¿Is U.S. – Colombia FTA good or bad for Colombian rice farmers?
August 2018
By: Luisa Fernanda García González
Colombo Americano – Challenge 2 – Position Paper
Intro
The Free Trade Agreement between the United States and Colombia entered into force on May 15, 2012, and is a bilateral agreement that eliminates tariffs and other barriers to trade in goods and services between both countries.
Although at a country level there are many benefits from the FTA with the USA, there is evidence that it has caused great harm to the Colombian rice sector because of the drastic inequalities between the competitiveness of the countries. The national rice crops are affected by imports made by Colombia especially under this FTA because imports exceed the demand and cause domestic producers to go bankrupt. In August 2017, thousands of small Colombian rice farmers marched in a strike looking for the attention of the government over a rice prices crisis. In this context, the FTA between Colombia and the United States is unfair and non-beneficial to Colombian rice farmers.
Colombian rice farmers are at a disadvantage compared to those in the United States because the US government grants high subsidies to rice farmers, there are differences in production costs, quality of infrastructure, research, and technology.
According to the U.S. Department of Agriculture, the federal government spends more than $20 billion a year on subsidies for farm businesses. About 39 percent of the nation's 2.1 million farms receive subsidies, with the lion's share of the handouts going to the largest producers of corn, soybeans, wheat, cotton, and rice.[1]
As the Colombian Rice Federation (Fedearroz) states, the per capita consumption of rice in Colombia is 39 kilos, while it is 44.2 kilos in the rural sector. Therefore, the demand for rice is high. Nonetheless, due to the high levels of crop production per year and the volume of imported rice that arrives from the United States, it has been necessary to store sacks of rice, which lets part of the harvest go to waste.[2]
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The negotiation of an FTA is supposed to prioritize the national economy. In the case of the FTA between Colombia and the USA, the conditions that our country negotiated and accepted are not effective for two reasons. First, the conditions are not equitable between the US and Colombia. Second, Fedearroz, which is supposed to promote innovation and competitiveness, uses its funds inefficiently, which increases the gaps between the national goals and the actual situation.
According to Indalecio Dangond, an expert in the agricultural development sector, five years after the FTA began, Fedearroz has been accumulating the money to invest in improvements and the scenario is as follows: i) The average yield per hectare went from 4.48 to 4.53 tons when it should be in seven tons. ii) Imports of rice increased from 155,000 tons to 400,000 tons in 2016. iii) The cost of production increased by more than 23% per hectare, due to the inflated prices of land leasing ($ 2 million per hectare in the Tolima and $ 1 million in Casanare and Córdoba). iv) Seed varieties remain the same, the machine bank is obsolete, and most farmers do not have an irrigation system.[4]
By comparison, according to Southwest Farm Press, the "U.S. rice industry is eager to move forward and maximize the benefits of the U.S.-Colombia FTA. The agreement with Colombia offers tremendous short-and long-term economic benefits to U.S. rice producers, millers and exporters". In addition, among the United States´ FTAs with Colombia, Panama and South Korea, Southwest affirms that the agreement with Colombia is the most favorable for the U.S. This is the case because the tariff-rate quota (TRQ) will increase over time and will end 19 years after the FTA goes into effect. At that time, all U.S. rice imports into Colombia will be duty-free.
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One of the most significant obstacles in the implementation of the FTA, according to counter-arguments, is that there has been the lack of knowledge of the small Colombian agricultural companies. This lack of expertise relates the challenges of not only competing in their own national market but also internationally. Their lack of innovation also limits their ability to improve productivity in a global market.
While our companies are vulnerable in competition with other international rice companies, it is not directly the responsibility for the small and medium farmers. The Colombian government needs to take responsibility to make sure there is enough effective credit, technical assistance, and sufficient technology to support the farmers. The current government policies do not encompass these support systems, which leaves the farmers and the rice industry vulnerable.
Now, because of the lack of state support, rice growers ask for a renegotiation of the FTA. While the farmers are committed to innovating their methods, they request that the government maintain the current import tariff, which would allow for more time to implement the improvements and ensure that the government accomplishes its promises about supply public goods. Even if the Colombian government agrees, renegotiating with the USA is not viable while considering the international policy of President Donald Trump.
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I propose to improve the situation by planning future harvests to not only improve the crops but also the marketing process to increase sales. Next, the government should intervene in the national market to establish a fixed price. Otherwise, more producers will go bankrupt.
Luis Sanabria, a Yopal's rice grower in Casanare has expressed his concern because the farmer's debts have increased and they have no way to pay them. These farmers face many daily problems, for example, weather events, lack of government aid and variations in the price of rice.[7]
Conclusion
For all the reasons above, the U.S. – Colombia FTA has been very bad for Colombian rice-growing. Not only are there disparities in production, technology, innovation, researching, infrastructure, and financial support, but the state´s ineffective policies do not represent the needs and interests of the national industry.
We must constantly learn about the opportunities that may arise from the FTA and the US market. Likewise, we must take advantage of and support the research that exists today. Thanks to leader institutions such as the Inter-American Center for Tropical Agriculture (CIAR), and the Latin American Rice Irrigation Fund (FLAR), we already have better tools. We must undertake new ways to grow rice, continue to demand government support and work in local partnerships to leverage our knowledge about Colombia´s rural conditions.
Sources:
[1] Source: U.S. Department of Agriculture, "2012 Census Highlights: Farm Economics," ACH12-2, May 2014. See also Environmental Working Group, Farm Subsidy Database.
[2] The imported rice from the US to Colombia was 276,121 tons in 2016 and 98,448 tons in 2017.
[3] Source: Portafolio. (august, 2017). ¿Por qué están en paro los arroceros colombianos? Available online: http://www.portafolio.co/economia/inicia-paro-de-arroceros-en-el-pais-509140
[4] Source: El Espectador. (august, 2017). La Plata de los arroceros. Available online: https://www.elespectador.com/opinion/la-plata-de-los-arroceros-columna-709933
[5] Source: El Tiempo (january, 2017). Por el TLC entrarán 98.000 toneladas de arroz al país. Available online: http://www.eltiempo.com/economia/sectores/toneladas-de-arroz-que-entran-a-colombia-por-tlc-29949
[6] Source: Riceoutlook. (January 2017). USA rice joins coalition highlighting importance of agriculture with President-Elect Mr. Donald Trump. Available online: http://riceoutlook.com/usa-rice-joins-coalition-highlighting-importance-of-agriculture-with-president-elect-mr-donald-trump/
[7] Source: Contextoganadero. (March, 2017). 5 problemas que tienen en dificultades a los arroceros de Casanare. Available online: http://www.contextoganadero.com/regiones/5-problemas-que-tienen-en-dificultades-los-arroceros-de-casanare
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