Trade agreement could boost beef industry

Stillwater News Press
By: Ricky O’Bannon
October 13, 2011

STILLWATER — Three free trade agreements passed by Congress Wednesday night could open up markets and new customers for Oklahoma’s farmers and ranchers if the state and nation find ways to market their products abroad, according to one agricultural economist.

After being delayed for years, bilateral agreements with South Korea, Panama and Colombia were pushed through both the House and Senate just hours apart. Rep. Frank Lucas, R-Okla., spoke on the House floor multiple times in support of the deals. Lucas, a western Oklahoma farmer and rancher, is chair of the House Committee on Agriculture.

“All three free trade agreements under consideration today are essential for our nation’s agricultural industry,” he said. “Out of every $100 in agricultural sales, more than $25 comes from exports. So market access is critical to the success of our farmers and ranchers.”

Lucas said that farm exports support 10,000 jobs in Oklahoma and 1 million nationwide, and he added those jobs have a ripple effect for the processing, manufacturing and transportation industries as well. Lucas said that every $1 of exports means $1.31 added to the economy.

The biggest impact is likely to come from the free trade agreement with South Korea, which is the fifth largest market for American agricultural products.

“America’s producers face an average tariff of 54 percent when exporting to Korea. Similar goods from Korea enter the U.S. at an average rate of only 9 percent,” Lucas said in a statement after the vote. “Passing this agreement corrects that imbalance and provides better access to Korea’s 49 million consumers.”

He also cited an estimate from the Farm Bureau that said the U.S. could see $1.9 billion annually in increased farm exports once the Korean agreement is fully implemented.

“Generally from an economist perspective a trade is always beneficial as long as it’s free and fair trade,” said ag trade expert Mike Dicks. “That’s what we’re trying to do with these bilateral agreements.”

Dicks teaches agricultural economics at Oklahoma State University and is Wes and Lou Watkins Chair of International Trade and Development.

“For Oklahoma in particular, if you consider the two biggest industries are the oil industry and agriculture, we’re in a pretty good position (to export) to those three countries,” he said. “That doesn’t mean we’ll have a trade surplus, but we (have the potential).”

Dicks often takes students on overseas service trips, and he said he is always interested when students talk about what products they don’t see in foreign countries.

“This is a time if we have these agreements that it behooves us to think what products do we have that they want, and that requires an understanding of Korean culture,” he said.

Dicks added that requires American businesses to be as aggressive as foreign companies are in learning other languages, traveling abroad and marketing their products. He said that for a very long time most of the noodles eaten by Americans were produced in South Korea but made with American wheat, which shows the ability of South Korean companies to recognize and fill a void for desired products.

“I think it’s really important that if you’re going to throw stones at a free trade act, you’ll have to do as much as they are to increase your exports,” Dicks added. “It’s really difficult to say ‘this caused this’ because it just opened the door, and what happened was either the success or failure of people to act aggressively.”

He also said that while the free trade agreements are a big step, the U.S. will have to continue to work through problems as they come up. South Korea, for example, has had a history of not accepting American beef on occasion because it and the U.S. health agencies look for different things in beef.

”You say free trade, but it also has to be fair where all products are under the same regulations,” Dicks said. “There are still some structural impediments in Korea, Japan and southeast Asia … in how much marketing margin is added.”

That also means trying to make sure that all countries are under similar labor and environmental regulations.

While new markets could mean a boost for Oklahoma ranchers, Dicks said he didn’t think it was likely this would mean Oklahomans will have to pay more for things like beef at their grocery store. The U.S. is actually a net importer of beef because of the public demand for hamburger, which is made from lower grade cuts. Dicks said what Oklahoma and the U.S. as a whole export is steak and other high quality cuts of beef.

While Panama and Colombia have much smaller markets than South Korea, Dicks said they are important because they start to open up trade with an entire region.

“If you think about the size of the economies you’re talking about, these economies are not as big as some of our smaller states, but it is the idea of opening access for us to the entire world,” Dicks said. “Every one of those doors that we open, each one of them might be small at the margin, but the combined effect of them is quite large.”

Ricky O’Bannon writes for the Stillwater NewsPress.

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