The American Soybean Association and the Importance of U.S. Soy Exports to Our Nation s Economy

Transcription

1 American Soybean Association Comments for the Administration s Report on Significant Trade Deficits Executive Order Submitted to the U.S. Trade Representative and Department of Commerce May 10, 2017 The American Soybean Association and the Importance of U.S. Soy Exports to Our Nation s Economy The American Soybean Association (ASA) is the national, not-for-profit organization that represents U.S. soybean farmers on policy and trade. The United States is the world s largest soybean producer and exporter, with over 60% of the soy crop exported globally. Soybean exports globally totaled nearly $25 billion in the 2015/2016 marketing year and made up 17.5% of agricultural export sales. Thanks to trade agreements, including the NAFTA, other Free Trade Agreements, and agreements under the World Trade Organization (WTO), U.S. soy exports have grown significantly over the past 25 years. These agreements reduced or eliminated tariffs and other market access barriers, and have allowed us to challenge unfair market restrictions. Exports Are Critical to Farmers and Ranchers, the Rural Economy, Jobs, and Employment Economic growth in America s heartland is inextricably linked to the long-established productivity and growing success of U.S. food and agriculture, which is an American success story. Our sector employs millions of hard working Americans, has improved the nutrition and economic wellbeing of generations of American families and is one of our nation s most efficient and competitive industries. America s food and agriculture sector is poised to grow internationally, building upon its well-deserved reputation for high quality products, trusted brands and continual innovation. However, our ability to continue to create jobs and support economic growth in rural America depends on maintaining and increasing access to markets outside the United States through existing and future trade agreements. With more than 95% of our customers living outside our borders, expanding access to international markets - including in growing regions in the Asia Pacific - is essential for our future success. USDA s Economic Research Service estimates that, in 2014, each dollar of U.S. agricultural exports stimulated another $1.27 in business activity. The $150 billion of agricultural exports in 2014 produced an additional $191 billion in economic activity, for a total economic output of $341 billion. Every $1 billion of U.S. agricultural exports in 2014 generated 7,550 American jobs throughout the economy. Agricultural exports in 2014 therefore required 1,132,000 full-time civilian jobs, which included 808,000 jobs in the nonfarm sector. The U.S. soybean sector exported $27 billion in soybean products last year, making it the largest agricultural export. The top market for soybeans was China accounting for $14 billion in sales followed by Mexico with $2.5 billion in sales. Trade Agreements Have Greatly Benefited U.S. Agriculture and U.S. Soy Exports 1

2 The U.S has 20 free trade agreements with countries that account for 10% of the global economy. Yet these deals are the basis for nearly one-half of America s exports. In the first five years after the U.S. has concluded free trade agreements, U.S. exports have increased three times as rapidly as overall export growth. Over the past five years the U.S. has, with its free trade partners, run a trade surplus for manufactured goods of about $230 billion. Those agreements have helped open U.S. markets and have contributed to the strong growth in agricultural exports during the last 30 years. Importantly, in calendar year 2014, U.S. agricultural exports to these countries account for 41 percent of total U.S. agricultural exports, according to USDA data. For U.S. food and agriculture sector, 95% of its customers and 80% of global purchasing power lie outside our borders. To prosper, we have to go where the consumers and the money are. WTO Agreements Have Benefited U.S. Farmers and Ranchers, Opened Markets and Protected against SPS Violations Overall, the United States, the U.S. agricultural sector, and the U.S. soy industry have greatly benefited from WTO agreements. The WTO has helped U.S. agricultural trade by finding solutions to the below three trade issues: Market access various trade restrictions confronting imports, Domestic support subsidies and other programs, including those that raise or guarantee farm gate prices and farmers incomes, Export subsidies -- and other methods used to make exports artificially competitive. In the WTO, the United States has been highlighting and discouraging the use of trade distorting policies. Export competition in the WTO covers ag export subsidies, ag export credits, food aid, and the operation of agricultural exporting state trading enterprises (STEs). WTO export competition rules aim to preserve well-functioning markets by facilitating competition amongst market actors. The WTO has also created a standard for addressing SPS issues through the Agreement on the Application of Sanitary and Phytosanitary Measures (the "SPS Agreement"). The SPS agreement was entered into with the establishment of the World Trade Organization on January 1, It concerns the application of food safety and animal and plant health regulations. These sanitary and phytosanitary measures can take many forms, such as requiring products to come from a disease-free area, inspection of products, specific treatment or processing of products, setting of allowable maximum levels of pesticide residues or permitted use of only certain additives in food. Sanitary (human and animal health) and phytosanitary (plant health) measures apply to domestically produced food or local animal and plant diseases, as well as to products coming from other countries. China The importance of the China market to U.S. soybean farmers cannot be over-emphasized. China is the largest consumer of U.S. soybeans and demonstrates the greatest increase in 2

