Some Missouri farm and livestock groups are confident their members will profit from the Free Trade Area of the Americas trading bloc, but the cheap costs of production in Central and South America have others worried that the playing field won’t be level for Missouri farmers.
Negotiations end today in Miami, where U.S. officials and representatives from 34 countries of Central and South America have been discussing the framework of an agreement that would remove trade barriers among member countries. If an agreement is reached, the FTAA would be the largest trading bloc in the world, stretching from Alaska to Argentina.
Fred Stemme, a spokesman for the Missouri Corn Growers Association, said Missouri corn growers are supportive of efforts to expand trade abroad and he is optimistic that the reductions in trade barriers brought about by FTAA will allow Missouri corn growers to export to new markets. Any agreements on cuts in tariffs wouldn’t go into effect until January 2005.
Brent Bryant, executive vice president with the Missouri Cattlemen’s Association, is confident that Missouri ranchers will be able to export their products successfully if FTAA goes into effect.
“My position is that we want to open up markets for our beef producers,” he said. “We produce the best beef in the entire world.”
But the quality of American products is not going to be the problem when the United States enters into FTAA, said Bryce Oates, a spokesman for the Missouri Rural Crisis Center.
“The commodity groups believe that U.S. producers of commodities are the lowest cost producers, but we’re not,” he said.
American farmers are subject to higher production costs than countries in Central and South America. Cheaper land prices and a lack of environmental and labor standards allow farmers and ranchers in these countries to produce at much lower costs than American farmers, said Dave Dillon, deputy director of the Missouri Department of Agriculture.
The problem for small farmers is that they rely on large corporations, such as Cargill and Bunge, to buy their products, Oates said. Corporations will buy commodities at the lowest price. Cheap land costs and the end of trade barriers could mean these corporations could buy agricultural products at cheaper prices from South American countries, Oates said.
“It’s a mistake to say that farmers will benefit from increased exports,” Oates said.
But while Latin American countries have the advantage of cheaper production costs, the United States has the ability to be extremely competitive in creating “differentiated products,” such as soybeans that are grown to produce a high quality oil, Dillon said.
“We have been doing a lot in Missouri to move away from commodity farming,” Dillon said. “The key is for farmers to move up the chain of value in production of commodities,” he said.
The Missouri Corn Growers Association has been helping members to add value to their corn by distinguishing it through a patented system called “virtual processing,” said Stemme. The process allows buyers of corn to “virtually” see every step of the growing process of a grain of corn. The process is not yet widely used, but it would allow buyers to eventually know exactly who created the corn, what type of soil the corn was grown in and what properties a grain of the corn contains, including starch, oil and protein content, Stemme said.
“Virtual processing will allow us to retain a competitive advantage,” Stemme said.
Missouri farmers are also strategically located near the Missouri and Mississippi rivers. This puts Missouri in a better position to export products than other states in the region with similar topography, Dillon said.
The focus of the negotiations on reduction of trade barriers, not agricultural subsidies, is good news for American farmers, said Richard Mills, a spokesman for the U.S. Trade Representative.
Disagreements over agricultural subsidies caused the collapse of World Trade Organization talks this September in Cancun when Brazil led 21 other developing nations out of the meetings. Those nations argued that agricultural subsidies prevent them from competing in the world market. U.S. subsidies allow farmers to sell their products cheaper than those from developing nations.
Dillon said that he doesn’t think Missouri farmers will see changes to their agricultural subsidies as a result of FTAA.
“I strongly believe that fair trade is more important than free trade, especially in the agricultural sector,” Dillon said.