTA.
Conversely, each pending FTA partner would have additional access to the U.S. market for those
agricultural commodities that are now protected by restrictive U.S. import quotas. Of these, the
U.S. sugar sector would face some competition from increased imports of sugar from Colombia
and Panama. The small increase in additional imports from South Korea would likely be in the
form of primarily ethnic foods. Also, because these three countries consume most of the beef and
dairy products that they produce, any additional export sales to the United States would likely be
accommodated by the large U.S. market with little effect.
The United States also has sought to address other non-tariff barriers (particularly those dealing
with food safety and animal/plant health—commonly referred to as sanitary and phytosanitary
(SPS) measures) on a separate, but parallel, track. Although U.S. negotiators assert that resolution
of outstanding bilateral SPS disputes is not on the formal FTA negotiating agenda, the negotiating
process has witnessed U.S. and partner country negotiators seeking to resolve such disputes and
using them as leverage to achieve other FTA negotiating objectives. Further, resolving these
4 A country’s designation of certain agricultural commodities as “sensitive” usually reflects high levels of border
protection (e.g., high tariffs, restrictive quotas, price bands) to preclude competition from lower-priced imports and/or
the political strength of producers of these commodities that benefit financially from such border protection.
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disputes is viewed as essential to ensure that FTA partners do not resort to using these barriers to
undercut the openings created for U.S. exporters in market access talks.
South Korea
Expanding export opportunities for U.S. agriculture to the large South Korean market was the
main goal pursued by U.S. agricultural officials in negotiating the U.S.-Korea Free Trade
Agreement (KORUS FTA). Their objective reflected the interests of the U.S. agricultural sector,
which eyes potential for further export gains in a major food importing country with a high level
of border protection. U.S. exporters in particular see opportunities for increasing sales of higher-
value food products to an expanding middle class. Compromises on the final package, reached in
the final hours before the April 1, 2007, deadline,5 would provide for much improved market
access for all U.S. agricultural products (except for rice) to the Korean market. Trade ministers
formally signed the agreement on June 30, 2007. However, numerous Members of Congress then
signaled that their support for the KORUS FTA depends on South Korea fully reopening its
market to U.S. beef (see “Korea’s Rules for U.S. Beef Imports” below). The Bush Administration
had hoped that the subsequent 2008 bilateral agreement on the terms of U.S. access to Korea’s
beef market would open doors to submission of the KORUS FTA to Congress for a vote that year.
However, differences with the Democratic leadership over the agreement’s automobile provisions
and with some of the beef agreement’s terms halted further movement. In late June 2010,
President Obama directed Administration officials to begin to work with their Korean
counterparts to resolve the outstanding auto and beef issues with South Korea by the time he met
the Korean President in November 2010 at the G-20 meeting in Seoul. Missing that target,
negotiators in early December 2010 reached a supplemental agreement that secured Korean
changes to automobile and truck provisions in return for a U.S. concession on pork. Korean
negotiators, though, held firm on not negotiating the beef issue.
Overview of Agricultural Trade
The United States runs a strong positive agricultural trade balance with South Korea. In 2009,
South Korea was the 6th largest market for U.S. farm products in the world, as U.S. export sales
totaled $3.9 billion. Shipments in 2009 were 30% lower than in 2008, largely due to the decline in
trade worldwide caused by the economic recession. Exports rebounded 35% in 2010, reaching
$5.3 billion (Figure 1). Leading exports were corn, soybeans, wheat, beef, and pork (Table 1).
Agricultural shipments accounted for more than 14% of all U.S. merchandise exports to South
Korea, up from about 10% in 2000.
In 2009, U.S. sales accounted for 28% of South Korea’s $15 billion agricultural import market.
The other major competitors in South Korea’s commodity and food import market (China,
Australia, the European Union, and Brazil) accounted for another 41% of this total.
U.S. agricultural imports from South Korea in 2009 were small—$245 million—consisting
primarily of ethnic foods, and do not appear to compete directly with U.S. agricultural and
processed-food products. South Korea ranked 38th as a source of U.S. agricultural imports.
5 This was the last day that the Executive Branch could conclude a trade agreement under 2002-enacted trade
promotion authority (TPA) and notify Congress of its intent to sign it.
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Figure 1. U.S. Agricultural Trade with South Korea
6,000
5,000
4,000
$
n
3,000
illio
m 2,000
1,000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
U.S. Agricultural Exports
U.S. Agricultural Imports
Source: U.S. Department of Agriculture (USDA), Foreign Agricultural Service (FAS), Global Agricultural Trade
System Online.
Table 1. Composition of Agricultural Trade with South Korea, 2009
Leading U.S. Exports
Leading U.S. Imports
Value
Value
Share of
million
Share of
Product
million $
Total
Product
$
Total
Corn 1,107.4
28.3%
Pasta
Productsa 35.0
14.3%
Soybeans 276.0
7.0%
Nonalcoholic
Beverages
27.5
11.2%
Wheat 270.7
6.9%
Fresh
Pears 23.4
9.5%
Beef & Veal, Fresh-Chilled-Frozen
208.3 5.3% Food
Preparations
21.8
8.9%
Pork, Fresh-Chilled-Frozen
182.2
4.6%
Baked Products & Pastries
20.3
8.3%
Cattle Hides
151.1
3.9%
Fruit & Edible Plants, Preserved
12.1
4.9%
Hay & Related Forage Products
149.1
3.8%
Sauces & Condiments
10.9
4.4%
Food Preparations
107.2
2.7%
Photo Gelatin
6.5
2.7%
Soybean Meal
106.1
2.7%
Soups & Broth
5.4
2.2%
Cotton 84.5
2.2%
Ginseng 3.9
1.6%
Subtotal, Top 10
2,642.6 67.5%
Subtotal, Top 10
166.8
67.9%
Al Other Agricultural Products
1,274.9
32.5%
Al Other Agricultural Products
78.7
32.1%
Total
3,917.4 100.0%
Total
245.4
100.0%
Source: Derived by CRS from trade data available at USDA’s FAS Global Agricultural Trade System Online.
a. Large portion likely is ramen noodles.
b. Likely edible foods
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Leading imports were pasta products , fresh pears, nonalcoholic beverages, food preparations, and
various baked products (Table 1). In recent years, agricultural imports accounted for one-half of
1% of all U.S. merchandise imports from South Korea.
