05-19-16 USWA: An Alternative Take on ITC’s Mixed Score for Wheat under TPP

 

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An Alternative Take on ITC’s Mixed Score for Wheat under TPP

Following is a Joint Statement from U.S. Wheat Associates and the National Association of Wheat Growers.

WASHINGTON, DCOn Wednesday, the International Trade Commission (ITC) released its highly anticipated report on the economic impacts expected to accrue from the adoption of the Trans-Pacific Partnership (TPP). For the entire agriculture and food sector, the report forecasts a $7.2 billion increase in exports or a growth of about 2.6 percent by 2032 compared to the same time frame without TPP.

The report recognized that the U.S. wheat industry would see substantial gains in market access and subsequent exports to Vietnam where the United States currently competes at a tariff disadvantage to Australian suppliers. Specifically, the ITC notes that U.S. wheat and other grain exports to Vietnam would increase by a healthy 25.3 percent by 2032 under TPP. However, ITC also concludes that U.S. wheat exports to Japan would decline by 17 percent under TPP. Given our industry’s 60 years of experience in the unique Japanese market, we respectfully believe that ITC got this one wrong.

There are two distinct markets for wheat in Japan: one for high quality food grade wheat and one for lower quality, lower priced livestock feed wheat. Japan has consistently imported about 60 percent of its annual milling wheat needs from the United States, with Canada and Australia making up the balance. Because access to Japan’s milling wheat market would remain equal among the three suppliers under TPP and because Japan requires different types of wheat for distinct uses, we see no reason why U.S. sales would decline.

Regarding the feed wheat market, ITC notes that Canada would see higher feed wheat sales under TPP because it is a “low-cost producer.” If Canada has such an advantage over U.S. wheat producers, then why has U.S. wheat made up 45 percent of Japan’s feed wheat imports on average since 2013 while only 20 percent has been imported from Canada? The relative cost of feed wheat compared to alternative feed grain has far more to do with Japan’s feed import decisions than cost of production. As long as corn and other feed grain alternatives remain inexpensive Japan does not buy much feed wheat from any origin.

ITC’s statement that Canada is positioned to out compete the U.S. in either milling or feed wheat sales to Japan is out of touch with the reality of Japan’s preferences for U.S. wheat. It also fails to recognize that Canada’s competitive position with respect to the United States would be unchanged under TPP.

Modeling policy impacts to individual countries 16 years in the future is inherently difficult theoretical work. The reality is that TPP reduces barriers facing U.S. wheat farmers and keeps us on a level playing field with two of our largest competitors. That is particularly important because Canada and Australia continue to seek tariff advantages by negotiating and signing free trade agreements in competitive markets at a much more rapid pace than the United States.

“The assumptions made in the ITC report are disappointing and misleading,” said NAWG President Gordon Stoner. “U.S. wheat farmers stand to benefit from a lower MAFF (Ministry of Agriculture, Forestry, and Fisheries) markup and new market access in Japan and from being able to compete on a level playing field in Vietnam. Congress should act quickly to enable farmers to take full advantage of the potential economic opportunities at stake under TPP.”  

What really sets TPP apart from past agreements is it creates a platform for future growth. Not only does it target one of the fastest growing regions in the world, but once enacted it becomes a forum for other countries to join. Countries in line to join TPP include Indonesia, the world’s second largest wheat importer, the Philippines and Thailand, also significant importers. Each country already signed FTA’s with Australia.
That is why U.S. wheat farmers remain convinced that we need swift consideration and approval of TPP.

“Every day that TPP implementation is delayed, our ability to compete on a level playing field in established and new markets erodes that much more. Wheat farmers need TPP, but so do our customers around the world,” said USW Chairman Brian O’Toole, a wheat farmer from Crystal, ND.

Read the full ITC report online at https://www.usitc.gov/publications/332/pub4607.pdf.  Additional information about how TPP will benefit wheat farmers is also online at http://www.uswheat.org/newsRelease/doc/9B4AC6CC055E03CC85257F4F0056A111?Open and at http://www.uswheat.org/factsheets/doc/026BAE500967A7FE85257F2A006F0FDE/$File/TPP%20Fact%20Sheet%20Handout%20PDF.pdf?OpenElement#.

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