South Korea is clearly the biggest current market of the three for U.S. agriculture with exports of $4.38 billion in 2009 and imports of only $346 million, mostly seafood and consumer-oriented products. Coarse grains, mostly corn, accounted for 25 percent of U.S. exports at $1.11 billion, followed by soybeans and products at $448 million and red meat at $437 million. U.S. red meat exports grew from $157 million in 2005 as restrictions on beef imports from the U.S. have been eased. The other exports are spread out among virtually every product exported by U.S. agriculture. South Korea has a population of 48.5 million, the world’s 25th largest, and a per capita GDP on a purchasing power parity basis (PPP) of $28,000 per year, 49th highest in the world.
U.S. agricultural exports to Colombia in 2009 were less than 25 percent of the exports to South Korean at $922 million. The U.S. has an agricultural trade deficit with Colombia because of coffee, nursery products (mainly cut flowers) and bananas and plantain imports of $1.53 billion out of total imports of $1.82 billion. Colombia is now a bulk commodity market with coarse grains at $215 million, wheat $141 million, soybeans and products $141 million, cotton $66 million and other feeds $52 million accounting for two-thirds of U.S. exports. In times of ample world supplies open access to this market is critical because other suppliers in North and South America are readily available. Colombia’s population is almost as large as South Korea at 43.7 million with a per capita GDP of $9,200 per year.
The Panamanian market for U.S. agricultural products was about 40 percent of the Colombian market in 2009 at $379 million, with imports from Panama of $118 million, mostly seafood and consumer-oriented products. Like Colombia, most exports to Panama are bulk commodities with coarse grains at $69 million, soybean oil and meal $54 million, wheat $30 million and rice $17 million. Snack foods are the largest consumer-oriented category at $26 million. Panama’s population is only 3.4 million, the 134st largest country, and per capita GDP is $11,900 per year.
The South Korean agricultural market is a textbook case of market development where the market began as a bulk commodity market to supplement domestic production. Over time as per capita GDP grew, the bulk market grew and demand increased for intermediate and consumer oriented products. Colombia and Panama are working through the bulk commodity phase of development with the shift beginning toward intermediate and consumer oriented products. Full access to the intermediate and consumer-oriented product markets cannot be achieved without the three countries shaking off their protectionist policies with FTAs.
Under the U.S.-Korea FTA, tariffs on corn, wheat, soybeans for crushing and hides and skins would be zero, simply recognizing the reality that Korean consumers cannot prosper without these products. Rice remains a politically sensitive import and tariffs would not be change from WTO mandated levels. Consumer-oriented products accounted for 29 percent of U.S. exports to Korea in 2009 and are expected to grow rapidly under the FTA. Tariffs for out-of-season oranges would be reduced to 30 percent and eliminated over six years and the 54 percent tariff on frozen orange juice dropped immediately. The 30 percent tariff for lemons and grapefruit would be eliminated over two years and five years. Other fruits and vegetables would have a mixture of immediate elimination of tariffs and phase outs of up to 18 years. Frozen and fresh pork product tariffs would be reduced to zero by 2014. The 40 percent tariff on beef muscle meat would be reduced to zero over 15 years. Poultry meat, eggs and dairy would have similar reductions in tariffs with tariff rate quotas (TRQs).
Colombia’s economy is not as developed and more transition time is needed for many products. Tariffs would be eliminated on wheat, nonfeed barley, soybeans, soybean meal, high quality beef, most fruit and vegetable products, peanuts, whey, cotton and the majority of processed products. Duty-free TRQs would be created for standard beef, chicken leg quarters, dairy products, corn, sorghum, animal feeds, rice, and soybean oil. Over-quota tariffs for standard beef would be eliminated over 15 years, chicken leg quarters over 18 years, dairy products over 15 years, pork over 5 and 10 years, corn, sorghum and animal feeds over 12 years, soybean oil over 5 and 10 years and rice over 19 years.
Panama is similar to Colombia with tariffs on 63 percent of U.S. agricultural trade eliminated immediately with most other tariffs declining over 15 years. Wheat, barley, soybeans, soybean meal and crude soybean oil would be duty free immediately. High quality beef tariffs would be immediately reduced to zero, while standard quality beef tariffs would take 15 years. For products with longer tariff phase outs, duty-free market access would be provided through TRQs. Corn and rice would have TRQs phased out over 15 and 20 years. Pork over quota tariffs would be phased out over 15 years. Tariffs on some poultry products would be eliminated immediately and others’ over quota tariffs phased out over 18 years. Dairy products have similar provisions. For fruits and vegetables, 80 percent of tariffs would be immediately eliminated and others reduced over 5 to 12 years.
These countries have made a real paradigm shift in recognizing markets must be more open to provide benefits to consumers. They all have individual political needs to protect some products and provide long transitions for others. The Obama Administration and the U.S. Congress appear to have not caught on to that paradigm shift. These three countries have not remained static while the U.S. waits. If they cannot access food from the U.S., it will be done with other countries. South Korea signed a FTA with the EU and is working on one with Canada. Panama and Colombia have signed separate agreements with Canada.