Agricultural Provisions
In 2009, South Korea’s average applied tariff on agricultural imports was almost 49%. Average
tariffs are highest for vegetable products (over 100%). Tariffs on pistachios and shelled walnuts
are 30%, on pork either 22.5% or 25%, on poultry and egg products from 18% to 27%, on beef
40%, on oranges 50%. Also, Korea extensively uses tariff-rate quotas (TRQs) 6 with prohibitive
over-quota tariffs to limit imports of oranges (50%), various dairy products (89% to 176%),
potatoes (304%), onions (135%), non-malting barley (300% or 324%), corn starch (226%), and
numerous other agricultural products.7
The KORUS FTA would eliminate tariffs and quotas on most agricultural products traded
bilaterally. The United States would receive immediate duty-free access to Korea for almost two-
thirds of current U.S. agricultural exports once it takes effect. This would apply, among other
products, to wheat, corn, soybeans for crushing, whey for feed use, hides and skins, cotton,
cherries, pistachios, almonds, orange juice, grape juice, and wine. Tariffs and import quotas on
most other U.S. agricultural goods would be phased out within 10 years. However, longer
transition periods would apply to Korea’s more sensitive commodities. This means tariffs, quotas,
and safeguards to protect against import surges would be phased out in various stages ranging up
to 23 years. Tariffs on beef 8 and potatoes for chipping would be removed in 15 years, on fresh
grapes in 17 years, on ginseng products and fresh pears in 20 years, and on fresh apples in 23
years. TRQs with long phase-out periods (10 to 18 years) would apply to other sensitive products
as cheeses, butter, dairy-based infant foods, barley, whey for food use, animal feed supplements
and hay, corn starch, and ginseng. However, seven U.S. agricultural products (skim and whole
milk powders, evaporated milk, in-season oranges, potatoes for table use, honey, and identity-
preserved soybeans for food use) would be subject to Korean TRQs that slowly expand in
perpetuity. Shipments against these quotas would enter duty-free, but over-quota amounts would
indefinitely face prohibitively-high tariffs. USDA notes that these TRQs ensure access for U.S.
exporters that South Korea could have easily changed under its multilateral trade commitments.
Also, because of the sensitivity of marketing during harvest, quotas and/or tariffs and phase-out
schedules would vary, depending on the season of the year that U.S. oranges, table grapes, and
potatoes for chipping enter Korea’s market.9
6 A TRQ is a two-part tool used by countries to protect their more sensitive agricultural and food products, often while
transitioning over time to free trade. The quota component provides for duty-free access of a specified quantity of a
commodity, which in an FTA usually expands over time. Imports above this quota are subject to a prohibitive tariff that
in an FTA frequently declines over time. At the end of a product’s transition period to free trade under an FTA, both
the quota and tariff no longer apply (unless an exception is agreed to), allowing for its unrestricted access to the
partner’s market.
7 WTO, Country Profiles, October 2010; and WTO, Trade Policy Review – Report by the Secretariat – Republic of
Korea, September 3, 2008, p. 44.
8 Though South Korea would completely phase out its 40% tariff on beef muscle meats in 15 years, a separate bilateral
agreement on the terms of access for U.S. beef into Korea’s market that addressed Korean food safety concerns was not
concluded until June 2008 (see “Korea’s Rules for U.S. Beef Imports”).
9 The agreement’s agricultural provisions are summarized in USDA’s “Fact Sheet - U.S.-Korea Trade Agreement,”
December 2010, available at http://www.fas.usda.gov/itp/KORUS%20One-Page%20Fact%20Sheet.pdf. A detailed
description of the commodity-specific market access provisions (tariff reduction schedules, transition periods, TRQ
(continued...)
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Unique to this FTA, South Korea secured the right to specify the state entities and trade
associations that would administer each TRQ under either an auction or licensing system.
Safeguards (e.g., in the form of special add-on tariffs applied in case of import surges) would be
triggered if imports from the United States of some sensitive agricultural products exceed
specified levels. Korea succeeded in excluding rice and rice products from the agreement—its
main objective in negotiating agricultural issues. This outcome reflected the prevailing view that
rice is vital to maintaining, and inseparable from, Korea’s national identity, and the political
reality that rice farming preserves the basis for economic activity in the countryside. However,
the United States will continue to be able to sell rice under quotas created to meet South Korea’s
multilateral WTO commitments.
The late 2010 negotiations to address outstanding FTA issues resulted in only one change to the
agreement’s agricultural provisions. South Korea requested a concession involving U.S. pork in
return for changes that USTR sought in the automobile and truck provisions. The United States
accepted a two-year extension in the phasing out of Korea’s tariff on the largest category of pork
imports from the United States. As modified by the supplemental agreement, the KORUS FTA
would phase out South Korea’s 25% tariff on 90% of the U.S. pork (primarily frozen product)
now shipped to that market by January 1, 2016. This is two years longer than what both sides had
agreed to in the 2007 text (i.e., January 1, 2014).10 This concession appears to largely maintain a
competitive balance for U.S. pork exporters compared to what the EU secured for its pork sector
in its FTA with South Korea scheduled to go into effect in mid-2011. The National Pork
Producers Council acknowledged that even with this late change, the KORUS FTA is “good
deal.” It expects the agreement to “be one of the most lucrative for the U.S. pork industry,” with a
substantial increase projected in exports to South Korea, live hog prices, and direct jobs.”11
Because U.S. agricultural imports from South Korea are small and largely complementary, there
was little controversy in negotiating Korean access to the U.S. market. The United States agreed
to phase out tariffs and quotas on all agricultural imports from South Korea in stages ranging up
to 15 years. This longest period would apply to imports from Korea of beef, some dairy products,
rice, and malt extract.
Geographical Indications for Dairy Products
The U.S. dairy sector has expressed concern that the geographical indications (GI) provisions that
apply to various European cheeses in the FTA negotiated by South Korea with the European
Union (KOREU FTA) would undercut the potential benefits negotiated under the KORUS FTA
for U.S. cheeses with identical names that sell into the Korean market. GIs (similar to a
trademark) refer to marks that “identify a good as originating in the territory of a country, or a
(...continued)
amounts and growth rates, and safeguards) is found in USDA’s fact sheet “U.S. - Korea Free Trade Agreement
Benefits for Agriculture,” December 2010, available at http://www.fas.usda.gov/itp/KoreaTA/
KORUS%20Detailed%20Fact%20Sheet%202010.pdf. Additional fact sheets on the agreement’s commodity provisions
and the impacts for agriculture in 45 states are available at http://www.fas.usda.gov/info/factsheets/Korea/us-
koreaftafactsheets.asp.
10 South Korea’s 22.5% tariff on other U.S. pork products (e.g., fresh pork bellies and miscellaneous fresh cuts) would
be eliminated over 10 years as agreed to in 2007. It also secured a safeguard to protect against import surges from the
United States of these fresh pork products, which would expire at the end of 10 years.
11 NPPC, “U.S.-South Korea FTA Remains A Good Deal For U.S. Pork Producers,” December 3, 2010.
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region or locality in that territory, where a given quality, reputation or other characteristic of the
good is essentially attributable to its geographical origin.”12 To illustrate, “champagne” and
“Idaho potatoes” are examples of GI designations. Products so designated are eligible for relief
from acts of infringement and/or unfair competition under a country’s trademark laws and
regulations. Because GIs are commercially valuable in the international trade of agricultural
products, wines, and spirits, the EU in negotiating its bilateral trade agreements has sought to
secure additional protection for its GI-designated agricultural and beverage products in FTA-
partner country markets beyond what multilateral trading rules currently provide.
