American Agriculture and the Trans-Pacific Partnership (TPP) Agreement

Summary

The Trans-Pacific Partnership (TPP) is a regional free trade agreement (FTA), which the United States concluded with 11 other Pacific-facing nations in October 2015: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. Approval by Congress (through implementing legislation) is required before TPP can enter into force. If the United States and the other 11 governments ratify the deal, TPP would materially increase the overseas markets to which U.S. agricultural products would have preferential access. Exports account for around one-fifth of U.S. farm production, so foreign sales provide material support to commodity prices and farm income.

For U.S. agriculture and food industry interests, much of the potential benefit from TPP lies in improving access to TPP markets by eliminating or lowering tariffs, and also increasing the quantity of products that may be imported on preferential terms under tariff rate quotas (TRQs). TRQs allow imports of a given product to enter duty-free, or at a reduced rate, within the quota amount. Quantities in excess of the quota are subject to higher duties that can be prohibitive. The opportunity to increase sales of farm and food products is expected to be greatest in the five TPP countries with which the United States has not concluded FTAs, particularly Japan and Vietnam.

For example, the TPP agreement would substantially lower the tariff that Japan applies to U.S. fresh, chilled and frozen beef cuts—from 38.5% currently to 27.5%—when the agreement enters into force, with further reductions down to 9% over 15 years. Significantly, this would place U.S. beef on par with the tariff treatment for Australian beef, which is the major competitor of U.S. beef in Japan and which currently enjoys a tariff preference under an FTA with Japan. Japan also would create new TRQs specific to U.S. wheat and rice, among other agricultural products, thereby expanding U.S. export opportunities across a number of product categories.

The corollary to the potential for greater export opportunities for U.S. farm products under TPP is that the United States would lower and eliminate tariffs on many agricultural product imports—such as tree nuts, peanuts, cotton, various fruits, tobacco, and wine, among others. The United States also would provide limited additional duty-free access to farm imports via new TRQs for dairy products and for sugar and sugar-containing products. U.S. farm products, such as beef, that enjoy preferential access to Canada and Mexico under the North American Free Trade Agreement (NAFTA) would relinquish that advantage as tariffs are lowered over time for TPP partners.

While tariff rate reductions and TRQs have long been a staple of trade liberalization efforts, TPP also seeks to address several non-tariff measures that can impede trade in food and agricultural products. Among these are sanitary and phytosanitary measures (SPS), which concern actions by governments to assure food safety and guard against plant pests and animal diseases. TPP seeks to curb the use of SPS measures as impediments to trade and provides procedures for resolving disputes that arise, including recourse to dispute settlement. TPP also aims to minimize disruptions to trade in products of agricultural biotechnology and to bring greater coordination to the use of geographic indications, which involve exclusive naming rights for distinctive products from specific geographic locations. TPP commits countries to eliminate the use of export subsidies for agricultural products, which the United States does not employ, and seeks to reduce technical barriers to trade in wine and spirits by creating common definitions of these products and by establishing parameters for labeling and certification.

As of late-December 2015, numerous major farm and food trade organizations had endorsed the TPP agreement, but support within the farm and food sector has not been universal. The National Farmers Union, the United Food and Commercial Workers Union, and organizations representing tobacco leaf growers have all expressed opposition to the agreement.