DES MOINES, Iowa — If you want to see how a free trade agreement can benefit both ends of the deal, look a little south of Mexico to Colombia Dr. Dermot Hayes said.

“Colombia is just a textbook,” Hayes said.

The U.S.-Colombia Free Trade Agreement was passed by the U.S. Congress in 2011 and went into effect in May 2012. Among the U.S. agricultural products that were included in the pact was pork.

“People who live in Colombia are from Spain. They are naturally pork eaters. They just didn’t have pork before because they didn’t have a way of producing a lot. They were eating about four kilograms (about 8.81 pounds) of pork per person, even though they wanted more,” Hayes said.

The agreement allowed more U.S. pork to enter the country free of tariffs and other trade barriers.

“Suddenly, they’re getting access to chilled U.S. pork. They’re increasing their consumption. Their own industry should maintain its production, so it’s that textbook case. They are benefiting from cheaper pork and we are benefiting through exports and that is throughout Central America. A range of countries that you never heard of are now in our top 20 export markets,” Hayes said.

PORK Academy

Hayes presented a session on world economics and U.S. pork exports as part of the Pork Checkoff’s PORK Academy seminars during World Pork Expo.

Hayes said free trade agreements take the sting out of market share lost in other areas of the world.

“We have a free trade agreement with South America, so the reason you see places like the Dominican Republic, Panama, Guatemala and Peru is because we have free trade agreements and our exports to those countries are surging. That’s enough impact to compensate for the loss of a huge market in Russia and for losses in Mexico and China,” he said.

Hayes emphasized that exports for the U.S. pork market are vital for both producers and processors.

“We export about a quarter of the pork we produce. That means the industry is about a quarter bigger than it would otherwise be,” he said.

How important the export market is can be seen through sales ups and downs.

“We see it when we have a new market in Korea because they have disease, we see it in a surge of prices in March 2013. We saw hog prices collapse because we lost export markets,” Hayes said. “It really matters when these people are buying, they add value.”

As far as U.S. pork abroad, Hayes said he is optimistic despite losses from porcine epidemic diarrhea virus in the U.S. that will impact exports.

“What will happen this year is we will render less and export more so my bottom line — U.S. pork consumption by domestic consumers will fall by 4 to 6 percent and exports will fall about the same,” he said.

Pending Pacts

Two pending trade agreements, the Trans Pacific Partnership with 11 other countries, and the Transatlantic Trade and Investment Partnership with the European Union nations, lead the list of export news.

Hayes said disagreements over agriculture products is one of the sticking points for the TPP negotiations.

“The issue is that Japan wants to continue to protect its pork industry, so it wants to have a duty on imported pork and it wants to use that duty to protect its pork industry, to give more subsidies to producers and that is not sitting well with the leadership of the U.S. pork industry,” he said.

He noted that if the disagreements can be resolved, the U.S. stands to gain.

“I hope it turns out well. If it does, there’s phenomenal opportunity in exporting more pork to Japan. If it doesn’t, Japan has trading agreements with both the EU and Canada so the downside is if we don’t get a deal and Japan can get pork from Canada and EU, we lose market share. That’s the worst-case scenario,” he said.

The TTIP negotiations are slower-going, due to the EU’s refusal to budge on issues related to GMOs and other science-related concerns.

“They’ve had problems over there and they’ve lost faith in technology. They’ve moved away from science and now they want to take that anti-technology and bring it into the negotiations and that’s a concern,” Hayes said.

He said that while activists have limited the kinds of foods that are available on grocery shelves, the opportunity to supply commodities to the EU could be another growth area for U.S. farmers.

“The activists over there have pretty well stopped people from accessing the kinds of products that we buy here and I hope they get a choice. If they do, the opportunities there are also phenomenal,” he said.

Hayes is bullish on U.S. pork exports to China because, he said, countries where arable land is in short supply have moved toward importing land-intensive products, such as meat protein, corn and soybeans. The U.S. is the world’s second-lowest cost producer of pork, and Hayes said simple economics makes the case.

He said that smaller countries have realized that producing labor-intensive products benefits them more than land-intensive products.

“South Korea, other than rice, it’s all what we would consider labor-intensive products, like garlic, ginseng, fruit trees. That’s what you do when land is scarce, you grow labor-intensive products and make the maximum use of your small farm,” he said.

Hayes noted that while China has more pigs, 50 million sows compared to a U.S. sow herd of less than 6 million, productivity has not increased. Most of China’s pig population is crowded into a small area.

“There are some disease issues they have encountered,” Hayes said.

As a result, “China is behaving just like other Asian countries,” Hayes said, and importing more and more protein.

“In 2012-’13, it spent more dollars on importing animal protein than on corn and soybeans, even though it imported 70 million tons of soybeans. We get a little more than a ton of soybeans per acre, 40 bushels is the national average? Seventy million tons is like exporting 70 million acres,” Hayes said.

Mandatory country of origin labeling has taken a bite out of pork exports to Canada, and Hayes warned that the consequences of the requirement could increase for U.S. pork producers.

“It’s an attempt by us to keep Canadian product out. It’s working, but it’s also reducing our exports to Canada,” he said.