Bilateral
and Regional Free Trade Agreements: The Future of U.S. Agricultural Trade
Renée A. Vassilos
Bilateral and regional free trade agreements are a means immediately available for U.S. agricultural exports. While multilateral trade agreements may be considered a better tool for reducing discriminatory trade practices and encouraging governance reform among member countries, current multilateral talks are stalled over the issue of agriculture. Therefore, bilateral and regional agreements have become even more important for this globally significant sector.
The United States has recently pursued its free trade agenda through multilateral trade talks. The results of multilateral negotiations at the World Trade Organization (WTO) level are contingent upon all 149 WTO members participating and conceding to changes in domestic policy, for example removing agricultural subsidies.
The protectionist nature of countries with respect to agriculture emerged during the most recent round of multilateral negotiations. Exporters of agriculture commodities around the globe held high expectations for progress during the latest round of WTO negotiations (Doha Round), which began in 2001. After many attempts at consensus, this round of negotiations was postponed indefinitely in the summer of 2006. The main reason for the collapse was the inability of the major developed countries such as the United States and members of the European Union to come to an agreement on reducing domestic agriculture subsidies. However, many people, including the U.S. Trade Representative, Susan Schwab, and the Director-General of the WTO, Pascal Lamy, currently view the stall in negotiations as merely a roadblock. While possibility of completing the Doha Round remains a mystery, the United States continues advancing trade through bilateral and regional FTAs with both small and large economies.
Bilateral and regional agreements are currently the future for the successful expansion of U.S. agricultural trade as multilateral trade talks are stalled. Such agreements promote the elimination of tariff and non-tariff barriers to trade. However, bilateral and regional agreements are not substitutes for multilateral trade agreements. Bilateral and regional free trade agreements fail to adequately deal with issues such as discriminatory trade practices and trade diversion away from more efficient producers outside of the agreement and/or region.
The United States is not alone in its pursuit of bilateral and regional trade agreements, particularly in the wake of the collapsed Doha Round talks. Other developed and developing countries, such as Australia, Canada, the EU, Japan, Mexico, and China, are also signing bilateral and regional trade pacts, which include market access provisions pertaining to agriculture.
The projected growth in the agricultural sector suggests the importance for the United States of remaining a key player in the global agriculture market, which currently can be achieved through an active free trade agreement agenda. FTAs positively impact the U.S. agricultural industry. After the U.S.-Australia FTA was implemented in January 2005, U.S. agricultural exports to Australia increased twenty percent with pork, grapes, and rice representing the largest growth.
An important regional market for the United States is the Association of Southeast Asian Nations (ASEAN) because of its size and economic growth potential. China is a competitor for the United States in this market, which collectively represents the U.S.'s fourth largest trading partner and is one of the fastest growing economies in the world. Currently, China has a free trade agreement with ASEAN containing the Early Harvest Program, which was negotiated with each member country separately. This clause gradually reduces tariffs over a five year period to zero by 2010 on agriculture commodities. It is vital for the U.S. to remain an active participant in bilateral and regional trade negotiations in this and all other major trading regions in order to promote its exports.
Multilateral trade talks have stalled because of the competing interests and goals of WTO member countries. Agriculture trade continues to expand due to increasing demand from globalization and the emergence of new economic powers. Countries are opening their agriculture sectors through bilateral and regional trade agreements. The U.S. agricultural sector will suffer if it is excluded from the advantages that bilateral and regional trading agreements provide.
Renée Vassilos is pursuing her MS degree at the University of California,
Davis, Department of Agricultural and Resource Economics. The author is grateful
for the support provided by the Giannini Foundation.
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