As mentioned in last month’s Stakeholder Memo, I have recently taken an interest in the Trans-Pacific Partnership. After years of discussion, negotiators finalized the deal in October. On Nov. 5 President Obama notified Congress that he will sign the trade deal, which gives a window of 90 days for U.S. legislators to study the deal and consider public opinion.
I don’t have the time or desire to read all 30 chapters of the deal, with thousands of pages covering topics such as market access, rules of origin labeling, sanitary measures, investment, financial services and intellectual property. However, I do have an understanding of the influence it would have on Iowa’s economy and job market.
This deal will increase the demand for U.S. farm and food products among approximately 500 million consumers in the 11 other participating countries located in the Asia-Pacific region. In addition to the U.S., partners include Mexico, Japan, Canada, Vietnam, Peru, Malaysia, Chile, Australia, Singapore, New Zealand and Brunei. Taiwan has also recently shown interest in membership. These members are multibillion dollar customers of the U.S. when it comes to beef, pork, poultry, eggs, dairy, corn and soybeans, with Mexico serving as the biggest ag trade partner in recent years.
So what does this mean for Iowa? The experts are saying that the U.S. ag industry, which already supports 1 in 11 American jobs, has the most to gain from this trade deal that will reduce or eliminate about 18,000 taxes on U.S. exports. The deal would reduce tariffs and open new markets for American agricultural products and in the process, increase farm income, generate rural economic activity and support local jobs.
“Increased demand for American agricultural products and expanded agricultural exports as a result of the Trans-Pacific Partnership agreement will support stronger commodity prices and increase farm income. Increased exports will support more good paying export-related jobs, further strengthening the rural economy,” said Agriculture Secretary Tom Vilsack.
Iowa’s top 5 agricultural exports include soybeans, pork, feeds and fodder, corn, beef and veal which will all be influenced by the proposed deal.
Soybeans: Although tariffs are already low in the markets involved, Japan, Malaysia and Vietnam will eliminate tariffs on soybean oil and soybean meal. Additionally, meat tariffs will be reduced in the deal, creating a new feed demand and benefiting soybean producers.
Pork: Japan will get rid of duties on almost 80% of tariff lines, including processed pork. The remaining tariffs will decrease and the “Gate Price” will be significantly altered as well. Almost all Malaysian tariffs will be set at 0% and Vietnam will eliminate tariffs.
Corn: Corn producers will also benefit from reduced meat tariffs that are expected to create new feed demand. Although tariffs are already low, Malaysia and Vietnam will eliminate them within five years.
Beef and Veal: Japan’s beef tariff is currently as high as 50% and will be reduced to 9% if the deal passes. Japan will eliminate duties on ¾ of tariff lines, including processed beef products. Vietnam will eliminate tariffs and Malaysia will lock tariffs in at 0%.
Agricultural exports already support 78,800 Iowa jobs, and the annual value of Iowa agricultural exports comes to $10.4 billion. Although it’s uncertain whether the deal will succeed in Congress, if the proposal passes, it will be a win for Iowa.