3 growth from trade. Last year, one out of every three rows of soybeans grown by U.S. soybean farmers was exported to China. ASA opened an office in Beijing in At that time China did not have a vertically-integrated animal feed industry, and livestock production lacked health and nutritional standards. China has the largest swine herd on the planet, but much of it was backyard-based and did not include soybean meal in diets. Similarly, while China produces more fresh water aquaculture fish than the rest of the world combined; 20 years ago none of the fish feed included soybean meal. Through long-term and comprehensive programs to demonstrate the value of soy-based feeds, the U.S. soy family helped build demand for soybeans to the level China imports today. Since 1995, while feed use in China grew 140 percent, soybean meal used in animal feed rose an astronomical 839 percent. And we ve seen the amount of soybean meal used in aquaculture feeds grow from zero just 20 years ago to 7 million metric tons this year. The value of U.S. soybean exports to China has grown 27 fold, from $414 million in 1996 to over $11.2 billion in the 2015/2016 marketing year. China is the world s largest soybean importer, relying on imports from the United States and South America to 90% of its needs. China is importing more soybeans than the rest of the world combined. It is a mutually beneficial trade relationship. China depends on U.S. soybean imports for food security and to provide high-quality protein for China s livestock and aquaculture industries that feed its people. U.S. farmers depend on access to the Chinese for a large percentage of total U.S. production and exports. While China is a large and important customer for U.S. soybean producers and our exports have boomed, China s slow, unpredictable, and non-transparent approach to approving new biotech products is negatively impacting U.S. soy farmers by preventing them from adopting new biotech varieties to increase yields, improve nutrition, and fight weeds and disease. As efforts to improve U.S.-China trade continue, ASA urges the following: 1. Both the United States and China must take a prudent approach to the trade relationship, recognizing that both countries have a lot to lose if we don t manage the relationship well and address trade issues in a workman-like manner. 2. Address China s almost non-functional biotech approval process, which is delaying the introduction of new technologies to America s and the world s farmers. China s slow and unpredictable biotech approval process also is hurting China and Chinese consumers in the medium to long terms because as new technologies to increase yields and protect crops are delayed, that drives up China s and the world s food costs. As the world s most populous nation, that has serious consequences for China. The North American Free Trade Agreement Has Been Very Beneficial for Increasing U.S. Agricultural and Soy Exports 3

