March 5, 2007 - Ag Exports - Still Positive

Lest we forget...despite the monthly trade balance reports showing the large negative trade balance for the U.S., one segment of our economy still shows a positive balance...agriculture. We continue to export more farm products than we import and the number is growing.

Last November, USDA estimated fiscal 2007 agricultural exports would be a record $77-billion, well above the 2006 value of $68.7-billion. But, earlier this month at the annual USDA Agricultural Outlook Forum, Secretary Johanns raised the projection to $78-billion. If it happens, it would be the fourth straight year of record exports and the eighth straight year of growth. Part of the growth can be attributed to higher prices for most U.S. farm products moving into the world market.

Two countries will account for one-third of the exports; Canada and Mexico will increase their purchases this year to more than $25-billion. Meanwhile, farm exports to the European Union will fall to a historic low of $7.4-billion.

All of this positive trade news, perhaps again, begs the question...do we really need trade agreements? Before you answer that, remember that our two biggest farm trading partners, Canada & Mexico, are the two partners in our oldest and largest trade agreement, the North American Free Trade Agreement, the oft-maligned NAFTA. While trade agreements are supposed to level the playing field, providing market access for all parties, I think Canadian and Mexican producers would say that NAFTA is “Advantage America”.

So, should we spend time and energy trying to revive the Doha Round of WTO trade talks where the impasse between the U.S. and the European Union continues unabated. Recently, French President Jacques Chirac, criticized the EU Trade Minister for being too ready to give ground in global trade talks and said the Commissioner “keeps wanting to give more even though the Americans have not shown any intention of making the slightest concession on farm products, and emerging countries have shown no intention at all of making the slightest concession on industrial products or services.” French farmers loved his strong words because they don’t want to lose up to $12-billion in annual European Union farm subsidies. U.S. farmers, meanwhile, insist we are offering far more concessions than the EU.

I don’t know the answer to the trade questions, but we seem to be doing just fine with bilateral trade agreements, and $77-billion of foreign agricultural sales makes me wonder if pursuing the WTO talks is worth the time and effort.

My thoughts on Samuelson Sez