PUBLISHED ON March 9th, 2023

After record year, U.S. needs to step up, foster more trade deals, expert says

Trade has never been more important for U.S. agriculture, and 2022 was a very good year in that department.

Brian Kuehl, the executive director of Farmers for Free Trade, says the 2022 results were a “double-edged sword” because of higher retail value and lower overall volume. The question is, what’s ahead in 2023?

The American agricultural sector posted its best export year ever in 2022. International sales of America’s farm and food products reached $196 billion. Final trade data from the Commerce Department shows that U.S. agricultural exports increased 11%, or $19.5 billion, from the previous record set in 2021.

“Inflation has driven up commodity prices, and much of that has been driven by the war in Ukraine,” Kuehl said. “Supply chains coming out of COVID have also made things very challenging.”

He said the good news is America is exporting more by value and, in some sectors, more by volume too. Farmers can sell their products for higher prices, but the challenge is input costs have gone up so much in recent years.

“Even with the good trade numbers from last year, farmers are still having a hard time making a go of it,” he said.

While 2022 was a record value year, USDA predicts 2023 may look different as American food and ag will be operating at a trade deficit through the rest of this year.

“It’s not a huge trade deficit,” Kuehl said. “But I think any trade deficit should be troubling,” he said.

Until 2019, the U.S. consistently ran trade surpluses. Now trade deficits are beginning to pop up in food and agriculture.

“Part of that is because we aren’t pushing to open new markets,” Kuehl said. “Our competitors are striking trade deals around the globe, and the U.S. position is eroding at the same time.”
Mexico, a longtime U.S. trading partner, is threatening to seriously lower its demand for U.S. corn imports. Mexico issued a decree banning GMO corn imports for food products by 2024 but accelerated that timeline.

“On the one hand, they seem to be walking back their ban on GMO corn for commercial purposes like feed or fuel, which is 80% of our corn exports,” Kuehl said. “The other 20% of our corn exports go for food, which is still a considerable amount.”

Mexico’s ban on biotech corn imports used for certain purposes went into effect Feb. 17. A new decree of the Mexican government says they will continue to allow imports of biotech corn for animal feed while they look for possible substitutes. According to Kuehl, Mexico could be breaking part of the trade agreement known as the U.S.-Mexico-Canada (USMCA) agreement.
“There was hope that Mexico would see risking a big trade war with the United States would not be a positive thing for them,” Kuehl said. “USMCA commits the three countries to science-based standards when it comes to trade, which Mexico is not using to make this decision.”

Both the National Corn Growers Association and Farmers for Free Trade are asking the Biden administration to enforce the USMCA agreement that was signed by Mexican President Obrador himself.

“It looks like Mexico has decided they don’t like GMOs, so they’re going to mess with U.S. exports, and that’s something not allowed under the USMCA,” Kuehl said.

Mexico aside, that doesn’t mean the U.S. is lagging in other established markets. The export total to China, one of the world’s biggest commodity buyers, hit $36 billion and is, by far, America’s largest export destination.

“Soybeans have certainly led the way in China,” Kuehl said. “Important parts of South America have also had a drought, which has caused the forecast for U.S. soy exports to China in the first half of this year to continue to stay strong.”

U.S. sales values increased in every one of the top 10 agricultural export markets, which includes China, Mexico, Canada, Japan, the European Union, South Korea, Taiwan, the Philippines, Colombia and Vietnam. Sales in seven of the 10 markets set new records.

“I think China being a bright spot is a good thing,” he said.

That said, it’s not good to rely too much on one country.

“It’s an important market, and we want to sell all of the goods there that we can. But let’s balance that with exports to Vietnam, Indonesia, and India,” Kuehl said. “It’s time to broaden and diversify where we send our products.”

The relationship between the U.S. and China can be described as “tenuous, at best,” Kuehl said. America doesn’t want to get caught with a large number of goods on hand if China closes its borders to American imports.

The demand for American goods is still strong, and Kuehl said the U.S. has a lot of advantages, including dependability. Food safety is another big one.

“A lot of markets like our goods because they know where they come from, they’re produced with integrity, and are safe,” Kuehl said. “There won’t be any contamination, which is especially important in products like processed foods and dairy.”

More long-term market access needs to be a priority in 2023. Kuehl says it’s been over 10 years since America’s last new free trade agreement with a new country. That’s a long time to be on the sidelines.

In that time, China created RECEP (the Regional Comprehensive Economic Partnership), the world’s largest free trade bloc. The country recently entered into an agreement with Ecuador and trades in Africa.

“They’re going everywhere to cut trade deals, anywhere they can.” Kuehl said.

American allies like Canada and Australia are members of the CPTPP, which is the group that continued after the Trump administration pulled America out of the Trans-Pacific Partnership.

Farmers for Free Trade would like to see the Biden administration focus on a few key areas to help the country’s trade picture. One is the recently-established Indo-Pacific Economic Framework that focuses on things like corruption and non-tariff barriers to trade.

Standalone trade agreements with countries such as the United Kingdom and Kenya are another focus, as are what Kuehl calls “mini deals” addressing just a few commodities at a time. One mini deal is pushing for more U.S. pork access to Vietnam. Such deals could also help apple producers, almond growers or dairy farmers, he said.

“Trade deals matter,” Kuehl said. “They make our goods more competitive in other markets.”

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