Want to Know If Free Trade Agreements Work? Look At Our Exports to Korea.
by Kent Bacus
There’s been a great deal of discussion recently about
whether free-trade agreements like the Trans-Pacific Partnership (TPP) or the
North American Free Trade Agreement (NAFTA) are on balance positive or negative
for American workers and businesses.
That debate will continue, but one thing is absolutely
certain: opening foreign markets to American agricultural exports has been an
enormous boon for America’s farm and ranch families, who provide the world with
a safe and abundant food supply. American consumers are blessed with a safe,
affordable, and abundant food source, but Americans alone cannot consume all of
the agricultural goods that we produce. For many years we have seen global
demand for American agricultural goods continue to grow, while producers and
consumers have both benefitted from the removal of protectionist trade
barriers. And a perfect illustration of that can be seen by looking back to
something that happened exactly five years ago this week.
On March 15, 2012, the Korea-U.S. Free Trade Agreement
(KORUS) was implemented—representing the end of a long and difficult
negotiation process and the beginning of a new development in the trade
relationship between allies. For U.S. beef, the KORUS Agreement represents the
gold standard of trade agreements because it eliminates tariffs and sets in
place some of the strongest science-based standards the world has seen. Prior
to the implementation of KORUS, American beef imports in South Korea were
slapped with a 40-percent tariff, which obviously raised our costs and put us
at a competitive disadvantage against our cattle-producing competitors in
countries like Australia.
However, our free-trade agreement with South Korea flipped
that script. Those 40-percent tariffs are now being phased down to zero by
2027, and we currently have an 8-percent tariff advantage over the Australians
for the next 10 years.
The results for American cattle producers over the past few
years? An increase in annual sales to South Korea from $582 million in 2012 to
$1.06 billion in 2016 – a whopping jump of 82 percent. Similarly, exports have
spiked from 125,614 metric tons in 2012 to 179,280 metric tons last year – a
The Korean-U.S. Free Trade Agreement removed the
government-imposed obstacles that prevented us from reaching our growing
consumer base in Korea who want more U.S. beef. And by having the competitive
advantage with lower tariff rates than Australia, last year the United States
became the number one source of imported beef in South Korea – besting
Australia for the first time in 13 years. Moreover, global retailing giant
Costco recently announced that 100 percent of the imported chilled beef it
sells at its 13 warehouses across South Korea will be American-produced – a
potential boost of 15,000 metric tons just this year, according to the U.S.
Meat Export Federation.
Of course, South Korea isn’t alone in its love of
high-quality American beef. In fact, the world’s top importer of American beef
in 2016 was Japan – to the tune of $1.5 billion – despite our product being
slapped with 38.5-percent tariffs at the country’s ports. In contrast, Japan
only charges Australian beef imports a 27.5-percent tariff. TPP would have
eliminated this 11-percent Aussie advantage, but now this discrepancy will
actually get worse, as Japanese tariffs on Australian beef will continue to
drop in the coming years - while ours remain the same.
So what does all of this mean for a typical American
cattle-producing family? Consider Craig Uden, a fourth-generation cattleman who
runs a ranch and feeding business in tiny Cozad, Nebraska. He doesn’t sell his
cattle directly to restaurants or supermarkets in Korea, Japan, or Mexico, but
does sell them to meat packers who often do.
And the price that Craig gets for his cattle is based
largely on demand – global demand. If global demand for American beef
drops because high tariffs in Japan drive up the cost, or because a trade war
prevents us from selling at all to 1.3 billion hungry consumers in China,
that’s means less money for Craig and his family. And at a time when exports
account for 13 percent of overall U.S. beef production – or approximately $300
per head of cattle – those losses can add up quickly for real American
So as the debate on trade continues and treaties old and new
are (re)negotiated, let’s remember that the so-called faces of trade aren’t
always as they’re depicted on the campaign trail. Because if you look at the
faces of many American agricultural families, they’re probably smiling about
being able to sell their products competitively to the 96 percent of the
world’s consumers who don’t live in the United States.
Kent Bacus is Director of International Trade and Market
Access for the National Cattlemen’s Beef Association, which has represented
America’s cattle producers since 1898, preserving the heritage and strength of
the industry through education and public policy.