More than 50 Members of the House requested the USTR to ensure that as South Korea develops
regulations to implement the KOREU FTA’s GI provisions, those rules “do not undercut the dairy
market gains secured” in the KORUS FTA. They expressed concern that the U.S. dairy industry
will not be able to increase cheese exports if: (1) the United States does not “combat European
efforts to carve out the sole right for their producers to use … cheese names most familiar to
consumers around the world (e.g., feta, gorgonzola, munster, parmesan, provolone),” and (2) act
to safeguard against possible threats to the use of such generic terms as cheddar and mozzarella
“that could arise as a result of recent EU legal precedents” to protect the names of some EU wines
and spirits. USTR has held separate talks on this matter with South Korean officials, and
reportedly is still working on a solution to address these concerns.13
Potential Impact on U.S. Agricultural Trade
With the immediate elimination and phase out over time of much of South Korea’s relatively high
agricultural trade barriers under the KORUS FTA, the U.S. agricultural and food processing
sectors would noticeably benefit from additional exports. The U.S. International Trade
Commission (USITC) estimated that the increase in U.S. exports of agricultural commodities and
processed foods would account for up to one-third of the entire projected increase in total U.S.
merchandise exports to South Korea’s market once the KORUS FTA’s provisions are fully
implemented. U.S. sales of agricultural products would be from $1.9 billion to $3.8 billion (44%
to 89%) higher than exports under a no-agreement scenario. Almost half of this export increase
would accrue to the U.S. beef sector, based on the USITC’s assumption that U.S. beef exports
recover to the 2003 level before South Korea imposed for human health reasons its restrictions on
U.S. beef imports. About 20% of the export increase would benefit U.S. producers and exporters
of pork, poultry, and other meat products.14 The American Farm Bureau Federation (AFBF)
projected that U.S. agricultural exports by the end of the transition period (2027) would be more
than $1.5 billion (45%) higher under the KORUS FTA than would be the case otherwise. Sales of
beef, poultry, and pork would account for $644 million (or 42%) of this increase.15
12 Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), Article 22.1.
13 Letter from Congressional Dairy Farmers Caucus to USTR Ron Kirk, September 27, 2010; World Trade Online,
“Dairy GI Issue Related To Korea FTA Still Unresolved Despite Auto Deal,” December 8, 2010.
14 Derived by CRS from Table 2.2 in USITC, U.S.-Korea Free Trade Agreement: Potential Economy-wide and
Selected Sectoral Effects, September 2007, pp. 2-8 and 2-9.
15 Derived by CRS from American Farm Bureau Federation’s (AFBF) Implications of a South Korea-U.S. Free Trade
Agreement on U.S. Agriculture, July 2007, p. 17. To be consistent with the agricultural and food product categories
used to derive the USITC’s estimate, AFBF’s exports of fish products are not included in the estimated increase in
agricultural exports and agriculture’s share stated above. The AFBF assumed the KORUS FTA would have taken effect
in 2007 in developing its projections for 2027.
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The wide disparity in projected U.S. agricultural export estimates under the KORUS FTA
presented in these two analyses reflects the use of different methodologies and assumptions.16
One major factor that accounts for the difference is that the AFBF projects that U.S. beef sales
would be much lower than the USITC-estimated level.
Only the USITC looked at the impact of the KORUS FTA on U.S. agricultural imports. It projects
that U.S. imports of primarily processed food products from South Korea would be from $52
million to $78 million (12% to 18%) higher than such imports under a no-agreement scenario.17
Of the five FTAs that South Korea has entered into to date, the ones with Chile (2004) and
ASEAN – Association of Southeast Asian Nations (2007) are considered to be the more
significant for U.S. agricultural interests. South Korea’s FTA with the European Union (a
competitor of the United States in some agricultural products) is expected to take effect on July 1,
2011. Negotiations are continuing to conclude this year an FTA with Australia, another major
agricultural exporting country.
Korea’s Rules for U.S. Beef Imports
By the time that negotiators concluded the KORUS FTA on April 1, 2007, they had not reached a
breakthrough on the separate but parallel issue of how to resolve differences on the terms of
access for all U.S. beef in a way that would address Korea’s human health concerns. In 2003,
South Korea had been the third-largest market for U.S. beef exports. However, in late December
2003, Korea’s government imposed an import ban after a Canadian-born cow was discovered to
be infected with mad cow disease, or BSE (bovine spongiform encephalopathy), in Washington
state.18 Though the then-South Korean President stated in April 2007 that his government would
soon recognize international scientific standards as they applied to U.S. beef, little movement
occurred until after the Korean presidential elections later that year.
Talks on resolving this outstanding issue concluded just before newly-elected South Korean
President Lee met with President Bush at Camp David on April 18, 2008. Earlier that day, U.S.
and Korean negotiators reached agreement on the rules that Korea will apply to beef imports from
the United States. It allows for imports of all cuts of U.S. boneless and bone-in beef and other
beef products from cattle, irrespective of age, as long as specified risk materials known to
transmit mad cow disease are removed and other conditions are met. However, candlelight vigils
held by thousands protesting this agreement, calls by opposition parties that these terms be
renegotiated, and President Lee’s apologies for how his government mishandled this matter,
prompted the Korean government to secure additional changes to allay public concerns about the
safety of U.S. beef. Subsequent difficult negotiations led to the announcement of a “voluntary
private sector arrangement” on June 21, 2008, that limits sales to U.S. beef only from cattle less
16 For an explanation of these differences, see Appendix A in CRS Report RL34134, Agriculture in U.S. Free Trade
Agreements: Trade with Current and Prospective Partners, Impact, and Issues, by Remy Jurenas.
17 This range is derived by CRS using the USITC report referenced in footnote 14, pp. 2-8 and 2-9.
18 BSE is a fatal, neurodegenerative disease of cattle thought to arise from the consumption of animal-derived protein
supplements added to feed. Scientists believe that this disease can be transmitted to humans who eat the brain, spinal
cord, or other high-risk tissues of BSE-infected cattle, which causes a variant form of Creutzfeldt-Jakob disease
(vCJD). This is a very rare and incurable degenerative neurological disorder (brain disease) that is ultimately fatal.
Since then, there have been only two other discoveries of BSE in cattle in the United States—in June 2005, in a U.S.-
born cow on a Texas farm, and in March 2006, in another U.S-born cow in Alabama. To date, no persons have been
reported to have contracted vCJD in the United States.
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than 30 months old. Both countries view this as a transitional step intended to improve Korean
consumer confidence in U.S. beef.
