Free-Trade Agreements: New Trade Opportunities for Horticulture

Article excerpt

Highlights:

* The United States has embarked on ambitious negotiations to create a Trans-Pacific Partnership and a comprehensive trans-Atlantic agreement with the European

Union that will liberalize and promote trade.

* The horticulture industry, as well as all of U.S. agriculture, shares a strong interestin the outcome of both negotiations, as fruit and vegetable trade patterns continue to be influenced by a range of trade-distorting policies.

* Reductions in horticultural tariffs and more openness and transparent procedures for sanitary, phytosanitary, and technical standards can generate increased demand and trade for U.S. fruit and vegetables.

The United States has been engaged in negotiating free trade agreements (FTAs) since the 1980s, when it signed pacts with Israel and Canada. In 1994, the Canadian-U.S. accord expanded to include Mexico, creating the North American Free Trade Agreement (NAFTA). Twelve other FTAs with 17 countries followed, each providing additional opportunities for the U.S. economy and the agricultural sector. The United States recently embarked on ambitious negotiations to create a Trans-Pacific Partnership (TPP)with 10 countries that will liberalize and promote trade and investment in the Asia-Pacific region (Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam). Japan has announced its intentions to join the negotiations as well.The United States has also agreed to launch negotiations with the European Union to establish a Transatlantic Trade and Investment Partnership (TTIP), a free-trade area between the world's two largest trading partners.

Both TPP and TTIP would have trade implications for all sectors of the economy, including the food and agricultural sector. The 10 U.S.TPP partners, and potential TPP partner Japan, have a population of 475 million people and a combined Gross Domestic Product (GDP) estimated at over $11.5 trillion (2011). The EU encompasses 27 countries with a combined population and GDP of 502.5 million and $17.6 trillion, respectively. Both regions are important markets for U.S. agricultural exports; hence, the interest in how these agreements might affect the United States.

One subsectorof U.S. agriculture, the sometimes overlooked horticulture industry, shares a strong interest in the outcome of both negotiations, as fruit and vegetable trade patterns continue to be influenced by a range of trade-distorting policies. The horticultural sector faces a large number of high tariff rates as well as tariff-rate quotas (TRQs), some of which are characterized by cumbersome administrative procedures and over-quota tariff rates at trade-prohibitive levels. Moreover, phytosanitary and technical measures have affected trade by limiting or blocking imports of select horticultural products into world markets.

Growth in U.S. and Global Horticultural Trade

Overthe past decade, growth in global horticultural trade has been substantial. According to the United Nations' ComTrade database, fruit and vegetable trade rose from over $90 billion (2000) to nearly $218 billion (2010) (derived from import data) and accounts for almost 21 percent of global food and animal product trade. From a U.S. perspective, fruit and vegetable imports and exports more than doubled in value, reaching $22.9 billion and $15.7 billion, respectively, or about 26 percent of U.S. food and agricultural imports and 13 percent of exports.

At least four key long-term factors underlie the increase in fruit and vegetable trade. A growing middle class in emerging market countries has demonstrated a strong demand for product quality, variety, convenience, and the benefits of healthy and nutritious fruits and vegetables, further boosting trade in these products. Second, technological innovations, most notably in communication and transportation, have lowered the transaction costs of international trade, thus making imports more affordable. …