4 The United States is the world's largest economy and the largest exporter and importer of goods and services. Trade is critical to America's prosperity - fueling economic growth, supporting good jobs at home, raising living standards and helping Americans provide for their families with affordable goods and services. Global economic performance and population growth drive demand for food and agricultural products, providing the foundation for agricultural trade and U.S. exports. U.S. agricultural exports have been larger than U.S. agricultural imports since 1960, generating a surplus in U.S. agricultural trade. This surplus helps counter the persistent deficit in nonagricultural U.S. merchandise trade In 1993, the North American Free Trade Agreement (NAFTA) came into effect, creating one of the world s largest free trade zones and laying the foundations for strong economic growth and rising prosperity for Canada, the United States, and Mexico. In particular, America s farmers have benefitted greatly from NAFTA, because it s meant more export opportunities. Since NAFTA was approved in 1993, United States agricultural exports to Mexico have nearly doubled. Mexico now imports $6.5 billion of United States agricultural products making it our third largest agricultural market. United States exports of agricultural products to Canada since implementation of NAFTA have increased 44 percent. Canada is the second largest market for United States agricultural exports, with Canadians purchasing $7.6 billion worth of American products last year. Canada and Mexico purchased over 25 percent of the United States agricultural product exported in American farmers can t afford to lose access to the NAFTA markets. NAFTA has had a profound effect on many aspects of North American agriculture. With a few exceptions, intraregional agricultural trade is now completely free of tariff and quota restrictions, and the agricultural sectors of NAFTA s member countries - Canada, Mexico and the United States - have become far more integrated, as is evidenced by rising trade in a wider range of agricultural products and substantial levels of cross-border investment in the processed food sector. Perhaps the most obvious indicator of this increased integration is two decades of almost uninterrupted growth in intraregional agricultural trade. Between 1993 and 2013, the total value of this regional trade expanded from $16.7 billion to $82.0 billion, an increase of 233 percent when inflation is taken into account, according to USDA s Economic Research Service (ERS). Creation of a far more integrated North American market in grains, oilseeds and related products is one of NAFTA s major achievements. Prior to NAFTA, Mexico maintained strict control of corn, wheat and barley imports via licensing requirements and provided guaranteed prices to domestic producers of many field crops. Following NAFTA s implementation, Mexico transitioned to a system featuring duty-free trade with the United States and Canada and a mix of domestic agricultural supports similar to those in the United States. For the United States and Canada, trade liberalization of grains and oilseeds under NAFTA primarily involved the 4

5 removal of minor tariffs on bilateral trade. Rising demand for feed and food has created new opportunities for intraregional trade in grains and oilseeds. Poultry and hog producers in Mexico, for instance, rely heavily on imported feedstuffs as they seek to meet their country s growing demand for meat. Feedstuff trade among the NAFTA countries encompasses a diversity of products in addition to traditional bulk commodities such as soybeans, corn, sorghum, wheat, rapeseed, and oilseed oils and meals. There is a substantial two-way trade between Canada and the United States in mixed feeds and mixed feed ingredients other than pet food. U.S. feedstuff exports to Mexico include preparations used for animal feeding and brewers and distillers dregs and waste. This latter category includes distiller s dried grains with solubles (DDGS). As a result, Mexico and Canada are key markets for U.S. coarse grains, oilseeds and coproducts. The most recent numbers available from USDA now show that Mexico is the second largest market for soybeans, corn, and DDGS, and the top market for U.S. barley. These numbers show Canada is the third largest market for U.S. barley; the sixth largest for DDGS; and the seventh largest for U.S. corn. In 2015, the U.S. exported $438 million and $2.44 billion of soy products to Canada and Mexico, respectively. Mexico saw the greatest growth, nearly quadrupling their imports of U.S. soy products since the implementation of NAFTA. These numbers only continue to grow as Mexico s imports of U.S. soybeans grew to nearly $2.5 billion in Canada Soy Specific Overview Prior to US-Canada FTA, Canada did not apply tariffs on soybeans, soybean meal, rapeseed, and other meals. However, there were tariffs of 7.5 percent on soybean oil and 10 percent on other vegetable oils. Under the FTA, Canada eliminated its tariffs on selected imports over a 10-year period (concluded on January 1, 1998). Under NAFTA, Canada immediately eliminated its tariffs on soybean oil and other oil imports from Mexico, but maintained the phased tariff elimination on imports from the United States established by the US-Canada FTA. While the U.S., Canada and Mexico all agreed to progressively eliminate tariff and nontariff barriers to trade in nearly all goods, including soybean and red meat products, Canada refused to eliminate import quotas it uses to protect its supply management systems for dairy, chicken, turkey, and eggs. In response, the U.S. refused to eliminate Section 22 quotas on certain agricultural products from Canada. As a result of the Uruguay Round Agreement in 1995, the quotas on both sides were converted to tariff-rate quotas (TRQs). Hence, the combined result of the U.S.-Canada FTA and NAFTA was the establishment of free trade between the U.S. and Canada for all soy products. However, the failure to lift Canadian barriers to imports of U.S. dairy and poultry products was a major disappointment. These 5