U.S. beef exporters have since worked to recapture this key overseas market. Exports of U.S. beef
(including bone-in cuts) to South Korea resumed in mid-July 2008, and by year-end reached
almost $300 million, more than one-third of the record 2003 sales level. In 2009, with the decline
in beef sales worldwide due to the economic recession, U.S. beef sales to Korea fell to $216
million. For 2010, sales rebounded substantially to $518 million. Though Australia is the main
competitor, U.S. beef exporters have gained noticeable market share since the Korean market
reopened. The U.S. share (in quantity terms) rose from 15% in 2008, 26% in 2009, to a projected
34% in 2010 (compared to 69% in 2003). Promotional efforts to rebuild consumer confidence in
U.S. beef, aggressive marketing efforts by large store chains, and much lower retail prices for
foreign than for Korean beef, account for the continued growth in U.S. beef sales in Korea.
For additional information, see CRS Report RL34528, U.S.-South Korea Beef Dispute: Issues and
Status.
Outlook for Congressional Consideration
Following the President’s June 26, 2010, announcement of his decision to present the KORUS
FTA to Congress, Obama Administration officials stated their intent was to resolve the beef and
auto issues with South Korea by November 2010 once consultations with Congress and
stakeholders were complete. In the negotiations concluded on December 3, 2010, the beef issue
received little discussion as both sides focused on revising the auto provisions. President Obama,
in discussing the supplemental agreement, indicated that the United States will continue to work
toward “ensuring full access for U.S. beef to the Korean market.”19
Memories of the size and intensity of the 2008 anti-beef agreement protests in South Korea
appear to have directly influenced the position taken on the beef issue by Korean negotiators.
Reflecting this political sensitivity, they reportedly rejected any discussion on this matter in the
negotiations held in early November leading up to the summit between Presidents Obama and
Lee and in the final talks leading to the supplemental agreement. Their position was that this issue
“did not fall under” the FTA concluded in 2007. Soon after, South Korea’s trade minister
confirmed that there will be no more discussions on ending the age limits of U.S. cattle
slaughtered for exported beef. This stance was more recently affirmed by its ambassador to
Washington in late January 2011.20
Congressional reaction on the outcome of the beef issue was mixed. Senator Baucus (chairman of
the Senate Finance Committee), who has advocated for full access for U.S. beef irrespective of
the age of cattle in accordance with international scientific standards, expressed “deep
19 White House, Office of the Secretary, “Remarks by the President at the Announcement of a U.S.-Korea Free Trade
Agreement,” December 4, 2010.
20 Inside U.S. Trade, “Korean Negotiators Refused To Engage On Beef Issue In Seoul,” November 19, 2010;
Washington Trade Daily, “The KorUS Supplemental Agreement,” December 6, 2010, p. 3; Washington Post, Political
Economy Blog, “Obama, Lee outlined U.S.-Korea trade deal in Seoul, official says,” December 6, 2010; Bloomberg,
“South Korea’s Kim Rules Out Negotiations on U.S. Beef Imports,” December 6, 2010; Inside U.S. Trade, “Baucus to
Oppose Korea FTA Unless More Progress Made on Beef Issue,” December 10, 2010, p. 3; International Trade Daily,
“Korea Has No Plans to Discuss Beef Prior to Action on FTA, Ambassador Says,” February 1, 2011.
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disappointment” that the supplemental deal “fails to address Korea’s significant barriers to
American beef exports.” He stated his commitment to “right this wrong” and to work with the
Administration to ensure that ranchers “are not left behind.” More recently, Baucus said he will
not support the KORUS FTA until South Korea opens up its beef market. A few other Senators,
though concerned with the lack of progress on beef, viewed the deal positively and welcomed the
prospect for considering the KORUS FTA in 2011.21 Meat industry groups called for its quick
consideration, stating that over time it will significantly increase their exports to South Korea.
Beef interests called for continued efforts to secure full market access.22
On February 10, 2011, U.S. and South Korean negotiators signed the formal legal text of the
supplemental agreement that both sides reached in early December 2010. With this step
completed, the Obama Administration by early March plans to send a draft of a bill to implement
the revised KORUS FTA to the House Ways and Means and Senate Finance Committees. Both
committees will then engage in what is called a “mock mark-up,” whereby its provisions will be
reviewed, amendments offered, and votes held. The Administration does not have to accept any
amendments made in committee, nor is it bound by any committee votes. Once the President
formally submits the implementing bill to Congress for consideration under trade promotion
authority rules (i.e., limited debate with no amendments permitted, and an up or down vote, in
each chamber,), a maximum 60-day process starts for Congress to complete action. This would
imply a timetable where the White House submits the final bill by early April, the House votes by
late May, and the Senate votes in June.23 This schedule also reflects the high priority the
Administration has placed on securing approval by July 1, 2011, when the European Union’s FTA
with South Korea is scheduled to take effect.
For additional information, see CRS Report RL34330, The Proposed U.S.-South Korea Free
Trade Agreement (KORUS FTA): Provisions and Implications, CRS Report R41534, The EU-
South Korea Free Trade Agreement and Its Implications for the United States, and CRS Report
R41544, Trade Promotion Authority and the Korea Free Trade Agreement.
Panama
On December 19, 2006, after almost a year’s hiatus, U.S. and Panamanian negotiators reached
agreement on a comprehensive FTA that includes market access provisions for exports of interest
to U.S. agriculture. Though separate from this trade agreement, both governments on the next day
also signed an agreement detailing how SPS measures and technical standards will be applied to
bilateral agricultural trade (see “Sanitary and Phytosanitary Agreement,” below.) With these near-
simultaneous developments, both sides resolved outstanding differences over Panama’s earlier
21 Senate Finance Committee, “Baucus Deeply Disappointed With Announcement on Korea Trade Deal, Commits to
Keep Fighting for American Ranchers,” December 3, 2010; Senate Agriculture Committee, “Sen. Chambliss Statement
on U.S.-South Korea Free Trade Agreement,” December 3, 2010; Senator Grassley, “Conference Call with Farm
Broadcasters,” December 7, 2010; Washington Post, “Senator’s objection may slow trade pact,” February 3, 2011, p.
A4.
22 Meatingplace.com, “U.S.-Korea FTA deal leaves beef unchanged, phases out tariffs,” December 6, 2010; Ibid.,
National Cattlemen’s Beef Association; American Meat Institute, “AMI Statement on Finalized U.S. Free Trade
Agreement with South Korea,” December 3, 2010.
23 WSJ.com, “Negotiators Finalize Korea-FTA Language,” January 27, 2011; Inside U.S. Trade, “USTR Circulates
Korea FTA Legal Language, Could Submit Draft Bill Soon,” January 28, 2011, pp. 1, 22.
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unwillingness to accept the equivalency of the U.S. meat inspection system24 and achieved a
balance in bilateral market access for sensitive agricultural products (sugar for the United States;
rice, onions, and potatoes for Panama). Both countries signed the U.S.-Panama Trade Promotion
Agreement (PTPA) on June 28, 2007. Panama’s legislature ratified the PTPA on July 11, 2007.
