TPP: Taking the Measure of the Agreement for U.S. Agriculture

TPP: Taking the Measure of the Agreement for U.S. Agriculture

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Updated October 13, 2016
TPP: Taking the Measure of the Agreement for U.S. Agriculture
The Trans-Pacific Partnership (TPP), which the Obama
Japan’s applied most-favored nation (MFN) agricultural
administration and 11 other Pacific Ocean-facing nations
tariffs averaged 14.3% in 2014, well above the U.S. average
signed in February 2016, would constitute the largest
of 5.1%. The MFN rate is the normal tariff charged on
regional free trade agreement (FTA) to which the United
imports from World Trade Organization (WTO) members.
States is a member. Whether TPP enters into force is
Even with its high tariffs and various other trade-limiting
contingent on Congress enacting legislation to implement it
measures, Japan ranked as the fifth largest export market
and whether other signatories ratify the agreement.
for U.S. agricultural products in FY2015, importing 8% of
all U.S. agricultural exports in value terms. Examples of
The future of TPP is matter of consequence for U.S.
market access changes Japan has agreed to in TPP, which
farmers and ranchers and also for the agribusiness and food
could benefit U.S. farmers, include the following:
sectors that are closely aligned with food, feed, and fiber
production. Suppliers of farm inputs—such as seed,
 As the leading export market for U.S. beef, Japan would
fertilizer, machinery, and food processors and exporters—
immediately lower its tariff on fresh, chilled, and frozen
have a direct interest in developments that promote a
beef from 38.5% to 27.5%, followed by subsequent
dynamic and profitable U.S. agricultural sector. Exports
annual reduction to 9% by year 16.
constitute a vital link in farm profitability, absorbing about
 The largest U.S. export market for U.S. pork would
20% of U.S. farm output. For a number of commodities the
immediately lower its tariff on pork cuts from 4.3% to
export share of production is far higher (Table 1). Rising
2.2%, phasing out the rest over nine years. Japan would
U.S. farm productivity and faster growth of demand for
also reduce a separate duty under its “gate price
food in developing countries are among the reasons the
system,” which acts as a minimum import price.
agricultural community has a stake in gaining more
favorable access to export markets.
 Seasonal tariffs on oranges of 16% and 32% would be
eliminated over six and eight years, respectively. Tariffs
Table 1. Major U.S. Export-Dependent Commodities
of 2.4% on almonds, 4.5% on pecans, and 10% on
2014/2015 Marketing Year
walnuts would be eliminated immediately.
Export Share of
Exports in U.S.$
 Some products (e.g., beef and oranges) would be subject
Commodity
Production
Millions
to safeguard duties if imports exceed certain limits.
Pecans
75%
506
The United States for its part would lower or eliminate
existing tariffs on many agricultural products, including
Walnuts
71%
1,633
beef, pork, cotton, and tobacco, to name a few. The United
Cotton
69%
4,182
States would also expand moderately its tariff-rate quotas
(TRQs) for sensitive products, such as dairy products and
Almonds
68%
4,815
sugar. Under a TRQ, lower tariffs are applied to in-quota
Pistachios
59%
951
imports with higher rates for over-quota product. Tariff
elimination for these products and the expansion in the
Soybeans
47%
21,707
dairy TRQs would take place over a number of years.
Wheat
41%
6,586
USDA has issued a summary of agriculture-related
provisions of TPP that includes key tariff and TRQ
Source: USDA; U.S. Census Bureau Trade Data.
changes. For more on potential implications of TPP for U.S.
Japan a Promising Market Opportunity
agriculture, see CRS Report R44337, TPP: American
Agriculture and the Trans-Pacific Partnership (TPP)
The 11 other TPP signatories—Australia, Brunei, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand, Peru,
Agreement, by Mark A. McMinimy.
Singapore, and Vietnam—include five with which the
A number of observers contend that U.S. agricultural
United States does not have an FTA: Brunei, Japan,
Malaysia, New Zealand, and Vietnam. Among the non-FTA
exports would benefit from the proposed agreement through
countries, Japan likely represents the most promising, near-
lower tariffs and expanded TRQs such as those listed
above. Beyond these market access changes, TPP would
term expansion opportunity for U.S. farm and food exports.
Japan’s sizable population of 127 million, high per capita
establish rules and procedures for addressing non-tariff
GDP, and heavily protected agricultural sector point to the
barriers and other practices that impede agricultural trade.
potential for U.S. farm exports to make further inroads into
Prominent among the non-tariff measures in TPP is the
the Japanese market given the broad range of market-
chapter on sanitary and phytosanitary measures (SPS),
opening concessions that Japan has agreed to in TPP.
which covers actions that address food safety, plant pests,
and animal diseases. The SPS obligations go beyond the
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TPP: Taking the Measure of the Agreement for U.S. Agriculture
WTO SPS agreement in matters of risk assessment, risk
tariff footing with Australian beef in Japan. Also, while the
management, transparency, border checks and laboratory
European Union (EU) is not a party to the TPP, it is
testing, and rapid response to issues over export shipments.
negotiating FTAs with Japan, Malaysia, and Vietnam—
three promising markets for expanding U.S. farm exports
The Bottom Line for U.S. Agriculture
within TPP. If successfully concluded, these FTAs could
The U.S. International Trade Commission (ITC), in a report
enhance the EU’s competitive position in those markets.
issued in May 2016, concluded that TPP would provide
Also, absent U.S. implementation of TPP, the remaining
significant benefits for U.S. agriculture. The report was
TPP countries could always negotiate an agreement without
mandated by Trade Promotion Authority legislation (P.L.
U.S. participation.
114-26). According to ITC’s model, estimated TPP
outcomes in 2032 for U.S. agriculture, compared with a
Some critics contend that the potential TPP holds for
baseline scenario without TPP, include the following:
boosting farm exports will be overshadowed by greater