6 barriers remain in place today and would have been only slightly eased under the Trans-Pacific Partnership (TPP) agreement. As mentioned, increased exports of such U.S. livestock products has been a goal of the soy industry in all recent FTAs Soybeans Meal Oil US Soy Product Exports to Canada Million Dollars U.S. Soy Exports, U.S. Agricultural Exports and Imports To Canada Both Pre and Post U.S.- Canada FTA Post NAFTA % Change U.S. Ag Exports to Canada Ag Imports from Canada U.S. Soy Exports to Canada $1.8 billion $21 billion $2.2 billion $21.8 billion +891 $199 million $438 million +120 Mexico Soy Specific Overview Prior to NAFTA, Mexico imposed a seasonal tariff of 15 percent on soybeans. Under NAFTA, Mexico immediately reduced this tariff to 10 percent and shortened the dutiable season from August 1-January 31 to October 1-December 31. This tariff was phased out by Mexico had tariffs of 15 percent on soybean meal, 10 percent on crude soybean oil, and 20 percent on refined soybean oil. These restrictions were also phased out over 10 years. 6

7 US Soy Product Exports to Mexico Billion Dollars Soybeans Meal Oil U.S. Soy Exports, U.S. Agricultural Exports and Imports To Mexico Both Pre and Post NAFTA % Change U.S. Ag Exports to Mexico Ag Imports from Mexico U.S. Soy Exports to Mexico $3.6 billion $17.7 billion +392 $2.7 billion $21 billion +678 $489 million $2.44 billion +399 Japan Japan is the third-largest individual country market for U.S. soy exports, with shipments valued at just over $1 billion in the last marketing year. Japan s World Trade Organization commitments provide duty-free treatment for soybeans and soybean meal imports. While soybeans and soybean meal enter Japan duty-free, U.S. exports of meat and dairy products face high tariffs and other barriers, and face unequal access to the Japanese market compared to their international competitors. The U.S. soy industry s domestic livestock customers (e.g., the U.S. pork, poultry, beef, and dairy industries) would greatly benefit from a free trade agreement with Japan and greater market access; for this reason ASA strongly encourages the Administration to immediately initiate free trade negotiations with Japan. European Union (EU) Soybeans and soybean products (e.g., soybean meal and oil) are the United States secondlargest agricultural export to the EU, totaling $2.3 billion in the 2015/16 marketing year. While 7

