 |
|
|
|||||
|
|
January 1, 2004 Impacts of U.S.-Central America Free Trade Agreement on U.S. Sugar Industry The U.S. – Central American Free Trade Agreement (CAFTA) may be good for the United States and the Central American countries involved but the U.S. sugar industry may become a victim of the agreement. That’s the finding of a special report prepared for North Dakota Senator Byron Dorgan by three North Dakota State University researchers. The U.S. – Central American Free Trade Agreement is an agreement with four Central American countries: El Salvador, Guatemala, Honduras and Nicaragua. “One of the largest exports by those countries is sugar,” according to Won Koo, a professor of agricultural economics at North Dakota State University and director of the Center for Agricultural Policy and Trade Studies. “The region exports about 1.5 million tons of sugar annually but currently exports less than 10 percent of its sugar to the United States.” Under the agreement provides that CAFTA countries can ship an additional 90,000 tons of sugar to the United States initially. That amount is gradually increased to an additional 130,000 tons over 15 years. Sugar imports would increase further if the U.S. reaches free trade agreements with Latin American countries and Australia. “This study showed that if additional imported sugar from Central America is brought into the United States, the largest impact will be on price,” According to Koo. “If the United States imports more than 500 thousand tons of sugar, some of the less efficient regions will start to leave the industry. The Red River Valley would continue to produce sugar but the returns would be much smaller.” Koo studied several possibilities if sugar imports are further expanded by other agreements. “A 1-million-ton increase in imports would cut wholesale prices to 14 cents a pound,” Koo says. “That means our domestic price would be the same as the world price. It would wipe out sugar production in the United States.” Under Koo’s scenario, as additional sugar is imported into the United States, the wholesale price of sugar falls, along with the prices for sugar beets and sugar cane. Domestic consumption would increase, responding to lower sugar prices. However, the number of sugar beet and cane acres would fall in response to lower farm prices. The draft text of the agreement will be released in January. Under the Trade Act of 2002, the Administration must notify Congress at least 90 days before signing the agreement. The Administration expects to notify Congress early next year of its intent to sign the CAFTA. It will also continue to consult with Congress on the agreement to prepare the way for eventual consideration. The complete study is available on the Web at http://www.ag.ndsu.nodak.edu/capts/documents/DorganSugarReport.pdf ### Source: Won Koo, (701) 231-7448, wkoo@ndsuext.nodak.edu |
|
|
North Dakota State University |
