Arkansas Farmers Will Benefit from CAFTA-DR
Exports of farm products help boost Arkansas’ farm prices and income. Such exports help support about 22,120 jobs both on and off the farm in food processing, storage, and transportation. In 2003, Arkansas's farm cash receipts were $5.3 billion, and agricultural exports were estimated at $1.4 billion, putting its reliance on agricultural exports at 27%. Implementation of the Central America-Dominican RepublicFree Trade Agreement (CAFTA-DR) will increase Arkansas’ exports of agricultural products.
Arkansas Benefits From the CAFTA-DR
Despite over $1.6 billion in United States farm exports in 2003, CAFTA-DR countries continue to impose high tariffs and other barriers on most agricultural products, including Arkansas’ key exports. A primary United States objective was to change the "one-way-street" of duty-free access currently enjoyed by most CAFTA-DR exports into a "two-way-street" that provides United States suppliers with access to these markets and levels the playing field with other competitors. This objective was achieved.
Poultry - With over $2.5 billion in total sales and ranked 2nd in national exports, Arkansas poultry producers benefit from the FTA.
- United States poultry exporters currently face tariffs as high as 164% on both fresh and frozen products and the WTO permits tariffs as high as 250%.
- Each CAFTA-DR country will provide immediate duty-free access on chicken leg quarters, a product where the United States is the world’s most competitive exporter, through country-specific TRQs that expand annually as tariffs are eliminated in 17 to 20 years. (A TRQ, or tariff rate quota, is a two-leveled tariff where the tariff rate charged on imports depends on the volume of imports; a lower tariff is charged on imports that fall within the quota volume and a higher tariff is imposed on imports in excess of the quota volume.)
- Costa Rica and the Dominican Republic will establish duty-free TRQs for chicken leg quarters totaling 850 metric tons, each expanding by 10% annually. The other four Central American countries will establish a total regional duty-free TRQ of 21,810 metric tons (with individual country minimum quota levels). After year 12, the TRQ quantity will be no less than 5% of regional chicken production.
- Duties on poultry products such as wings, breast meat and mechanically de-boned poultry meat will be reduced more quickly, with many eliminated within 10 years.
- CAFTA-DR countries are working toward the recognition of the United States meat inspection and certification systems in order to facilitate United States exports.
- The AFBF economic analysis of CAFTA-DR estimates that Arkansas will increase poultry exports to the six countries by $55 million per year by 2024.
Soybeans and Products - As the 2nd largest source of farm cash receipts and agricultural exports in the state, Arkansas soybean farmers benefit from the FTA.
- Central American and Dominican import tariffs range from zero to 20%, and the WTO permits tariffs as high 90%.
- CAFTA-DR countries will provide immediate duty-free access for soybeans. Duties on soybean meal and flour will be eliminated immediately in most CAFTA-DR countries.
- Most CAFTA-DR countries will immediately eliminate tariffs on crude soybean oil, and the current tariffs on refined soybean oil phased out over 12 to 15 years.
- The AFBF economic analysis of CAFTA-DR estimates that Arkansas will increase soybeans and products exports to the six countries by $2 million per year by 2024.
Rice - As the #1 state agricultural export and the 3rd largest source of farm cash receipts in the state, Arkansas rice producers benefit from the FTA.
- United States rice exports face CAFTA-DR tariffs up to 60%, and the WTO permits tariffs as high as 90%.
- Each CAFTA-DR country will establish zero duty TRQs for milled rice, and rough rice in all except the Dominican Republic (which will have a TRQ for brown rice).
- In the first year of the FTA, the TRQ access will total over 400,000 metric tons immediately and will grow through the tariff phase-out period.
- The AFBF economic analysis of CAFTA-DR estimates that Arkansas will increase rice exports to the six countries by $8 million per year by 2024.
Cotton - As 4th largest source of farm cash receipts in the state and the nation’s 4th largest exporter, Arkansas cotton farmers benefit from zero tariffs that the FTA locks-in immediately for markets worth over $73.1 million to United States cotton suppliers
- Under the WTO, CAFTA-DR countries could raise tariffs on cotton to 35 to 60%, depending on the country.
- The AFBF economic analysis of CAFTA-DR estimates that Arkansas will increase cotton exports to the six countries by $1 million per year by 2024.
Beef - Arkansas cattle and calve operators, with cash receipts of nearly $500 million, benefit from the FTA.
- Current import tariffs on United States beef exports are as high as 30%, and the WTO permits tariffs as high as 79%.
- Duties on the products most important to the United States beef industry - Prime and Choice cuts - will be eliminated immediately in Central American countries, while the Dominican Republic will establish a zero duty TRQ of 1,100 metric tons which expands annually as tariffs are eliminated.
- Some immediate duty-free access will be provided by certain countries on other beef cuts through an initial TRQ totaling 1,165 metric tons, expanding annually until tariffs are fully phased-out.
- Duties currently applied to other beef products and beef offals will be phased-out in 5 to 10 years.
- CAFTA-DR countries are working toward the recognition of the United States meat inspection and certification systems in order to facilitate United States exports.
- The AFBF economic analysis of CAFTA-DR estimates that Arkansas will increase meat exports (beef and pork) to the six countries by $1 million per year by 2024.
One line of the USTR’s Trade Fact Sheet describing the agreement is a good comment on which to close, “U.S. farmers and ranchers will have access to the Central American countries that is generally better than suppliers in Canada, Europe and South America.” Given this preferred access, AFBF economic analysis suggests that the CAFTA-DR will be of overall, long-term benefit to American agriculture and to our membership.
| Estimated Trade Impact of CAFTA-DR on Arkansas for Selected Commodities |
| (Values in Million Dollars) |
| |
1999-2001 AR Exports |
2024 Imports from AR |
CAFTA-DR |
| Commodity |
Total |
CAFTA-DR |
Without
CAFTA-DR |
With
CAFTA-DR |
Difference |
| Dairy |
2.77 |
0.06 |
0.09 |
0.26 |
0.17 |
| Cotton |
139.10 |
2.78 |
4.73 |
6.15 |
1.42 |
| Feed Grains |
21.13 |
0.42 |
0.80 |
0.88 |
0.08 |
| Fruits |
1.49 |
0.03 |
0.07 |
0.09 |
0.03 |
| Meats |
5.48 |
0.11 |
0.64 |
1.46 |
0.83 |
| Poultry |
264.46 |
5.29 |
34.38 |
89.39 |
55.01 |
| Soybean & Products |
210.66 |
4.21 |
8.85 |
10.62 |
1.77 |
| Sugar |
N/A |
N/A |
N/A |
N/A |
0.00 |
| Rice |
450.45 |
9.01 |
20.72 |
29.01 |
8.29 |
| Vegetables |
1.37 |
0.03 |
0.06 |
0.08 |
0.02 |
| Wheat |
76.00 |
1.52 |
2.74 |
3.56 |
0.82 |
| Total |
1,172.91 |
23.46 |
73.07 |
141.50 |
68.43 |
Fact Sheet Sources: United States Department of Agriculture’s Foreign Agricultural Service State Fact Sheets and American Farm Bureau Federation’s Economic Analysis