Remarks by Ambassador Michael Froman at the National Council of Farmer Cooperatives Washington Conference
June 14, 2016
Thanks very much, Carl, and thanks Chuck as well for having me. And I understand that you are going to have some Members of Congress here later today, and I am delighted that you are all here, and have made your way up and around the Hill.
It’s always a pleasure to meet with groups such as yours. Farm cooperatives not only have a significant impact on the economy of the United States, they have a unique appreciation for the benefits of international trade.
You get it. As Chuck Conner said last month, “TPP offers tremendous opportunity to farmers and their co-ops to expand exports and generate additional economic activity across farm country.” Thanks, Chuck.
I feel a bit like I’m preaching to the choir. But as a Senator told me the other day, even the choir needs a little preaching every once in a while.
You know what’s at stake when it comes to international trade.
American farmers are the most productive in the world, and their products, such as soybeans, beef, almonds, and oranges, are in demand all over the world. And that demand is growing all over the world. For example, there are about 1 billion middle-class consumers in the Asia-Pacific region and that number is expected to triple by 2030.
We know that the first thing middle-class consumers want is more of the kinds of foods they couldn’t previously afford. They want more protein, better nutrition and safer foods for their families.
America’s farmers and ranchers are second to none in producing those kinds of foods, and they are ready and willing to meet that demand.
So, not only do you well understand the benefits of open trade in general, you know that free trade agreements like the Trans-Pacific Partnership are critical tools for knocking down barriers to exports and giving American farmers fair and equitable access to foreign markets.
As you know, the United States and the eleven other parties to the TPP finished negotiating the agreement last October and signed it in February. And now 12 countries are at various stages of the ratification process. The United States, I’m sorry to say, lags behind.
That is doubly unfortunate, because it’s not just about what you stand to gain from TPP on the upside, but what you stand to lose if TPP gets delayed as other countries move ahead.
Let’s talk about what’s on offer:
Japan has had one of the most closed agricultural markets in the world for the last 70 years. Under TPP, we’ll see tariff elimination for oranges to Japan, the United States’ 3rd largest export market in 2015, where the tariff can be as high as 32 percent. Japan will eliminate its duties on key categories of cheese, which range as high as 40 percent right now. We already export $160 million a year in cheese to Japan, but when you eliminate those tariffs in these key products, we expect exports to grow significantly. And while Japan had previously excluded rice from all of its previous trade agreements, in TPP we secured significant new market access. And very importantly, Japan has made commitments to improve the way they manage their TRQs, the way they are going to auction the commitment to make sure our producers are able to fill every bit of those TRQs. And that will add to what is already a $278 million export market for rice from the United States.
When you look at countries like Vietnam – a new FTA partner – we’ll see 40 percent tariffs on chicken eliminated, and 30 percent tariffs on cranberries eliminated. And when it comes to dairy, we gained expanded access not only to Japan, but to Canada, which we had failed to achieve in the Canadian Free Trade Agreement, and in NAFTA 22 years ago. And so there is new market access for our products, and new opportunities here.
Japan’s average agricultural tariff is 19 percent. Vietnam’s is 16 percent. Some TPP countries impose tariffs on food and agricultural products as high as 300 percent. Those tariffs will either go away completely or be greatly reduced in the areas of priorities to the United States.
In a report it issued a few weeks ago, the International Trade Commission estimated that U.S. food and agricultural exports would be $11.1 billion higher in 2032 than they would be without TPP. And that total U.S. agricultural output would be $10 billion higher.
The American Farm Bureau has estimated that farm income will increase $4.4 billion because of TPP. It’s hard to see another federal policy or action the federal government can take that would have such a dramatic, positive impact on the American agricultural community.
But while we are waiting for ratification, other countries are sewing up their own trade agreements, putting our exports and our farmers and ranchers at a disadvantage.
For example, there is a trade agreement that Australia already has with Japan. And that is giving Australian beef exporters superior access to Japan than we have. In April, the agreement’s third round of tariff cuts took place, and that means that Japan’s duty on Australia’s beef has fallen to 30.5 percent for fresh or chilled beef, and 27.5 percent for frozen beef. Those tariffs are going to continue to decline, to 19.5 percent. In the meantime, we face tariffs of 38.5 percent, and I am perfectly prepared to relate that our beef is better than Australian beef. If we face a tariff that is twice as much as what Australian exporters are facing, we are going to lose market share. In fact the, National Cattlemen’s Beef Association has already estimated that right now, we’re losing $122 million a year in exports to Australia, and that number is rising.
But when it comes to ag, TPP is more than about tariffs and quotas. It’s also about the rules. Making sure other countries, for example, live by the same science-based regulations that we do. Putting a stake in the ground when it comes to efforts to use geographical indications to exclude our products from other markets.
Of course, as I understand that you all don’t just represent producers; you represent processors, marketers of agricultural and food products, you sell tractors, and fencing, and other supplies. Or you provide financial services to producers. For farm-supporting-businesses, the ITC predicts the TPP will bring employment gains and income gains throughout the agriculture supply chain.
We know that 20 percent of U.S. farm income comes from exports and those exports support rural communities. The growth in ag exports between 2009 and now has supported an additional 300,000 jobs across the economy. Those exports have fostered economic growth across rural America. As my friend and agricultural mentor Tom Vilsack has taught me, every dollar of agricultural exports stimulates another $1.27 in business activity elsewhere in the economy.