Action by the U.S. Congress depends on when the White House decides to submit implementing
legislation.
Overview of Agricultural Trade
The United States runs a strong positive agricultural trade balance with Panama. In 2009, Panama
ranked 42nd as an overseas market for U.S. farm products, with U.S. agricultural exports totaling
$362 million. Shipments in 2009 fell almost 16% from 2008, largely due to the decline in trade
caused by the worldwide economic recession. Exports rebounded 23% in 2010, reaching $445
million (Figure 2). Leading U.S. exports were corn, soybean meal, wheat, food preparations, and
rice (Table 2). Though U.S. agricultural exports have increased noticeably in recent years,
agriculture’s share of all U.S. merchandise exports to Panama stood at 9% in 2009, down from
just over 11% in 2000.
Figure 2. U.S. Agricultural Trade with Panama
450
400
350
300
$ 250
ion
ill 200
m 150
100
50
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
U.S. Agricultural Exports
U.S. Agricultural Imports
Source: U.S. Department of Agriculture (USDA), Foreign Agricultural Service (FAS), Global Agricultural Trade
System Online.
24 The FTA talks collapsed in January 2006, when Panama’s Agriculture Minister resigned, stating that the U.S. Trade
Representative’s request that the trade agreement include a side letter accepting the U.S. Department of Agriculture’s
safety certification would lower the country’s food and health standards and increase the risk of introducing animal
diseases. Subsequently, Panama’s government changed its position, and agreed to sign this separate SPS agreement.
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Table 2. Composition of Agricultural Trade with Panama, 2009
Leading U.S. Exports
Leading U.S. Imports
Share
Share
Value
of
Value
of
Product
million $
Total
Product
million $
Total
Corn
69.2
19.1% Raw Cane Sugar
16.8
39.7%
Soybean Meal
51.8
14.3% Coffeea 7.7
18.2%
Wheat 30.0
8.3%
Fresh
Pineapple
6.0
14.3%
Food Preparations
23.3
6.4% Bakery Products
2.4
5.6%
Rice
16.7
4.6% Fresh Pumpkins & Squash
1.8
4.3%
Chocolate & Cocoa-Containing
13.0 3.6%
Fresh
Melons
1.8 4.1%
Foods
Fresh Fruit, Decidiousb 9.7
2.7%
Beverages,
Nonalcoholic
1.6
3.9%
Beer 9.2
2.5%
Fresh
Bananas
1.6
3.7%
Pork & Products
7.9
2.2% Cocoa Beans
0.5
1.2%
Mixtures Oderiferousc
5.9
1.6% Fresh Yams & Dasheens
0.4
1.0%
Subtotal, Top 10
236.6 65.4%
Subtotal, Top 10
40.6 96.0%
Al Other Agricultural Products
125.3
34.6% Al Other Agricultural Products
1.7
4.0%
Total
362.0 100.0%
Total
42.3 100.0%
Source: Derived by CRS from trade data available at USDA’s FAS Global Agricultural Trade System Online.
a. Primarily unroasted
b. Primarily fresh grapes and fresh apples
c. Flavoring ingredients for food and drink industries
U.S. sales accounted for 45% of Panama’s $905 million agricultural import market in 2009.
Imports from major country competitors (Costa Rica, the European Union, Guatemala, and
Mexico) accounted for another 27% of this total.
In 2009, U.S. agricultural imports from Panama totaled $42 million. This placed Panama 67th as a
supplier of commodities and food products to the United States. Leading imports were raw cane
sugar, coffee, pineapple, bakery products, and pumpkins/squash (Table 2). Agricultural imports
accounted for 14% of total U.S. merchandise imports from Panama that year.
Agricultural Provisions
Currently, less than 40% of U.S. agricultural exports have duty-free access to Panama’s market.
Other agricultural products face an average 15% tariff, but some key products are subject to much
higher rates. Tariffs on meat can reach as high as 70%, and on grain up to 90%. U.S. chicken leg
quarters face a 260% tariff. Under the PTPA, almost two- thirds of present U.S. farm exports to
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Agriculture in Pending U.S. Free Trade Agreements
Panama would receive immediate duty-free treatment, according to the U.S. Department of
Agriculture (USDA).25 This would apply to sales of high quality beef, mechanically de-boned
chicken, frozen whole turkeys and turkey breasts, pork variety meats, whey, soybeans and
soybean meal, crude vegetable oils, cotton, wheat, barley, most fresh fruits (including apples,
pears, and cherries), almonds, walnuts, many processed food products (including soups and
chocolate confectionery), distilled spirits, wine, and pet food. Panama agreed to establish
preferential tariff-rate quotas (TRQs) for U.S. pork, chicken leg quarters, specified dairy
products, corn, rice, refined corn oil, dried beans, frozen french fries, fresh potatoes, and tomato
paste. Quotas for these import-sensitive commodities would be phased out in 5 to 20 years. The
longest transition period (20 years) would apply to rice, Panama’s most sensitive agricultural
commodity. However, Panama agreed to increase tariff-free access for U.S. rice if needed to
cover a shortfall in domestic output. Border protection on U.S. chicken leg quarters would end in
year 18. Quotas to be created for fresh onion and fresh potatoes would expand slowly in
perpetuity; high tariffs would apply to imports that exceed quota amounts.26
Almost all of Panama’s agricultural exports to the United States already enter duty free under the
Caribbean Basin Initiative trade preference program. Of U.S. commodities subject to quota
protection, much attention focused on the additional market access granted to sugar from Panama.
Additional sugar would be allowed entry into the U.S. market under preferential quotas that
would be in addition to Panama’s access for sugar under an existing U.S. multilateral trade
commitment. For 30 years, Panama has had a minimum 2.7% share (30,540 metric tons [MT]) of
the U.S. raw cane TRQ under U.S. WTO commitments. Under the PTPA, three new preferential
quotas for sugar and sugar-containing products would in the aggregate represent a 23% increase
over Panama’s current access. The largest duty-free TRQ (for raw sugar) would be set initially at
6,000 MT. It would then increase each year by 60 MT (1%) for 10 years, and then be capped at
6,600 MT indefinitely. All sugar product over-quota tariffs would indefinitely remain at high
levels (e.g., at an estimated tariff equivalent of 86% for raw cane sugar, using FY2008 data). In
the aggregate, these quotas represent most of the sugar surplus that Panama recently has had
available to export each year.
To provide another tool to manage U.S. sugar supplies and meet sugar program objectives,
negotiators also included a sugar compensation mechanism which the United States would be
able to exercise at its sole discretion. If activated, the United States would commit to compensate
Panama for sugar that its sugar industry would not be allowed to ship under these sugar TRQ
provisions.27 Other U.S. preferential TRQs would be established for cheeses, condensed and
evaporated milk, and ice cream imported from Panama, to be phased out completely in 15 to 17
years.
