By U.S. Sen. Mike Rounds (R-S.D.)
In South Dakota, agriculture is our state’s top industry but over the past four years, net farm income has collapsed due to low commodity prices. Opening up new trade markets for our ag products is vital as we continue working to improve the economy in South Dakota and the United States.
Net farm income in our country is projected to decrease $4.3 billion from last year to $59.5 billion in 2018, the lowest net farm income level since 2006. This marks the fourth straight year of decline, and is mainly the result of weak prices for crop and livestock products. Opening up new markets for American exports will greatly contribute to the overall health of the farm economy, since foreign markets absorb around one-fifth of all U.S. agriculture production today.
I recently joined a group of senators in a letter to President Trump to let him know we agree with comments he made at a meeting of world leaders in Davos, Switzerland, indicating that he is open to re-engaging in Trans-Pacific Partnership (TPP) trade negotiations.Increased economic engagement with the eleven countries currently in the TPP has the potential to substantially improve the competitiveness of U.S. businesses, including farms and ranches. It would also support millions of U.S. jobs, boost U.S. exports, increase wages and benefit consumers. Increasing access to a region and market that has a population of nearly 500 million—and is continuing to grow—is a smart move for our country. Additionally, U.S. participation in TPP could counter the influence of China in the Pacific Rim region.
Japan, a member of TPP, is the number one market for U.S. beef exports. In 2016, the U.S. exported 203,000 metric tons of beef to Japan, valued at $1.3 billion. Currently, U.S. fresh, chilled and frozen beef enters the Japanese market at a 38.5 percent tariff rate. In the summer of 2017, Japan slapped a 50 percent tariff on frozen U.S. beef shipments. This tariff will continue through March 2018. Under TPP, this rate would have declined to 27.5 percent in year one, and ultimately would have declined to 9 percent over a 16-year phase in period. Australia is a top competitor to U.S. beef in Asia. In January 2015, the Japan-Australia Economic Partnership Agreement took effect, which set Australia’s frozen beef tariff at 30.5 percent and fresh beef tariff at 32.5 percent, and will continue to be phased-down over the next 15-18 years.
According to the U.S. International Trade Commission (ITC), TPP would provide significant benefits for U.S. agriculture and would increase U.S. ag exports by $7.2 billion by 2032. Gains in farm and food exports would stem primarily from greater market access for U.S. products due to lower tariffs and expanded tariff-rate quotas. Additionally, according to an analysis by the American Farm Bureau, under TPP, U.S. net farm income is projected to be $4.4 billion higher than without it. South Dakota exported nearly $1 billion in products to TPP countries in 2015, including $37 million in goods exported to Japan, $4 million in goods to Vietnam and $3 million in goods to Malaysia.
The president recently announced plans to impose tariffs on steel and aluminum imports. While this may sound like good news for those industries, it is important to consider the negative impacts the policy change could have on goods produced in the United States that use these materials in production, such as farm machinery. Also, we must recognize potential repercussions from other countries, should they retaliate by restricting U.S. produced products being imported to their countries. If other countries do retaliate, it may impact our sales of corn, wheat, soybeans, livestock and other commodities to these countries. We will continue to monitor this development.
Free and fair trade has a proven record of keeping our economy healthy and vibrant. The president has been meeting with Congressional leaders to discuss trade and recently reiterated his commitment to free, fair and reciprocal trade, and remains open to potential future bilateral trade agreements, including in the Indo-Pacific region. I will continue working with the administration and my colleagues in the Senate to improve trade deals around the world.