competition from imports, reducing domestic revenues for
U.S. agricultural exports would be $7.2 billion higher
farmers and ranchers. Critics of TPP also assert that the
(2.6%), while agricultural imports would increase by
$2.7 billion (1.5%). Other macro effects include a gain
lack of an enforcement mechanism against currency
of $10 billion (0.5%) in U.S. agricultural output and an
manipulation could nullify the benefits of tariffs reductions.
increase of 0.5% in agricultural employment.
Another potential drawback of TPP is that the preferential
access U.S. agriculture and food interests have to markets
 U.S. dairy product exports would increase by $1.85
in Canada and Mexico under the North American Free
billion, or 18%, while processed foods and beef would
Trade Agreement compared with competitors would be
be expected to post gains of $1.54 billion (3.8%) and
eroded over time as tariffs are lowered for TPP partners.
$876 million (8.4%), respectively. But corn and rice
exports could be marginally lower.
For U.S. consumers, if TPP were to result in a substantial

sharp rise in agricultural exports that exceeded an
As for U.S. imports, processed foods would be $427
expansion in domestic supplies, then consumers could
million higher, or 1.1%, while beef imports would be
potentially experience higher prices for food products. But
higher by $419 million, or 5.7%, and imported dairy
the farm share of retail food prices is fractional in any case
products would post a gain of $349 million, or 10.3%.
at about 17% in 2014, according to the USDA.
ITC estimates gains in farm and food exports stem
Farm and Food Interests Pass Judgment
primarily from greater market access for U.S. products via
As noted above, a large number of agricultural groups and
lower tariffs and expanded TRQs. The overall U.S.
food and agribusiness interests have expressed support for
agricultural export gain of $7.2 billion would be
implementing TPP, including groups representing beef,
concentrated in Japan ($3.6 billion) and Vietnam ($3.3
milk, pork, and poultry producers and organizations
billion).
representing corn, soybeans, and wheat. Other TPP
supporters with close ties to agriculture include processors
In February 2016, the American Farm Bureau Federation,
and exporters, such as Cargill, Inc., and the Grocery
which has endorsed TPP, issued its analysis of the effects of
Manufacturers Association, representing food and beverage
TPP for U.S. agriculture compared with a second scenario
manufacturers. But support for the agreement is not
in which the United States does not implement TPP and the
universal within agriculture. The National Farmers Union
other 11 TPP signatories ratify an equivalent deal:
and the Ranchers Cattlemen Action Legal Fund United
 Once TPP is fully implemented, a process that would
Stockgrowers of America are among those in agriculture
take a number of years, net farm income is projected to
that have urged Congress to reject TPP. Others opposing
be $4.4 billion higher than without TPP. For
TPP include the U.S. Rice Producers Association and the
perspective, since 2011 net farm income has ranged
Burley Tobacco Growers Cooperative Association. The
from $123.3 billion in 2013 to $80.7 billion in 2015.
United Food and Commercial Workers Union

International—representing workers in the grocery, retail,
Cash receipts for cattle and hogs are projected to
meat-packing, and food processing industries—is a
increase by $1.1 billion each under TPP, while those for
milk production would rise marginally.
prominent critic of the deal.

What Comes Next?
Crops projected to post higher cash receipts include
For TPP to enter into force, Congress would need to pass
increases for fruit and nuts of 825 million; corn, $680
million; soybeans, $530 million; and vegetables, $471
implementing legislation to codify TPP tariff rates and
million. Wheat receipts are expected to rise marginally.
make necessary changes to U.S. laws. Congress is under no
time limit to act on the agreement until implementing
TPP: Pros and Cons
legislation is introduced. For more on TPP, see CRS Report
In addition to highlighting the increase in market access for
R44489, The Trans-Pacific Partnership (TPP): Key
U.S. farmers and food products and progress in addressing
Provisions and Issues for Congress, coordinated by Ian F.
non-tariff barriers, USDA, ITC, and a number of
Fergusson and Brock R. Williams
agricultural interest groups point to the potential negative
consequences of not implementing TPP. They assert that
Mark A. McMinimy, Specialist in Agricultural Policy
this outcome would risk placing U.S. agriculture at a
disadvantage vis-a-vis export competitors. For example,
IF10412
Australia already enjoys preferential tariff rates on its beef
exports to Japan. TPP would place U.S. beef on an even
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TPP: Taking the Measure of the Agreement for U.S. Agriculture

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