25 USDA, FAS, Fact Sheet summarizing the PTPA’s agricultural provisions, December 2010, available at
http://www.fas.usda.gov/info/factsheets/Panama/FINAL%20Panama%20One%20Page%20Fact%20Sheet%2012-6-
10.pdf.
26 A detailed description of commodity-specific market access provisions (transition periods, TRQ amounts and growth
rates, and safeguards) is found in the USDA fact sheet “U.S.-Panama Trade Promotion Agreement - Detailed Look at
Agriculture,” December 2010, available at http://www.fas.usda.gov/info/factsheets/Panama/
FINAL%20Panama%20Detailed%20Fact%20Sheet%2012-6-10.pdf. Fact sheets on the PTPA’s impacts for major
agricultural commodities in 45 states are available at http://www.fas.usda.gov/info/factsheets/Panama/us-
PanamaTPAfactsheets.asp.
27 It is similar to a provision found also in the Dominican Republic-Central America FTA, the Peru FTA, and the
pending FTA with Colombia.
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Potential Impact on U.S. Agricultural Exports
Because Panama is a small market for U.S. agriculture, gains from additional exports under the
PTPA are projected to be small relative to those projected under the FTAs with Colombia and
South Korea. Two studies analyzed what these gains might be compared to the no-trade
agreement scenario—one issued by the U.S. International Trade Commission (USITC) and
another prepared by the American Farm Bureau Federation (AFBF). The USITC estimated that
U.S. exports of agricultural commodities and processed foods to Panama would be $46 million
higher (or about 20% above the 2006 level) when the agreement is fully implemented, compared
to exports under a no-agreement outlook. Exports of corn and rice would be $27 million higher;
sales of processed foods—$10 million higher, and sales of meat—$7 million higher.28 The AFBF
study projects that U.S. agricultural exports at the end of the transition period (2027) would be
$195 million (46%) higher under the PTPA than would be the case otherwise. Sales of corn and
rice would be $66 million higher; sales of poultry, pork and beef—$43 million higher; sales of
soybeans and products—$29 million higher.29 The wide disparity in estimates presented in these
two analyses reflects the use of widely different methodologies and assumptions to estimate the
projected change in future U.S. agricultural exports under this trade agreement.30 Neither analysis
looked at possible changes in agricultural imports under the PTPA.
Of the seven FTAs that Panama has in effect, those with the five neighboring countries in Central
America (2003, 2008, 2009) and Chile (2006) are considered to be the most significant in terms
of competition for U.S. agricultural interests. An FTA signed with Canada in May 2010 has not
yet been ratified by both countries.
Sanitary and Phytosanitary Agreement
In the separate SPS agreement, Panama agreed to accept the U.S. meat and poultry inspection
system “as equivalent to its own.” This means that all Panamanian facilities that USDA certifies
as meeting U.S. food safety standards are eligible to export meat products to the U.S. market,
without the need for further inspection by Panama. The SPS agreement also commits Panama to
provide access for all U.S. beef, poultry, and related products, on the basis of accepted
international standards. It also streamlines import documentation requirements for U.S. processed
foods and affirms Panama’s recognition of the U.S. beef grading system. USDA notes that this
agreement eliminates “long-standing regulatory barriers faced by a variety of U.S. products” in
Panama’s market.31
Outlook for Congressional Consideration
The Obama Administration has signaled its intent to resolve two outstanding issues with Panama
as identified by some Members of Congress before submitting the PTPA for a vote. Concerns on
28 Derived by CRS from Table 2.4 in USITC, U.S.-Panama Trade Promotion Agreement: Potential Economy-wide and
Selected Sectoral Effects, September 2007, p. 2-7.
29 AFBF, Implications of a Panama Trade Promotion Agreement on U.S. Agriculture, 2007, p. 17. The AFBF assumed
the PTPA would have taken effect in 2007.
30 For an explanation of these differences, see Appendix A in CRS Report RL34134, Agriculture in U.S. Free Trade
Agreements: Trade with Current and Prospective Partners, Impact, and Issues, by Remy Jurenas.
31USDA, PTPA detailed fact sheet, p. 2, available at http://www.fas.usda.gov/info/factsheets/Panama/
FINAL%20Panama%20Detailed%20Fact%20Sheet%2012-6-10.pdf.
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worker rights center on certain provisions of Panama’s labor laws that restrict unions and that
have been criticized by the International Labor Organization. These include the requirement that a
minimum of 40 people are necessary to form a union, and the prohibition on more than one union
per business. Currently, Panama is standardizing its labor code so it will apply uniformly
nationwide. Plans call for expanding collective bargaining and right to strike provisions. The
minimum worker issue (i.e., reducing the number of workers required to form a union to 20, per
ILO guidelines, as called for by some Members) may not be addressed, reportedly for its lack of
support in Panama, even among labor groups. Also, Panama’s bank secrecy laws have raised
concerns that the country is serving as a tax shelter. To address this, the United States and Panama
signed a tax information exchange agreement on November 30, 2010—a tool that the Treasury
Department says will provide it with access to information needed to enforce U.S. tax laws. Some
observers view this as a positive development for moving toward congressional consideration of
the PTPA. Though House and Senate Republicans have called on the Administration to set a
timetable for submitting this agreement for a vote, the White House’s position is that outstanding
issues must be resolved before the PTPA is submitted to Congress.
For additional information on the PTPA, see CRS Report RL32540, The Proposed U.S.-Panama
Free Trade Agreement. For background on Panama, see CRS Report RL30981, Panama: Political
and Economic Conditions and U.S. Relations.
Colombia
Although U.S.-Colombian negotiators announced on February 27, 2006, that they had concluded
an FTA, remaining differences over two agricultural market access issues took another four
months (until July 8, 2006) to resolve. Further, the signing ceremony for the U.S.-Colombia Free
Trade Agreement (CFTA) was not scheduled until Colombia took steps to fulfill a separate
commitment to allow, by no later than October 31, 2006, the entry of U.S. beef imports (see “SPS
Side Letter,” below). The CFTA was formally signed on November 22, 2006. Colombia’s
legislature completed the approval process for the CFTA on October 30, 2007. Action by the U.S.
Congress depends on when the White House decides to submit implementing legislation.
Overview of Agricultural Trade
Colombia is the third largest market for U.S. farm products in Latin America after Mexico and
Venezuela, and ranked as the 20th largest market for U.S. agriculture in 2009. U.S.-Colombian
agricultural trade nearly come into balance in 2008, as U.S. agricultural exports since 2006 had
increased at about a 40% annual rate. In 2009, U.S. agricultural exports totaled $907 million,
down 46% from the $1.7 billion recorded in 2008. This trend continued in 2010, as exports fell
another 8% to $832 million (Figure 3). Much of the decline is due to increased competition from
Argentina and Brazil under preferential trade terms in those commodities that the United States in
prior years had exported to Colombia. The top U.S. agricultural commodities shipped to
Colombia in 2009 were corn, wheat, soybeans, cotton, and food preparations (Table 3).
