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.
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
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
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
“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.
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
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
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
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,”
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.