Trade Is Worth the Work

 

By:  Scott VanderWal, President

South Dakota Farm Bureau

 

The current round of trade negotiations in the World Trade Organization (WTO) is at a critical point.  The negotiations recently entered into a new phase with member nations placing more detailed proposals on the table.

 

This hive of activity is in preparation for the sixth ministerial meeting scheduled for December 2005 in Hong Kong, China.  The Hong Kong meeting is broadly viewed as critical because a level of consensus between member governments is necessary in December for the round to reach a successful conclusion prior to June 2007, when U.S. Trade Promotion Authority expires.

 

The United States demonstrated strong leadership in the agriculture negotiations when it released a new negotiating proposal in early October.  The proposal was very ambitious across the three areas of market access, export competition and domestic support.  Farm Bureau recognizes that the U.S. proposal advances the idea of increasing access to world markets, which is important for the future of U.S. agriculture.  This increase in market access, however, must be secured before the United States commits to reductions in trade-distorting domestic support programs.

 

Trade is vital to the success and profitability of the American agricultural sector.  The importance of global trade to agriculture can best be illustrated with three points.

 

First, 96 percent of the world’s population lives outside the borders of the United States.  The 4 percent of the world’s population made up of Americans can only consume so much food, fuel and fiber.  American agriculture must sell some of its production to foreign consumers.

 

Second, the productivity of American agriculture is growing.  In fact, American agricultural output has grown at an average rate of 1.89 percent annually for the last 50 years.  However, this productivity is growing faster than domestic food and fiber demand. Therefore, farmers rely heavily on export markets to sustain prices and revenues.

 

And finally, U.S. agricultural exports are important to farm income.  American agricultural export revenues have accounted for 20 to 30 percent of U. S. farm revenues during the past 15 years.  In 2004, 24.8 percent of farm cash receipts came from the export market.

 

Agricultural trade is not just vital to the American agricultural sector.  According to the Agriculture Department, every dollar of agricultural exports creates another $1.47 in supporting economic activities, such as processing, packaging, shipping and financing.  In 2004, the $62.3 billion of agricultural exports generated $162 billion in total economic activity.

 

So, as you can see, increasing the exports of American agricultural products is vital to the whole of U.S. economic activity and U.S. agriculture has been very successful in growing export markets.  The $62.3 billion of U.S. agricultural products exported in 2004 was the highest year on record. As the world’s largest agricultural exporter, the United States would benefit from reduced tariffs, expanded tariff rate quotas, elimination of direct export subsidies and reduced trade-distorting domestic supports.  The WTO, and the negotiations therein, provide the greatest opportunity for the United States to expand export markets on a global scale.

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