Agriculture’s share of all U.S. merchandise exports to Colombia stood at just above 10%, down
from 12% in 2001.
In 2009, U.S. agricultural sales accounted for 26% of Colombia’s $3.6 billion agricultural import
market, compared to a 44% share in 2008. Agricultural imports from other major competitors in
this market (Argentina, Brazil, Ecuador, and Bolivia) accounted for another 44% of this total. For
comparison, these four countries’ share in 2008 was 30%.
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Figure 3. U.S. Agricultural Trade with Colombia
2,000
1,800
1,600
1,400
$
1,200
n
1,000
800
millio
600
400
200
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
U.S. Agricultural Exports
U.S. Agricultural Imports
Source: USDA, FAS, Global Agricultural Trade System Online.
Table 3. - Composition of Agricultural Trade with Colombia, 2009
Leading U.S. Exports
Leading U.S. Imports
Value
Share of
Value
Share of
Product
million $
Total
Product
million $
Total
Corn 216.0
23.8%
Coffee
Beansa
716.2
40.4%
Wheat
141.4 15.6%
Fresh
Roses
244.7 13.8%
Soybeans
100.3 11.1%
Fresh
Bananas
194.5 11.0%
Cotton
65.9
7.3% Fresh Cut Flowers
129.7
7.3%
Food Preparations
43.8
4.8% Fresh Chrysanthemums
75.2
4.2%
Soybean
Meal
30.6 3.4%
Coffee
Extracts
66.0 3.7%
Corn Gluten Meal
25.3
2.8% Sugarb 55.8
3.2%
Rice
25.3 2.8%
Carnations,
Fresh
55.5 3.1%
Chicken Meatc
20.0 2.2%
Plantains,
Fresh
42.8 2.4%
Animal Feed Preparations
14.8
1.6% Bakery Products
23.7
1.3%
Subtotal, Top 10
683.5 73.5%
Subtotal, Top 10
1,604.2 90.5%
Al Other Agricultural Products
223.7
24.7% Al Other Agricultural Products
167.8
9.5%
Total
907.2 100.0%
Total
1,772.0 100.0%
Source: Derived by CRS from trade data available at USDA’s FAS Global Agricultural Trade System Online.
a. Primarily raw cane sugar
b. Primarily unroasted
c. Frozen and processed
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U.S. agricultural imports from Colombia in 2009 reached nearly $1.8 billion, ranking Colombia
12th as a supplier of U.S. agricultural imports (Figure 3). Leading imports were coffee beans,
roses, bananas, cut flowers, and chrysanthemums (Table 3). In 2009, agricultural imports
accounted for almost 16% of total U.S. merchandise imports from Colombia, about the same as in
2000.
Agricultural Provisions
Currently, no U.S. agricultural export has duty-free access to Colombia’s market. Applied tariffs
on agricultural imports range from 5% to 20%, but under WTO rules, Colombia could raise these
to bound levels which range from 15% to 388%.32 The CFTA would eliminate tariffs and quotas
on all agricultural products traded bilaterally (except for sugar) and establish long transition
periods for the more sensitive commodities. The United States would secure immediate duty-free
access to Colombia for more than one-half of its current exports by value. This would apply to
high-quality beef, bacon, cotton, wheat, soybeans, soybean meal; apples, pears, peaches, and
cherries; and frozen french fries and cookies, among other food products. Also, Colombia agreed
to immediately eliminate price bands for some 150 products—a mechanism that added fees onto
existing tariffs which fluctuated depending upon world prices. This effectively had resulted in a
higher level of border protection than would usually be the case.33 Colombia’s tariffs on most
other farm and food products imported from the United States would be phased out in periods
ranging from 3 to 15 years. For its most sensitive commodities (including those subject to price
bands), Colombia would eliminate quotas and over-quota tariffs for corn and other feed grains in
12 years, for dairy products in 15 years, for chicken leg quarters in 18 years, and for rice in 19
years. Both countries would also commit to consult and review the implementation and operation
of provisions on trade in chicken about midway through the long transition period.34
Almost all of Colombia’s agricultural exports to the United States would continue to benefit from
current duty free access under the Andean Trade Preferences Act,35 which the CFTA would make
32 A bound tariff represents the maximum tariff that a country can impose on imports of a particular product, and
reflects the outcome of the last set of WTO multilateral negotiations concluded in 1993. Bound rates are incorporated
as an integral component of each country’s schedule of concessions or commitments to other WTO country members.
However, a country can decide to impose a lower, or applied, tariff rate on imports of this particular agricultural
commodity (i.e., because of changing supply or demand factors). Just as easily, though, it has the right to increase an
applied tariff back up to the bound rate, which could adversely affect trade flows.
33 Price bands serve to insulate producers and processors from trade competition when the world price for any
commodity falls below a calculated reference price (e.g., a price target comparable to a commodity support level). The
domestic sector is protected by a variable fee imposed on the imported commodity, which when added to the lower
world price or a selected international reference price, raises the importer’s cost to this adjusted import price. This fee
can fluctuate, depending on changes in the reference price (adjusted for freight, insurance, and other factors) to equal
this pre-determined minimum import price. Under the CFTA, Colombia would convert the level of border protection
that their price bands provide into a relatively high over-quota tariff—frequently the product’s bound rate—which
would then be reduced to zero during a specified transition period.
34 The CFTA’s agricultural provisions are summarized in USDA, FAS, “U.S.-Colombia Trade Promotion Agreement -
Agriculture Overview,” December 2010, available at http://www.fas.usda.gov/info/factsheets/Colombia/
FINAL%20Colombia%20One%20Page%20Fact%20Sheet%2012-6-10.pdf. For a detailed description, see USDA
“U.S.- Colombia Trade Promotion Agreement – Detailed Look at Agriculture ,” December 2010, available at
http://www.fas.usda.gov/info/factsheets/Colombia/FINAL%20Colombia%20Detailed%20Fact%20Sheet%2012-7-
10.pdf. Fact sheets on the CFTA’s impacts for major agricultural commodities in 45 states are available at
http://www.fas.usda.gov/info/factsheets/Colombia/us-ColombiaTPAfactsheets.asp.
35 This trade preference program extends special duty treatment to certain U.S. imports that meet domestic content and
other requirements from designated countries in the Andean region. Its purpose is to promote economic growth in the
(continued...)
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permanent. Of those commodities subject to U.S. quota protection, much attention focused on the
amount of additional sugar that would be allowed access to the U.S. market. Additional sugar
would be allowed entry into the United States under a preferential quota that would be in addition
to Colombia’s current access for sugar under an existing U.S. multilateral trade commitment.