8 a large and important market, the EU has taken a number of actions that are restricting U.S. soy exports and hurting U.S. farmers. The Transatlantic Trade and Investment Partnership (TTIP) negotiations have stalled, and ASA believes that the following issues must be addressed to improve trade with the EU: 1. reform the EU biotech approval process to make it timely, transparent, and sciencebased; 2. resolve soybean industry concerns with the EU s Renewable Energy Directive, which imposes unfair, costly and onerous sustainability and greenhouse gas emission reduction requirements on U.S. soybean production and soy oil used as a feedstock in EU biodiesel; 3. clarify the impact on access for U.S. soybeans and soybean meal to the EU market of the coupled option included in the recent CAP reform to support increased production of protein crops in the EU; 4. clarify the impact on U.S. access to the EU market of the EU s new pesticide law, which could de-list crop protection products used in the U.S.; and 5. meet the demands of the U.S. livestock industry for increased market access by eliminating sanitary regulations that restrict imports. Indonesia Indonesia has become the fifth-largest export destination for U.S. soy, importing nearly $890 million in the 2015/16 marketing year. South Korea Korea is the 16 th -largest export market for U.S. soy, importing over $258 million in the 2015/16 marketing year. The U.S.-Korea FTA has been successful. It created a 5% duty on RBD SBO which set to phase out by 2016 and crude SBO by It opened markets for variety-specific identity preserved soybeans for soy-food processing and set a 2015 TRQ allocation is 25,000 MT for U.S. variety specific IP soybeans, out of which 95% utilized. Taiwan Taiwan is the seventh-largest export market for U.S. soy, importing over $571 million in U.S. soy in the 2015/16 marketing year. While traditionally Taiwan has been a good customer for U.S. soybeans, the government of Taiwan (headed by the Democratic Progressive Party or DPP) has implemented several non-science based measures regarding genetically enhanced crops and food ingredients (GEs) that have very negatively impacted market share and demand for U.S. soybeans. This includes banning foods containing or made from GEs from school meals, and implementing mandatory GE labeling laws for foods sold at retail or in restaurants. In addition the government is considering to ban all products (including highly processed products such as soybean oil) containing GE ingredients in all government funded institutional kitchens. This would expand the ban from just schools, to include military canteens, hospitals and universities. 8

9 The impact of Taiwan s policy actions at the local and national levels have reduced U.S. market share in the soybeans going into soy food production, and have cost U.S. soybean farmers millions in lost sales. We believe a number of policy actions need to be taken to ensure that this loss of sales and market share is arrested and reversed. These include: 1. Revision of the Government of Taiwan s non-science based and discriminatory actions on GEs that are affecting U.S. sales and market share. These actions include regulations adopted by the Government of Taiwan which require mandatory labeling of foods containing GE ingredients, mandatory signs in restaurants that may serve foods prepared from GE ingredients and prohibiting school food services to use soy foods made from GE ingredients. 2. Provision prohibiting GEs and their ingredients from being included in school meals be withdrawn, and ensure that such a discriminatory and non-science based prohibition is not expanded to other institutions. 3. Food labeling requirements for highly process products (e.g., soybean oil) made from GEs be withdrawn. 4. Coordination of food and feed approvals so that the process is not duplicative. Thailand Thailand is the eleventh-largest export destination for U.S. soy and imported just over $428 million of U.S. soybeans and soy products in the 2015/16 marketing year. India India is the 49 th -largest market for U.S. soy due to high tariffs, quotas, and phytosanitary barriers that severely restrict U.S. soy exports to that country. In the 2015/16 marketing year U.S. soy exports totaled just over $17 million. Malaysia Malaysia ranks as the 22 nd -largest export destination for U.S. soy. The United States exported $156 million of soybeans and soybean products to Malaysia in 2015/16 marketing year. Soybeans currently enjoy duty-free access in Malaysia. This is a country that is largely dependent on importing the bulk of its raw feed ingredient needs so most of the feed ingredients imported are at 0% tariff. Vietnam The United States exported $547 million of soybeans and soybean products to Vietnam in 2014/15. Soybeans currently enjoy duty-free access in Vietnam. While soybeans enter Vietnam duty-free, U.S. exports of meat and dairy products face high tariffs and other barriers, and face unequal access compared to their international competitors. The U.S. soy industry s domestic livestock customers (e.g., the U.S. pork, poultry, beef, and dairy industries) would greatly benefit from a free trade agreement with Vietnam and greater market access; for this reason ASA strongly encourages the Administration to initiate free trade negotiations with Vietnam. Switzerland 9

10 Switzerland is a very small market for U.S. soy, ranking 102 nd out of the 128 countries around the world where U.S. soy is exported. In the 2015/16 marketing year, Switzerland imported $14 million of U.S. soy products. 10