So a failure or a delay in ratifying the TPP will have consequences for agriculture and throughout the U.S. economy. This region, the Asia-Pacific region, is the fastest growing region in the world. It represents 40 percent of the global economy.
Other parties to the agreement are not going to give up or just stand still while the United States delays or does not take action. They’re not waiting around for us. They’re going to forge ahead with their own agreements, whether they’re with China or the EU. Many of them will take alternative approaches to trade, including in some of these agricultural issues, that don’t necessarily comport with our interests.
So, the choice we face is simple. As you go up to Capitol Hill today, I want you to keep this choice in mind and make it clear to the people you’re talking to. Do we want to help shape an Asia Pacific market based on a rules-based trading system that reflects our interests and out values, or are we going to cede that role to others and find ourselves excluded from large and some of the fastest growing markets in the world, facing a set of rules that do not necessarily play to our advantages?
Let me say a word about Europe and T-TIP. At the same time the European Union has been negotiating T-TIP with us, it has completed agreements with Canada, Vietnam and Singapore. It is currently negotiating trade agreements with Japan, Brazil, Argentina, India, and more than a dozen other countries. The rest of the world is not standing still, waiting for us. We need to be proactive about leveling the playing field for our producers.
Since last summer, we have accelerated the progress in the T-TIP negotiations, and our teams are working basically around the clock to try to complete an ambitious, comprehensive agreement by the end of this year. Despite the significant progress we have made in a number of areas, there are a number of outstanding issues in the agricultural arena. And if we’re going to solve this, it’s going to require creativity and pragmatism on both sides, not ideology.
Take geographic indications.
We’ve taken Europe’s requests very seriously, and we’ve looked closely at our ag trade. It is helpful to have a fact-based discussion, one with real data. What the data shows is that EU farm products are doing very well in the United States, while our farm products are often completely shut out of the EU. The EU exports about twice as much agricultural products to the U.S. as we do to Europe. Over the past 15 years, our ag exports have skyrocketed to an all-time high of about $150 billion in 2014 – but our exports to the EU have remained flat or actually declined in real terms.
When it comes to GIs, our system already provides meaningful protection for Europe’s products. For $250 and 15 minutes online, any European producer can apply for a trademark, which the U.S. government will proactively protect against any future conflicting trademark application. European agricultural producers know this, and in fact, they hold 12,000 trademarks in the United States, which is one of the reasons they have been so successful in our market.
We’ve got more work to do with the Europeans on eliminating tariffs and quotas for our exports. When we negotiate free trade agreements, we have the goal of eliminating all tariffs, and that goal is what the EU agreed to when we launched the T-TIP negotiations three years ago.
Now, there’s a big debate going on in Europe about whether T-TIP will lower food safety standards. And let me be clear: It will not. We have no interest in lowering standards for food safety, or labor, or the environment, or consumer protection, or health and safety, or any other area.
We’ve made clear that we’re not trying to force anyone to eat anything. We do believe that when it comes to food safety, animal health and plant health, decisions about what’s safe ought to be based on science, not politics and not protectionism. We have faith in European scientists. All we are asking is that the EU honor its WTO and international commitments that call for a country’s decisions on food safety, animal health, and plant health, to be based on science and risk analysis. The EU agreed to that more than 20 years ago at the WTO. The European Court of Justice has made it clear that the EU should do a better job of enforcing its own laws in this area, and that would be a good step forward.
Our goal in T-TIP is to raise standard, and to launch a race to the top. Because when we raise the bar, whether it’s on food safety, labor and environmental protection, consumer protection, it’s not just the United States and Europe that benefit, the whole world wins.
We believe that it’s still possible to reach agreement on T-TIP this year, provided that both sides bring that creative, pragmatic approach to the table.
We’re here at an interesting time. Our country is approaching a critical juncture when it comes to trade and our role in the world. On the one hand, we can stand together, lead, and shape tomorrow’s global economy so that it reflects our interests and our values. On the other hand, we can remain divided, sit on the sidelines, and watch other countries write tomorrow’s rules of the road.
That’s why it’s so important that we move this trade agenda forward, and that’s where we can use your help.
NCFC has a network of members all over the country. When you go home, we need you to remind your fellow co-op members, your friends, your neighbors, your local government officials, your local press, that trade agreements like the TPP are how we level the playing field for American farmers, ranchers and workers and protect America’s competitiveness globally.
We need you to impress upon them how important exports are to creating and supporting good, well-paying jobs in your communities.
And we need you to encourage them to speak up, to explain how important it is to eliminate taxes on our ag exports and make sure that the rules of the road in those markets reflect our interests and our values. In a town where the power of inertia is strong, it’s important that your voices of urgency are heard – because if TPP doesn’t get done this year, it’s unclear exactly when it might get done. And rather than seeing new opportunities opened up for you, you could find some of the hard-fought gains you’ve made internationally over the last couple of years erased.
I’ve learned from experience that when the agriculture community gets together, there’s nothing that you can’t accomplish. And we look forward to working with you to get this done, and to get it done this year.
Thank you for your time, and I’m happy to take your questions.