A Growing Trend: U.S. Ag Exports Face Significant Trade Barriers

April 17, 2015

A recent study released from the Office of the United States Trade Representative (USTR) sheds light on significant trade barriers American goods and services face in some of the largest export markets like China, Canada, the European Union (EU), and others.

USTR’s National Trade Estimate Report on Foreign Trade Barriers (NTE) highlights a “growing trend among our trading partners to impose” both tariff and nontariff trade barriers whether or not they are consistent with international trading rules. The findings mirror another recent study that demonstrated our foreign competitors have also been busy ramping up trade-distorting subsidies while the U.S. was reforming its own farm policy during the reauthorization of the farm bill.

Taken together, these reports are cause for concern. The agricultural community views commodity and food exports as vital to improving farm income and business profitability. Moreover, contrary to what farm policy critics say, this research emphasizes the need to maintain a strong farm policy so that America’s agricultural producers can successfully compete on the global scale.

As the report indicates, American exports are a major source of economic growth and support 11.7 million jobs nationwide. The agricultural industry, in particular, is sensitive to foreign trade barriers and trade-distorting practices given that it is one with a consistent trade surplus. And, on average, exports account for more than 25 percent of total agricultural sales.

However, because of these trade practices and restrictions, anticipated growth in U.S. exports has not been realized, according to the report.

Consider the assessment on China, which is the third largest export market for U.S. goods and the top export market for U.S. agricultural products. The report highlights that for the last seven years livestock products continue to be affected by “questionable” sanitary and phytosanitary barriers implemented by China’s regulatory authorities. This treatment defies international scientific guidelines under the World Organization for Animal Health (known as OIE), which not only declared the products safe to trade, but also gave the U.S. the lowest risk status.

Additionally, China maintains a number of export restraints such as quotas, licensing, and export duties the report reveals. Most damaging is the revelation that since joining the World Trade Organization (WTO) in 2002, China has not yet submitted an account of government subsidies to its domestic industries, “some of which appear to be prohibited under WTO rules.”

The European Union with its 28 member states is another export market that is mired in arbitrary restrictions for U.S. agricultural products. The EU has developed a number of policies on so-called “agricultural quality” that USTR considers overall “unclear and difficult to comply with, and lack a basis in international standards.”

The EU has also used a number of technical barriers, such as banning U.S. meat produced with hormones or other growth promotants despite scientific evidence indicating such products are safe for consumers. And, it has delayed decisions on biotech crops despite a WTO ruling stating this practice was inconsistent with its obligations under trade rules.

Another egregious offender of high trade restrictions is Brazil – the ninth largest market for U.S. goods. According to the report, “exporters face significant uncertainty in the Brazilian market because the government frequently increases and decreases tariffs to protect domestic industries from import competition.” Additionally, there are a number of nontariff barriers such as federal and state taxes on imports that “double the actual cost” of the product. Also, they have imposed a number of bans on livestock products despite international scientific guidelines. In total, U.S. exports to Brazil were down 4 percent in 2014.

Meanwhile, as America’s farmers and ranchers try to compete in the global market with foreign competitors’ unfair trading practices, farm policy critics at home continue to call for the elimination of the farm safety net. Let the free market decide the fate of farmers, they say. But, this report clearly shows another side of the story and invites the question: what free market?

It is one thing for a farmer to compete against foreign farmers pound for pound, commodity for commodity, and product for product. It’s quite another to compete against foreign governments, their treasuries, and their arbitrary restrictions. Our farmers can successfully compete in the global market, but they need a level playing field. In the interim, a safety net for the people who produce our national food and fiber supply is essential.