Under the CFTA, the United States would triple Colombia’s access to the U.S. sugar market—
from its historic 2.3% share of the U.S. raw cane sugar TRQ (25,273 MT)—by an additional
50,000 MT of sugar and specified sugar products in the first year. This new quota would expand
in perpetuity each year by 750 MT (1.5%) starting in year 2, while the current high U.S. tariff on
over-quota sugar entries would be applied indefinitely.36 The CFTA also includes a sugar
compensation provision designed to protect the operation of the U.S. sugar program. Crafted so
that if the United States exercised its sole discretion to activate this mechanism, the U.S.
Government would commit to compensate Colombia for sugar that its exporters would not be
allowed to ship under the CFTA’s preferential access provision. In addition, preferential TRQs
would be established for imports from Colombia of beef, specified dairy products, and tobacco.
These would expand slowly until phased out in 10, 11, or 15 years.
Potential Impact on U.S. Agricultural Trade
Because Colombia protects its agricultural sector with high tariffs and import quotas, two
analyses project that their elimination over time under the CFTA would benefit the U.S.
agricultural sector. The U.S. International Trade Commission (USITC) estimated that U.S.
agricultural exports to Colombia would be $170 million, or 24% higher, with full implementation
of these provisions, compared to a baseline scenario of no policy change. Gains for U.S.
agriculture would accrue primarily to the corn, wheat, rice, and soybean sectors. The USITC also
projects that sales of beef, pork, and processed foods would increase. Agricultural exports alone
would account for 16% of the projected increase in all U.S. merchandise exports to Colombia
under this FTA.37 Separately, the American Farm Bureau Federation (AFBF) estimated that U.S.
agricultural exports to Colombia would be $693 million higher in 2026 when the FTA is fully
implemented than would occur otherwise. The AFBF study similarly expects that most of the
additional exports would be of U.S. corn, wheat, and soybean products.38 The wide disparity in
estimates presented in these two analyses reflects the use of different methodologies and
assumptions to estimate the projected change in future U.S. agricultural exports under this trade
agreement.39
Only the USITC study considered the CFTA’s impact on U.S. agricultural imports. It estimated
that such imports would be $223 million, or 11% higher, than under the no-agreement scenario.
Additional imports of sugar would account for almost half of the estimated increase in farm
(...continued)
Andean region and to encourage a shift away from dependence on illegal drugs by supporting legitimate economic
activities. Congress in late 2010 extended ATPA benefits for Colombia through February 12, 2011 (P.L. 111-344). For
additional information, see CRS Report RS22548, ATPA Renewal: Background and Issues, by M. Angeles Villarreal.
37 Derived by CRS from Table 2-4 in USITC, U.S.-Colombia Trade Promotion Agreement: Potential Economy-wide
and Selected Sectoral Effects, Publication 3896, December 2006, p. 2-11.
38 AFBF, Implications of a Colombia Trade Promotion Agreement on U.S. Agriculture, October 2006, p. 17. The AFBF
assumed the CFTA would have taken effect in 2007.
39 For an explanation, see Appendix A in CRS Report RL34134, Agriculture in U.S. Free Trade Agreements: Trade
with Current and Prospective Partners, Impact, and Issues, by Remy Jurenas.
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product import value. The increased access for Colombian sugar and sugar-containing products to
the U.S. market are likely to have only a minor effect on U.S. imports and production, according
to the USITC’s analysis. Cut flower imports from Colombia could increase if permanent duty-free
access stimulates investment in the country’s flower sector and diverts trade away from other
flower-exporting countries in South America.40 Agricultural imports from Colombia would
account for 46% of the increase in total U.S. merchandise imports from Colombia under this
FTA.
Of the five FTAs that Colombia now has in effect, the most significant in terms of competition for
U.S. agricultural interests are: (1) the trade agreement with the three other full members of the
Andean Community (Bolivia, Ecuador, and Peru), and (2) the preferential trade terms granted to
Argentina and Brazil under the Andean Community’s framework agreement with these Mercosur
countries. Under the latter, both countries in 2009 and 2010 significantly increased their exports
of soybean oil and meal, corn to Colombia, and contributed to a major drop in the U.S. share of
that country’s agricultural import market. Colombia’s FTA signed with Canada, a wheat exporting
competitor, in November 2010 has not yet been ratified by either country.
SPS Side Letter
Thought to have been resolved at the time negotiators concluded the CFTA, the separate SPS
issue dealing with the terms of access under which U.S. beef and beef products would be allowed
to enter Colombia was not resolved until later. The Colombian government in a second exchange
of letters on August 21, 2006, committed to permit such imports of cattle over 30 months old, by
no later than October 31, 2006.41 In turn, on August 24, President Bush notified Congress of his
intent to enter into an FTA with Colombia. Once Colombia issued regulations to fulfill its beef
import pledge on October 27, the White House agreed to set November 22, 2006, as a date for the
FTA’s formal signing.
Though an FTA normally is not used as the mechanism to address the substance of SPS issues,
this timeline illustrates how U.S. negotiators exercised leverage to achieve a desired outcome for
the domestic beef sector. This likely reflected the Bush Administration’s recognition that such
efforts were essential to gain support from an agricultural group that may be vital to secure the
agreement’s approval by Congress.
Outlook for Congressional Consideration
Though U.S. agriculture would gain significant additional market access to Colombia under the
CFTA, concerns expressed by some Democratic Members of Congress over violence directed at
labor union officials in that country and human rights issues have affected congressional
consideration of this trade agreement. Reflecting these concerns, the House on April 10, 2008,
voted 224-195 to suspend fast-track rules (H.Res. 1092) in response to President Bush’s decision
40 USITC, U.S.-Colombia Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects,
Publication 3896, December 2006, pp. 3-1 to 3-3.
41 Colombia, among many other countries in late 2003, imposed a ban on the import of U.S. beef following the
discovery of a cow with bovine spongiform encephalopathy (BSE) or mad cow disease in Washington state. To restore
beef trade export flows, the U.S. government has pressed trading partners to recognize the U.S. measures taken to
address the BSE measures as conforming with internationally recognized scientific guidelines governing meat trade.
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to submit the CFTA and implementing legislation (H.R. 5724/S. 2830) to Congress for
consideration. The House leadership took the position that the President had submitted this
measure without adequately fulfilling the TPA requirement for consultation with Congress.
President Obama in his January 2011 State of the Union address to Congress stated his intent is to
pursue the trade agreement with Colombia as part of his agenda to promote American jobs.
Though House and Senate Republicans have called on the Administration to set a timetable for
submitting this agreement for a vote, the White House position is that outstanding issues must be
resolved before the CFPA is submitted to Congress.
For additional information, see CRS Report RL34470, The Proposed U.S.-Colombia Free Trade
Agreement, and CRS Report RL34759, Proposed U.S.-Colombia Free Trade Agreement: Labor
Issues. For background on Colombia and its political situation, see CRS Report RL32250,
Colombia: Issues for Congress, Colombia: Issues for Congress.
Author Contact Information
Remy Jurenas
Specialist in Agricultural Policy
rjurenas@crs.loc.gov, 7-7281
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